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intermediate accounting volume 1

Accounting Volume 1 8th Canadian Edition Charles T. Horngren, Walter T. Harrison, M. Suzanne Oliver, Peter R. Norwood, Jo-Ann L. Johnston - Solutions

12. What is a contra account? Identify the contra account introduced in this chapter, along with the account’s normal balance.
11. The title Prepaid Expense suggests that this type of account is an expense. If it is, explain why. If it is not, what type of account is it?
10. Manning Supply Company pays $3,600 for an insurance policy that covers three years. At the end of the first year, the balance of its Prepaid Insurance account contains two elements. What are the two elements, and what is the correct amount of each?
9. Why must the balance of Supplies be adjusted at the end of the period?
8. Do all adjusting entries affect the net income or net loss of the period? Include the definition of an adjusting entry.
7. Name five categories of adjusting entries and give an example of each.
6. Why are adjusting entries usually made at the end of the accounting period, not during the period?
5. What is the purpose of making adjusting entries?
4. Briefly explain the matching objective.
3. What two questions do the recognition criteria for revenues help answer?
2. How long is the basic accounting period? What is a fiscal year? What is an interim period?
1. Distinguish accrual-basis accounting from cash-basis accounting.
10. Accumulated Amortization is reported on (p. 129)a. The balance sheetb. The income statementc. The statement of owner’s equityd. Both a and b
9. The links among the financial statements are (pp. 128–129)a. Net income from the income statement to the statement of owner’s equityb. Ending capital from the statement of owner’s equity to the balance sheetc. Net income from the balance sheet to the income statement.d. Both a and b above
8. A business received cash of $3,000 in advance for service that will be provided later. The cash receipt entry debited Cash and credited Unearned Revenue for $3,000. At the end of the period, $1,100 is still unearned. The adjusting entry for this situation will(pp. 121–122)a. Debit Unearned
7. The adjusting entry to accrue salary expense (pp. 120–121)a. Debits Salary Expense and credits Cashb. Debits Salaries Payable and credits Salary Expensec. Debits Salaries Payable and credits Cashd. Debits Salary Expense and credits Salaries Payable
6. A building that cost $120,000 has accumulated amortization of $70,000. The carrying value of the building is(pp. 118–119)a. $70,000c. $120,000b. $50,000d. $190,000
5. A building-cleaning firm began November with supplies of $210. During the month, the firm purchased supplies of $290. At November 30, supplies on hand total$160. Supplies expense for the period is (pp. 116–117)a. $160c. $290b. $340d. $500
4. Adjusting entries (p. 114)a. Assign revenues to the period in which they are earnedb. Help to properly measure the period’s net income or net lossc. Bring asset and liability accounts to correct balancesd. Do all of the above
3. The matching objective provides guidance in accounting for (p. 112)a. Expensesc. Assetsb. Owner’s equityd. Liabilities
2. Under the recognition criteria for revenues, revenue is recorded (pp. 111–112)a. At the earliest acceptable timeb. At the latest acceptable timec. After it has been earned, but not befored. At the end of the accounting period
1. Accrual-basis accounting (p. 109)a. Results in higher income than cash-basis accountingb. Leads to the reporting of more complete information than does cash-basis accountingc. Is not acceptable under GAAPd. Omits adjusting entries at the end of the period
2 This problem helps to develop journalizing skills by using an actual company’s account titles. Refer to the Sun-Rype Products Ltd. financial statements in Appendix B at the back of the book. Assume Sun-Rype completed the following selected transactions during December 2008. All amounts are in
1 Banks provide a unique set of financial statements to their users. Refer to the Canadian Western Bank (CWB) financial statements in Appendix Aand answer the following questions.1. Why would loans be considered an asset on CWB’s balance sheet?2. Why are deposits considered to be a liability on
2 Although all the following questions deal with the accounting equation, they are not related:1. Explain the advantages of double-entry bookkeeping to a friend who is opening a usedbook store.2. When you deposit money in your bank account, the bank credits your account. Is the bank misusing the
1 Your friend, Amin Akmali, has asked your advice about the effects that certain business transactions will have on his business. His business, Car Finders, finds the best deals on automobiles for clients. Time is short, so you cannot journalize transactions. Instead, you must analyze the
2–3C Cash............................................ $2,840 Notes Payable .............................. $1,200 Accounts Receivable ................ 3,331 Fees Earned.................................. 2,380 Supplies...................................... 800 Salary
2–2C Over the years you have become friendly with a farmer, Jack Russell, who raises crops, which he sells, and has small herds of beef cattle and sheep. Russell maintains his basic herds and markets the calves and lambs each fall. His accounting system is quite simple; all his transactions are
2–1C Some individuals, for whatever reason, do not pay income tax or pay less than they should.Often their business transactions are cash transactions, so there is no paper trail to prove how much or how little they actually earned. Canada Revenue Agency, however, has a way of dealing with these
2–9B Maquina Lodge, owned by Bob Palmiter, had the following account balances, in random order, on December 15, 2010 (all accounts have their “normal” balances):The following events also took place during the final days of the year:Dec. 16 The accountant discovered that an error had been made
2–8B Ryan Kessler operates a heavy equipment transport company, Kessler Transport. The company had the following transactions for the month of August 2010:Aug. 1 Kessler Transport received $20,000 cash and a truck and trailer from Kessler.The truck had originally cost Kessler $300,000, but had a
2–7B The trial balance for Delainey Fitness, shown below, does not balance. The following errors were detected:a. The cash balance is overstated by $6,000.b. Rent expense of $3,000 was posted as a credit rather than a debit.c. The balance of Advertising Expense is $4,500, but it is listed as
2–6B Refer to Problem 2–5B. After completing the trial balance in Problem 2–5B, prepare the following financial statements for Blue Ribbon Catering.1. Income statement for the month ended January 31, 2010.2. Statement of owner’s equity for the month ended January 31, 2010.3. Balance sheet
2–5B Bill Ronalds started a catering service called Blue Ribbon Catering. During the first month of operations, January 2010, the business completed the following selected transactions:a. Ronalds began the company with an investment of $50,000 cash and a van (automobile)valued at $26,000. The
2–4B The trial balance of the desktop publishing business of Doug Foster at November 15, 2010, is shown below.During the remainder of November, the business completed the following transactions:Nov. 16 Collected $4,000 cash from a client on account.17 Performed publishing services for a client on
2–3B Scott Jameson opened a translation business on January 2, 2010. During the first month of operations, the business completed the following transactions:Jan. 2 The business received $60,000 cash from Jameson, which was deposited in a business bank account entitled Jameson Translation
2–2B Gladys Yu practises civil engineering under the business title Gladys Yu Consulting.During April 2010 the company engaged in the following transactions:April 1 Yu deposited $40,000 cash in the business bank account. The business gave Yu owner’s equity in the business.5 Paid monthly rent on
2–1B Joan Simpson, the owner of Simpson Designs, is selling the business. She offers the trial balance below to prospective buyers.Your best friend is considering buying Simpson Designs. She seeks your advice in interpreting this information. Specifically, she asks whether this trial balance is
2–9A CrossCountry Movers had the following account balances, in random order, on December 15, 2010 (all accounts have their “normal” balances):The following events took place during the final days of the year:Required Where appropriate, record each transaction from December 16 to 31 in the
2–8A Ken Suzuki operates a fishing charter business, Pacific Charters. The business had the following transactions in September 2010:Required Record each transaction in the journal. Identify each transaction by date. Explanations are not required. Sept. 1 3 4 5 O 9 10 15 20 222 26 29 30 30 Suzuki
2–7A The following trial balance does not balance:The following errors were detected:a. The cash balance is understated by $1,300.b. The cost of the land was $44,600, not $46,600.c. A $400 purchase of supplies on account was neither journalized nor posted.d. A $3,000 credit to Consulting Service
2–6A Refer to Problem 2–5A. After completing the trial balance in Problem 2–5A, prepare the following financial statements for Frideris Consulting:1. Income statement for the month ended June 30, 2010.2. Statement of owner’s equity for the month ended June 30, 2010.3. Balance sheet at June
2–5A Jane Frideris started an investment counselling business, Frideris Consulting, in Montreal on June 1, 2010. During the first month of operations, the business completed the following selected transactions:a. Frideris began the business with an investment of $20,000 cash, land valued at
2–4A The trial balance of Thomson Engineering is dated February 28, 2010. During March, Thomson Engineering completed the following transactions:March 4 Collected $600 cash from a client on account.8 Designed a system for a client on account, $580.13 Paid for items purchased on account, $320.18
2–3A Harry Lawson opened a renovation business called Lawson Renovations on September 3, 2010. During the first month of operations, the business completed the following transactions:Sept. 3 Lawson deposited his cheque for $36,000 into the business bank account to start the business.4 Purchased
2–2A Party Time Amusements Company owns movie theatres. Party Time engaged in the following transactions in November 2010:Nov. 1 Darrell Palusky invested $350,000 personal cash in the business by depositing that amount in a bank account titled Party Time Amusements Company. The business gave
2–1A The owner of Archer Communications, Nancy Archer, is selling the business. She offers the trial balance shown below to prospective buyers.Your best friend is considering buying Archer Communications. He seeks your advice in interpreting this information. Specifically, he asks whether this
1.1 Associated Charities Inc., a charitable organization in Brandon, Manitoba, has a standing agreement with Prairie Trust. The agreement allows Associated Charities Inc. to overdraw its cash balance at the bank when donations are running low. In the past, Associated Charities Inc. managed funds
2–1 Jake Fissel asks your advice in setting up the accounting records for his new business, Jake’s Photo Shop. The business will be a photography studio and will operate in a rented building. Jake’s Photo Shop will need office equipment and cameras. The business will borrow money using a note
2–17 Bridget Battle has trouble keeping her debits and credits equal. During a recent month, Bridget made the following errors:a. In preparing the trial balance, Bridget omitted a $5,000 note payable.b. Bridget posted a $1,000 utility expense as $100. The credit to Cash was correct.c. In
2–16 The owner of Fergus Technical Services is an architect with little understanding of accounting.She needs to compute the following summary information from the accounting records:a. Net income for the month of Marchb. Total cash paid during Marchc. Cash collections from customers during
2–15 Exercise 2–15 continues with the consulting business of Carl Haupt, begun in Serial Exercise 1-16. Here you will account for Haupt Consulting’s transactions as it is actually done in practice.Haupt Consulting completed the following transactions during early December 2010:Dec. 2 Received
2–14 The trial balance of Zoom Travel at February 28, 2010, does not balance.Investigation of the accounting records reveals that the bookkeepera. Recorded a $400 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.b. Posted a $2,000 credit to Accounts Payable
2–13 After recording the transactions in Exercise 2–12, prepare the trial balance of Yarrow Strategic Consulting at May 31, 2010.
2–12 Open the following three-column ledger accounts for Yarrow Strategic Consulting at May 1, 2010: Cash, #1100; Accounts Receivable, #1300; Office Supplies, #1500; Office Furniture,#1800; Accounts Payable, #2100; Florence Yarrow, Capital, #3100; Florence Yarrow, Withdrawals, #3200; Consulting
2–11 The accounts of Western Consulting are listed below with their normal balances at October 31, 2010. The accounts are listed in no particular order.Required Prepare the company’s trial balance at October 31, 2010, listing accounts in the sequence illustrated in the chapter. Supplies comes
2–10 Prepare the trial balance of Dash Carter Hockey School at April 30, 2010, using the account data from Exercise 2–9.
2–9 The first five transactions of Dash Carter Hockey School have been posted to the company’s accounts as shown on the next page:Required Prepare the journal entries that served as the sources for posting the five transactions. Date each entry April 30, 2010, and include an explanation for
2–8 The journal of Alert Defensive Driving for October 2010 is below.Required 1. Describe each transaction.2. Set up T-accounts using the following account numbers: Cash, #1000; Accounts Receivable, #1200; Supplies, #1400; Accounts Payable, #2000; Tom Marshall, Capital, #3000; Service Revenue,
2–7 Refer to Exercise 2–6 for the transactions of Yula’s Yoga.Required 1. After journalizing the transactions of Exercise 2–6, post the entries to T-accounts. Identify transactions by their date. Date the ending balance of each account Mar. 31.2. Prepare the trial balance of Yula’s Yoga
2–6 Yula’s Yoga engaged in the following transactions during March 2010, its first month of operations:Mar. 1 The business received a $15,000 cash investment from Yula Gregore to start Yula’s Yoga.1 Paid $4,000 cash to rent a yoga studio for the month of March.4 Purchased studio supplies for
2–5 Refer to Exercise 2–4 for the transactions of Ryan Jackson Engineering.Required 1. Open the following T-accounts with their December 1 balances: Cash, debit balance$6,000; Accounts Receivable $0; Supplies, $0; Equipment $0; Land, debit balance $24,000;Accounts Payable $0; Notes Payable $0;
2–4 Analyze the following transactions of Ryan Jackson Engineering in the manner shown for the December 1 transaction. Also, record each transaction in the journal.Dec. 1 Paid monthly utilities expense of $200.(Analysis: The expense, utilities expense, is increased; therefore, debit Utilities
2–3 Refer to the Summary Problem for Your Review, specifically the trial balance on page 83.Required 1. Write the company’s accounting equation, and label each element as a debit amount or a credit amount. If you use $28,500 for the owner’s equity, why is the accounting equation out of
2–2 Review accounting terms by completing the following crossword puzzle.Across:2. Amount collectible from a customer 3. Statement of financial position 5. Copy data from the journal to the ledger 6. Records a decrease in an asset Down:1. Records a decrease in a liability 4. “Bottom line” of
2–1 Your employer, Prairie Tours, has just hired an office manager who does not understand accounting.The Prairie Tours trial balance lists Cash of $57,800. Write a short memo to the office manager, explaining the accounting process that produced this listing on the trial balance. Mention debits,
2–13 Return to Ladner Environmental Services’ trial balance on page 74. Assume that John Ladner accidentally listed his utilities expense as $100 instead of the correct amount of $1,000. Compute the incorrect trial balance totals for debits and credits. Then show how to correct this error,
2–12 Ladner Environmental Services prepared its trial balance on page 74. Suppose John Ladner made an error: He erroneously listed his Capital balance of $250,000 as a debit rather than a credit.Compute the incorrect trial balance totals for debits and credits. Then refer to the discussion of
2–11 Redwing Floor Covering reported the following summarized data at December 31, 2010. Accounts appear in no particular order.Revenue........................... $32,000 Other Liabilities ........ $17,000 Equipment ...................... 43,000 Cash............................ 6,000 Accounts
2–10 Use the September transaction data for Liana Garcia, Veterinarian, given in Starter 2–6.1. Open the following T-accounts: Cash; Accounts Receivable; Medical Supplies; Accounts Payable; Liana Garcia, Capital; Service Revenue, Rent Expense.2. After making the journal entries in Starter
2–9 Tina Serelio performed legal services for a client who could not pay immediately.The business expected to collect the $12,000 the following month.Later, the business received $5,500 cash from the client.1. Record the two transactions for Tina Serelio, Lawyer. Include an explanation for each
2–8 Nancy Carpenter Optical Dispensary bought supplies on account for$10,000. Two weeks later, the company paid half on account.1. Journalize the two transactions for Nancy Carpenter Optical Dispensary.Include an explanation for each transaction.2. Open the Accounts Payable T-account and post to
2–7 After operating for a month, Liana Garcia, Veterinarian, completed the following transactions during the latter part of October:Oct. 22 Performed service for patients on account, $6,000.30 Received cash on account from patients, $3,000.31 Received a utility bill, $150, which will be paid
2–6 Liana Garcia opened a veterinary practice. Record the following transactions in the journal of Liana Garcia, Veterinarian. Include an explanation with each journal entry.Sept. 1 Garcia invested $32,000 cash in a business bank account to start her practice. The business received the cash and
2–5 The accounting records of all businesses include three basic categories of accounts:assets, liabilities, and owner’s equity. In turn, owner’s equity holds the following categories: capital, withdrawals, revenues, and expenses.Identify which categories of all the accounts—including the
2–4 Allison Franklin is tutoring Blaine McCormick, who is taking introductory accounting. Allison explains to Blaine that debits are used to record increases in accounts and credits record decreases. Blaine is confused and seeks your advice.• When are credits increases? When are credits
2–3 Accounting has its own vocabulary and basic relationships. Match the accounting terms at left with the corresponding definitions at right._____ 1. Posting A. Record of transactions _____ 2. Normal balance B. Always an asset _____ 3. Payable C. Right side of an account _____ 4. Journal D. Side
2–2 Fill in the blanks to review some key definitions.Rita Bowden is describing the accounting process for a friend who is a philosophy major. Rita states, “The basic summary device in accounting is the _____. The left side is called the _____ side, and the right side is called the _____ side.
2–1 Review basic accounting definitions by completing the following crossword puzzle. 16 5 Across: 2. Records an increase in a liability 3. List of accounts with their balances 6. Another word for liability Down: 1. Left side of an account 4. Book of accounts 5. An economic resource 7. Record of
20. Briefly summarize the similarities and differences between manual and computer-based accounting systems in terms of journalizing, posting, and preparing a trial balance.
19. What is the effect on total assets of collecting cash on account from customers?
18. The accountant for Bower Construction mistakenly recorded a $500 purchase of supplies on account as$5,000. He debited Supplies and credited Accounts Payable for $5,000. Does this error cause the trial balance to be out of balance? Explain your answer.
17. What is a compound journal entry?
16. Why do accountants prepare a trial balance?
15. Explain the difference between the ledger and the chart of accounts.
14. Campus Cleaners launders the shirts of customer Bobby Baylor, who has a charge account at the cleaners.When Baylor picks up his clothes and is short of cash, he charges it. Later, when he receives his monthly statement from the cleaners, Baylor writes a cheque on his bank account and mails the
13. What is the meaning of the statement “Accounts Payable has a credit balance of $1,700”?
12. Rearrange the following accounts in their logical sequence in the chart of accounts:Note Payable Cash Accounts Receivable Jane East, Capital Sales Revenue Salary Expense
11. What four steps does the posting process include?Which step is the fundamental purpose of posting?
10. Label each of the following transactions as increasing owner’s equity (), decreasing owner’s equity (), or having no effect on owner’s equity (0). Write the appropriate symbol in the space provided.____ Investment by owner ____ Invoice customer for services ____ Purchase of supplies on
9. What does posting accomplish? Why is it important?Does it come before or after journalizing?
8. Indicate the normal balance of the five types of accounts.Account Type Normal Balance Assets ____________________________ Liabilities ____________________________ Owner’s equity ____________________________ Revenues ____________________________ Expenses ____________________________
7. To what does the normal balance of an account refer?
6. Briefly describe the flow of accounting information using the accounting cycle.
5. Suppose you are the accountant for Smith Courier Service.Keeping in mind double-entry bookkeeping, identify the dual effects of Mary Smith’s investment of$10,000 cash in her business.
4. What are the three basic types of accounts? Name two additional types of accounts. To which one of the three basic types are these two additional types of accounts most closely related?
3. Write two sentences that use the term debit differently.
2. Is the following statement true or false? Debit means decrease and credit means increase. Explain your answer.
1. Name the basic shortcut device or tool used in accounting.What letter of the alphabet does it resemble?Name its two sides.
10. The account credited for a receipt of cash on account is(p. 70)a. Cashc. Service Revenueb. Accounts Payabled. Accounts Receivable

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