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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
9. Smale Transport earned revenue on account. The earning of revenue on account is recorded by a (p. 69)a. Debit to Cash and a credit to Revenueb. Debit to Accounts Receivable and a credit to Revenuec. Debit to Accounts Payable and a credit to Revenued. Debit to Revenue and a credit to Accounts
8. A business has Cash of $3,000, Notes Payable of $2,500, Accounts Payable of $4,300, Service Revenue of $7,000, and Rent Expense of $2,400. Based on these data, how much are its total liabilities? (p. 54)a. $4,600c. $9,800b. $6,800d. $13,800
7. What is the normal balance of the Accounts Receivable, Office Supplies, and Rent Expense accounts? (p. 61)a. Debitb. Credit
6. The purpose of the trial balance is to (p. 73)a. List all accounts with their balancesb. Ensure that all transactions have been recordedc. Speed the collection of cash receipts from customersd. Increase assets and owner’s equity
5. The purchase of land for cash is recorded by a (p. 67)a. Debit to Cash and a credit to Landb. Debit to Cash and a debit to Landc. Debit to Land and a credit to Cashd. Credit to Cash and a credit to Land
4. Posting is the process of transferring information from the (p. 64)a. Journal to the trial balanceb. Ledger to the trial balancec. Ledger to the financial statementsd. Journal to the ledger
3. Why do accountants record transactions in the journal?(p. 62)a. To ensure that all transactions are posted to the ledgerb. To ensure that total debits equal total creditsc. To have a chronological record of all transactionsd. To help prepare the financial statements
2. Increases in liabilities are recorded by (p. 57)a. Debitsb. Credits
1. A T-account has two sides called the (p. 57)a. Debit and creditc. Revenue and expenseb. Asset and liabilityd. Journal and ledger
1.2 Refer to the Sun-Rype Products Ltd. financial statements located in Appendix B at the end of this book. Notice that the amounts reported in Sun-Rype’s financial statements are in thousands of dollars.Required 1. How much cash and cash equivalents did Sun-Rype have at December 31, 2008?2. What
1.1 Refer to the CWB financial statements located in Appendix Aat the end of this book. Notice that the amounts reported are in thousands of dollars.Required 1. How much cash, short-term deposits, and items in transit did CWB have at October 31, 2008?2. What were total assets at October 31, 2008?
2 A friend learns that you are taking an accounting course. Knowing that you do not plan a career in accounting, the friend asks why you are “wasting your time.’’ Explain to the friend:1. Why you are taking the course.2. How accounting information is used or will be used:a. In your personal
1 Two businesses, Tyler’s Bicycle Centre and Ryan’s Catering, have sought business loans from you. To decide whether to make the loans, you have requested their balance sheets.*The investments of $300,000 can be sold today for $380,000.Required 1. Based solely on these balance sheets, which
1–2C You and three friends have decided to go into the lawn-care business for the summer to earn money to pay for your schooling in the fall. Your first step was to sign up customers to satisfy yourselves that the business had the potential to be profitable. Next, you planned to go to the bank to
1–1C The going-concern assumption is becoming an increasing source of concern for users of financial statements. There are instances of companies filing for bankruptcy several months after issuing their annual audited financial statements. The question is: why didn’t the financial statements
1–8B Armstrong Marketing Consulting, a proprietorship owned by Jody Armstrong, was started on January 1, 2009, with an investment of $30,000 cash. The company prepares marketing plans for clients. It has been operating for two years. Business was quite slow in the first year of operations but has
1–7B John Bridges has been operating a plumbing business as a proprietorship (John Bridges Plumbing) for four years and had the following business assets and liabilities (at their historical costs) on May 31, 2010:Cash........................................................ $45,000 Accounts
1–6B Jan Robertson operates an interior design studio called Robertson Design Studio. The following amounts summarize the financial position of the business on April 30, 2010:During May 2010 the company did the following:a. Robertson received $15,000 as a gift and deposited the cash in the
1–5B The bookkeeper of Campbell Insurance Agency prepared the balance sheet of the company while the accountant was ill. The balance sheet contains errors. In particular, the bookkeeper knew that the balance sheet should balance, so she “plugged in” the owner’s equity amount needed to
1–4B The amounts of (a) the assets and liabilities of Morishita Office Cleaning as of December 31, 2010, and (b) the revenues and expenses of the company for the year ended on December 31, 2010, appear below. The items are listed in alphabetical order.The beginning amount of owner’s equity was
1–3B Recently, Michelle Hopkins formed a management accounting practice as a proprietorship.The balance of each item in the proprietorship accounting equation follows for November 16 and for each of the eight following business days.Required Assuming that a single transaction took place on each
1–2B Hayley Wilson is a realtor. She buys and sells properties on her own, and she also earns commission revenue as a real estate agent. She invested $50,000 on March 10, 2010, in the business, Hayley Wilson Realty. Consider the following facts as of March 31, 2010:a. Wilson had $15,000 in her
1–1B Diana Rose is an architect and was a partner with a large firm, a partnership, for 10 years after graduating from university. Recently she resigned her position to open her own architecture office, which she operates as a proprietorship. The name of the new entity is Rose Design.Rose
1–8A Bieksa Board Rentals was started on January 1, 2010, by Harvey Bieksa with an investment of $100,000 cash. The company rents out snowboards and related gear from a small store.During the first 11 months, Bieksa made additional investments of $25,000 and borrowed$50,000 from the bank. He did
1–7A Barry Melrose had been operating his law practice in Mississauga under the name Barry Melrose, Lawyer, for two years and had the following business assets and liabilities (at their historical costs) on April 30, 2010:Cash........................................................ $27,000
1–6A Phyllis Baines is the proprietor of a career counselling and employee search business, Baines Personnel Services. The following amounts summarize the financial position of the business on August 31, 2010:During September 2010, the following company transactions occurred:a. Baines deposited
1–5A The bookkeeper of Enderby Services Co., a proprietorship, prepared the balance sheet of the company while the accountant was ill. The balance sheet is not correct. The bookkeeper knew that the balance sheet should balance, so he “plugged in” the owner’s equity amount needed to achieve
1–4A Presented below are the amounts of (a) the assets and liabilities of Superior Sounds as of December 31, 2010, and (b) the revenues and expenses of the company for the year ended December 31, 2010. The items are listed in alphabetical order.The opening balance of owner’s equity was
1–3A Tofino Suppliers was recently formed as a proprietorship. The balance of each item in the business’s accounting equation is shown below for June 21 and for each of the nine following business days.Required Assuming that a single transaction took place on each day, describe briefly the
1–2A Trevor Michaels is a realtor. He buys and sells properties on his own, and he also earns commission revenue as a real estate agent. He organized his business as a sole proprietorship on November 15, 2010. Consider the following facts as of November 30, 2010:a. Michaels owed $20,000 on a note
1–1A Janice McLean was a civil engineer and partner in a large firm, a partnership, for five years after graduating from university. Recently she resigned her position to open her own consultancy practice, which she operates as a proprietorship. The name of the new company is McLean
1.2 The board of directors of Cloutier Inc. is meeting to discuss the past year’s results before releasing financial statements to the public. The discussion includes this exchange:Sue Cloutier, company president: “Well, this has not been a good year! Revenue is down and expenses are up—way
1.1 Why is it important that this type of information be disclosed?2. Suppose you are the chief financial officer (CFO) responsible for the financial statements of CV Technologies. What ethical issues would you face as you consider what to report in the 2007 Annual Report?3. What are the negative
1 The following excerpt was taken from the President’s letter to the shareholders in CV Technology’s 2007 Annual Report:In the fall of 2006, encouraged by enthusiasm from American retailers, we launched COLD-fX® in the U.S. In the face of unexpectedly high return rates from U.S. retailers, we
1–2 Shining Star Camp conducts summer camps for children with physical challenges. Because of the nature of its business, Shining Star Camp experiences many unusual transactions.Evaluate each of the following transactions in terms of its effect on Shining Star Camp’s income statement and
1–1 As an analyst for Royal Bank, it is your job to write recommendations to the bank’s loan committee. Kettle Engineering Co., a client of the bank, has submitted these summary data to support the company’s request for a $200,000 loan:Required Analyze these financial statement data to decide
1–18 Worldwide Travel Company’s balance sheet data are shown below.January 1, 2010 December 31, 2010 Total assets $210,000 $312,000 Total liabilities 175,000 235,000 Required 1. Compute the amount of net income or net loss for the company during the year ended December 31, 2010, if the owner
1–17 Compute the missing amounts for each of the following businesses. Yew Co. Ash Co. Arbutus Co. Beginning: Assets Liabilities Ending: Assets Liabilities Owner's equity: Investments by owner Withdrawals by owner. Income Statement: Revenues......... Expenses.. $330,000 $150,000 $270,000 150,000
1–16 Haupt Consulting began operations and completed the following transactions during the first half of December 2010.Dec. 2 Received $10,000 cash from owner Carl Haupt. The business gave owner’s equity in the business to Haupt.2 Paid monthly office rent, $1,000.3 Paid cash for a Dell
1–15 Publicly accountable enterprises in Canada must start using international financial reporting standards (IFRS) beginning in 2011. Provide two reasons why Canada is switching to these standards.
1–14 The assets, liabilities, owner’s equity, revenue and expenses of Hollins Company, a proprietorship, have the following final balances at December 31, 2010, the end of its first year of business. During the year, the proprietor, Gary Hollins, invested $55,000 in the business.Required 1.
1–14 The assets, liabilities, owner’s equity, revenue and expenses of Hollins Company, a proprietorship, have the following final balances at December 31, 2010, the end of its first year of business. During the year, the proprietor, Gary Hollins, invested $55,000 in the business.Required 1.
1–13 Examine Exhibit 1–9 on page 19. The exhibit summarizes the transactions of Ladner Environmental Services for the month of April 2010. Suppose the business completed transactions 1 to 7 and needed a bank loan on April 21, 2010. The vice-president of the bank requires financial statements to
1–12 Presented below are the balances of the assets and liabilities of Riverbend Consulting Services as of September 30, 2010. Also included are the revenue and expense account balances of the business for September. Linda Hall, the owner, invested $40,000 when the business was formed.Consulting
1–11 The analysis of the transactions that Ace Equipment Rental engaged in during its first month of operations follows. The business buys electronic equipment that it rents out to earn rental revenue. The owner of the business, Steve Mitchell, made only one investment to start the business and
1–10 Don Hill, M.D., opens a medical clinic. During his first month of operation, January, the clinic, entitled Forest Heights Clinic, experienced the following events:Jan. 6 Hill invested $200,000 in the clinic by opening a bank account in the name of Forest Heights Clinic.9 Forest Heights
1–9 Indicate the effects of the following business transactions on the accounting equation of a proprietorship. Transaction a is answered as a guide.a. Received $40,000 cash from the owner.Answer: Increase asset (Cash)Increase owner’s equity (Owner, Capital)b. Paid the current month’s office
1–8 Eager Beaver began 2010 with total assets of $24,000 and total liabilities of $11,000. At the end of 2010, the business’s total assets were $34,000 and total liabilities were $17,000.Required 1. Did the owner’s equity of Eager Beaver increase or decrease during 2010? By how much?2.
1–7 Janice Iverson owns Common Grounds Coffee House, near the campus of Western Community College. The company has cash of $16,000 and furniture that cost $36,000.Debts include accounts payable of $10,000 and a $26,000 note payable. Write the accounting equation of Common Grounds Coffee House.
1–6 Select financial information for three proprietorships follows:Required 1. Compute the missing amount in the accounting equation for each entity.2. Which accounting concept or principle tells us that the three companies will cease to exist if the owners die? Assets Liabilities Owner's Equity
1–5 Skeena Enterprises, a business owned by Sophie Chang, experienced the following events.State whether each event (1) increased, (2) decreased, or (3) had no effect on the total assets of the business. Identify any specific asset affected.a. Chang increased her cash investment in the
1–4 Give an example of a business transaction that has each of the following effects on the accounting equation:a. Increases an asset and increases a liability.b. Increases one asset and decreases another asset.c. Decreases an asset and decreases owner’s equity.d. Decreases an asset and
1-3 The accounting records of Jackman Consulting Services contain the following accounts:Required 1. Indicate whether each account listed is a(n) asset (A), liability (L), owner’s equity (OE), revenue (R), or expense (E) account.2. Indicate whether each account listed appears on the balance sheet
1–2 Jack and Virginia Swadden want to open a restaurant. In need of cash, they ask TD Canada Trust for a loan. With little knowledge of finance, the Swaddens don’t know how the lending process works. Explain to them the information provided to the bank by the income statement (statement of
1-1 Match each of the following accounting terms with its correct definition: TERMS: 1. Accounting equation 2. Asset 3. Balance sheet 4. Expense 5. Income statement 6. Liability 7. Net income 8. Net loss 9. Revenue 10. Cash flow statement 11. Statement of owner's equity DEFINITIONS: A. An economic
1–12 Review the income statement prepared in Starter 1-11. Evaluate the results of 2010 operations for Party Planners Extraordinaire. Was it a good year or a bad year?
1–11 Party Planners Extraordinaire has just completed operations for the year ended December 31, 2010. This is the third year of operations for the company.As the owner, you want to know how well the company performed during the year. To address this question, you have assembled the data below.
1–10 What four main financial statements are provided in a company’s annual report? Examples of two companies’ annual reports are provided in Appendix A and Appendix B at the back of this textbook.
1–9 A potential customer is extremely interested in renting a number of kayaks from Alexis Andrews Kayaks and emails his intention to rent kayaks in the summer. Would an accountant consider this event a transaction to be recorded in the accounting records? Explain.
1–8 Suppose Alexis Andrews Kayaks rents kayaks to tourists. The company purchased a storage building for the kayaks for $150,000 and financed the purchase with a loan of $85,000 and an investment by the owner for the remainder.Use the accounting equation to calculate the owner’s equity amount.
1–7 Match the assumption, principle, or constraint description with the appropriate term by placinga, b,c, d,e, and f on the appropriate line.a. Cost principle ______ Benefits of the information produced by an of measurement accounting system must be greater than the costsb. Going-concern ______
1–6 Awesome Adventures Travel recorded revenues of $2,400 earned on account by providing travel service for clients.Required 1. How much are the business’s cash and total assets, assuming this is the only transaction?2. Name the business asset that was increased as a result of this transaction.
1–5 Snail Creek Kennel earns service revenue by caring for the pets of customers.Snail Creek’s main expense is the salary paid to an employee. Write the accounting equation for (a) the receipt of $420 cash for service revenue earned, and (b) the payment of $1,350 for salary expense.
1–4 Wendy Craven is the proprietor of a property management company near the campus of a local university. The business has cash of $6,000 and furniture that cost $12,000 and has a market value of $16,000. Debts include accounts payable of $5,000. Craven’s personal home is valued at $350,000
1–3 Claire Hunter plans to open Claire Hunter Floral Designs. She is considering the various types of business organizations and wishes to organize her business with unlimited life and limited liability features. Which type of business organization will meet Hunter’s needs best?
1–2 Suppose you need a bank loan to purchase music equipment for Greg’s Groovy Tunes, a company you manage. In evaluating your loan request, the banker asks about the assets and liabilities of your business. In particular, the banker wants to know the amount of the business’s owner’s equity.
1–1 Sherman Lawn Service has been open for one year, and Hannah Sherman, the owner, wants to know whether the business earned a net income or a net loss for the year. First, she must identify the revenues earned and the expenses incurred during the year. What are revenues and expenses?
22. What piece of information flows from the income statement to the statement of owner’s equity? What information flows from the statement of owner’s equity to the balance sheet? What balance sheet item is explained by the cash flow statement?
21. Give another term for the owner’s equity of a proprietorship.
20. What information does the statement of owner’s equity report?
19. Which financial statement is like a snapshot of the entity at a specific time? Which financial statement is like a video of the entity’s operation during a period of time?
18. Give another title for the income statement.
17. What feature of the balance sheet gives this financial statement its name?
16. Give a more descriptive title for the balance sheet.
15. A company reported monthly revenues of $92,000 and expenses of $96,400. What is the result of operations for the month?
14. What role do transactions play in accounting?
13. Explain the difference between an account receivable and an account payable.
12. If assets liabilities owner’s equity, then how can liabilities be expressed?
11. What role does the cost principle of measurement play in accounting?
10. Briefly describe the reliability characteristic.
9. Give four examples of types of accounting entities.
8. Why is the economic-entity assumption so important to accounting?
7. Why do ethical standards exist in accounting? Which professional organizations direct their standards more toward independent auditors? Which organizations direct their standards more toward management accountants?
6. Identify the owner(s) of a proprietorship, a partnership, and a corporation.
5. What organization formulates generally accepted accounting principles? Is this organization a government agency?
4. Name three professional designations of accountants.Also give their abbreviations.
3. Name two important historical reasons for the development of accounting.
2. Identify five users of accounting information and explain how they use it.
1. Distinguish between accounting and bookkeeping.
12. The financial statements that are dated for a time period (rather than for a specific point in time) are the(pp. 21–22)a. Balance sheet and income statementb. Balance sheet and statement of owner’s equityc. Income statement, statement of owner’s equity, and cash flow statementd. All
11. The financial statement that summarizes assets, liabilities, and owner’s equity is called the (p. 20)a. Cash flow statementb. Balance sheetc. Income statementd. Statement of owner’s equity
10. Paying an account payable will (p. 17)a. Increase one asset and decrease another assetb. Decrease an asset and decrease owner’s equityc. Decrease an asset and decrease a liabilityd. Increase an asset and increase a liability
9. Performing a service for a customer or client and the immediate receiving of cash will (p. 16)a. Increase one asset and decrease another assetb. Increase an asset and increase owner’s equityc. Decrease an asset and decrease a liabilityd. Increase an asset and increase a liability
8. Purchasing office supplies on account will (p. 15)a. Increase an asset and increase a liabilityb. Increase an asset and increase owner’s equityc. Increase one asset and decrease another assetd. Increase an asset and decrease a liability
7. If the owner’s equity in a business is $66,000 and the liabilities are $36,000, how much are the assets? (p. 13)a. $30,000c. $102,000b. $66,000d. $36,000
6. A business has assets of $80,000 and liabilities of$120,000. How much is its owner’s equity? (p. 14)a. $0c. $80,000b. ($40,000)d. $200,000
5. If the assets of a business are $187,500 and the liabilities are $89,000, how much is the owner’s equity? (p. 14)a. $276,500c. $187,500b. $98,500d. $89,000
4. The economic resources of a business are called (p. 13)a. Assetsc. Owner’s equityb. Liabilitiesd. Accounts payable
3. You have purchased some T-shirts for $2,000 and can sell them immediately for $3,000. What accounting assumption or principle governs the amount at which to record the goods you purchased? (p. 12)a. Economic-entity assumptionb. Reliability characteristicc. Cost principled. Going-concern
2. Which of the following forms of business organization is an “artificial person’’ and must obtain legal approval from the federal government or a province to conduct business? (p. 8)a. Law firmc. Partnershipb. Proprietorshipd. Corporation
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