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intermediate accounting

Accounting 9th edition Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett - Solutions

The income statement of Peter’s Pest Control for the month of August 2016 shows a profit of $6800 based on:Services revenue $15200Wages expense
Calvin’s Cleaning has employed you to investigate whether any accrual entries are needed in the business. On completion of your investigation on 30 June, you have discovered that the following items need attention:1. Unearned cleaning services revenue now earned, $3200.2. Depreciation not
Victoria Holmes registered as a financial adviser several years ago. An income statement for the current period, prepared using cash accounting, is presented below. GST is ignored.HOLMES’ FINANCIAL ADVISORY SERVICEIncome Statementfor the year ended 30 June 2017Income: Fees revenueLess:
1. During March, Thuy Bui’s business performed services for a specific customer for which the fee was $9000. Payment was received in the following April.(a) Was the revenue earned in March or April?(b) What account should be debited in (i) March and (ii) April?2. During the month a business
At the end of the first year of operations, Arch Etec, owner of Architect Designs, engaged you to prepare yearly financial statements for the year ended 30 June 2016, on both the cash basis and the accrual basis. The following data are a summary of selected transactions that occurred during the
Match the end-of-financial-year adjustments (for each independent situation) to the appropriate journal entry.Adjustments1. Portion of prepaid insurance which has now expired (been used up)2. Revenue earned but not yet received3. Insurance expense which has
Describe the operating cycle. Is the operating cycle definition related in any way to the definitions of current and non-current assets? Explain.
‘Why would we bother classifying assets in order of their liquidity on a statement of financial position? After all, the value placed on assets is not a true reflection of how much we could sell them for.’ Discuss.
The Claremont Cricket Club collects membership fees of $100 in advance from its members at the beginning of October each year for the summer season, which ends in April. This entitles members to free entry to all games played at the home ground for the season. The club’s financial year ends on 31
On 31 March, Padbury Publishers received a subscription of $240 for the supply of twelve monthly magazines, beginning in April. At the end of the reporting period, 30 June, the accountant suggested that the owner make an adjusting entry to defer the revenue on nine issues until the new year. The
The owner of a business reviews the income statement prepared by you and asks, ‘Why do you report a profit of only $30 000 when cash collections of $100 000 were received and cash payments for the period totalled only $50 000 for expenses?’ How would you respond to the owner’s question?
‘If adjusting entries are not recorded in the accounts at the end of each month but are included on a worksheet for interim financial statements, why do we need to record them in the accounts for the financial statements at the end of the financial year?’ Discuss.
‘Why are adjusting entries necessary? Surely they cause too much delay in preparing financial statements, and the financial effect of any entries made is immaterial in the long run.’ Respond to this criticism.
During the year, the publishers of Fishing for the Family, a monthly magazine, received cash for a 3-year magazine subscription. A credit was made to the Unearned Subscriptions Revenue account.(a). Is the required adjusting entry made at the end of the period an example of accrual or a
Explain why the purchase of supplies is usually recorded in an asset account rather than in an expense account. If supplies were expensed when purchased, which accounts should be debited and which credited at the end of the period in order to reflect the amount of supplies on hand?
How is profit determined under(a) The cash basis of accounting (b) The accrual basis of accounting?
Refer to the consolidated financial statements in the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions:Required1. What is the total value in the consolidated financial statements for each of the following items at the end of
Big Business Tobacco (BBT) is a large Australian producer of tobacco products including a market-leader brand of cigarettes. With the continuing development of Asian countries such as China and its move to a market-based economy, the company has made the decision to sell its cigarettes in this
A. Decide which general journal entries are correct and which ones are incorrect.B. For each general journal entry that is incorrect, prepare the correcting journal entry.C. Which of the incorrect journal entries would prevent the trial balance from balancing?D. What was the correct profit figure
Your first assignment on your new job was to determine why the 31 December 2015 trial balance did not balance. In your review of the records you uncovered a number of errors described below:1. The Sundry Expense account with a balance of $245 was omitted from the trial balance.2. A
In September 2016, Niem Duong opened a car hire business. The following transactions occurred during the first month of the business (ignore GST).Sep.134515181924272930Niem opened a bank account to begin the business and deposited $500000 of her own money.Paid $1200 rent for the premises for
Using the data in problem 3.11, complete requirements A to F assuming the addition of GST of 10% where appropriate. Round your answers to the nearest dollar.A. Prepare general journal entries to record the December transactions. Assume that, for the transaction of 2 December, the loan agreement
In December 2016, Mike Mills opened a miniature golf course to cater for the summer holiday tourists and completed the transactions below during its first month of operations. For the sake of simplicity, GST is ignored.Dec.12461524313131Invested $90 000 capital in the business.Purchased golf clubs
Peter’s Personal Training Service had been in business for several years. In June 2016, as a result of a dispute with the owner, the accountant of the business disappeared and took all the records with her.You have been hired to reconstruct the accounting records, and with this in mind, you
On 1 April 2015, Kenny’s Equipment Hire opened for operations. Kenny Kowslowski contributed the capital of the business of $720000 cash. He has asked you to be record-keeper for the business on a part-time basis, and you initially establish the need for the following accounts (and numbers).
Lewis Edwards decides to branch out on his own and set up his own private practice as an accountant. Events occurring in March 2016 are as follows. Ignore GST.March1234781214192431Deposited $500000 into a business bank account, set up under the business name of Lewis Edwards, Accountant.Hired an
On 1 March 2014, James Taylor decided to open Taylor’s Tailormade that makes suits, trousers and jackets and repairs and alters clothes. He contributed for this purpose sewing equipment $46000 and a commercial van $48 000, and deposited $10000 cash in a business bank account. Transactions during
Roger’s Repair Services had the following transactions during April and May 2016:April17811Cash is received from a customer, D. Lloyd, $8200.Repair services are provided on credit to J. Turner for $12000.A bill for electricity consumed is received, $720.Supplies are requisitioned from storage for
The 31 May 2017 trial balance of Amy Wait, Physiotherapist, is shown below. Ignore GST.AMY WAIT, PHYSIOTHERAPISTTrial Balanceas at 31 May 2017AccountDebitCreditCash at bankAccounts receivableSuppliesPrepaid insuranceFurniture and equipmentAccounts payableElectricity account payableUnearned
The Arid Sands Golf Club was opened for business on 1 July by Todd Simpson. The following selected events and transactions occurred during the first month of operations:July1361018192527293031The owner invested $2500000 cash into the business.Acquired the business of Jeffrey’s Golf World for
Carrying Your Load provides heavy freight services with large trucks. The following transactions were Carrying Your Load. Ignore GST.July124591012121314Craig Dienhoff invested $620000 into Carrying Your Load organised to provide trucking services to remote parts of Australia.Purchased a truck for
On 1 July 2015 Nicole Andreou opened a beauty parlour. The following transactions occurred during the first month of operations (ignore GST):July22346162023Andreou invested $120000 in the business by depositing cash into a business cheque account with the Eastpac Bank.Paid $1800 for the first
Tsz Yeung Printers ledger accounts are listed below: 1. Accounts Payable 2. Accounts Receivable 3. Buildings 4. Cash at Bank 5. Electricity Account Payable 6. GST Payable 7. GST
A. For each of the following errors:(a) indicate whether the error would cause the trial balance to have unequal totals(b) determine the amount by which the trial balance totals would differ(c) determine whether the error would cause the debit total or the credit total to be larger. Ignore GST.1.
Nigel’s Gardening Services trial balance presented below does not balance. In examining the general journal and the general ledger you discover the following information. Ignore GST.1. The balance in the Mortgage Payable account is $5400. To fix 900 credit2. A purchase of lawnmower fuel for
When processing the accounts for Ellise’s Electrical Contractors, the following errors were made:(a) Electrical equipment purchased for $7800 cash was debited to Equipment and credited to Accounts Payable for an incorrect amount of $8700.(b) Collection of an account receivable for $4500 was
Kelly’s Cleaning Services T accounts for 30 April 2017 were as follows:Cash at BankCleaning Equipment2/4800005/417 0005/4170009/48 00010/412 000Loan Payable10/448 000Vehicle10/460000Chris Kelly, Capital2/480000Cleaning Supplies9/48 000RequiredAnalyse the above accounts and describe in
In December 2016, the following transactions occurred in Macchiato’s Coffee Roasters business that supplies cafés and also sells direct to the public:Dec.2Michael Macchiato invested $2 650 000 into the business of Macchiato’s Coffee Roasters by purchasing a fully equipped coffee roasting
The following information relates to the business of Man Ting’s Travel Agency for the month of June 2016:June 1 Man Ting Lau invested $120 000 cash into the new business.2 The business set up an office by purchasing some office equipment for $36 000 cash.3
The following accounts appear in the ledger of the Henrietta’s Huge Hair Hairdressers: Cash at Bank; Accounts Receivable; Hairdressing Equipment; Accounts Payable; Henrietta Bouffant, Drawings; Hairdressing Revenue; Salaries Expense; and Advertising Expense.RequiredA. Prepare the general journal
The general journal of Lenore Grunweld, Property Adviser, contained the entries below for the month of July 2016. GST is ignored.General JournalDateParticularsPost RefDebitCredit2016July 1Cash at BankLenore Grunweld, Capital(Cash invested by owner)150000150000
Each of the following items describes aspects of the business of Lenny Linnehan, lawyer:1. cash which Lenny Linnehan has withdrawn from the business for personal use2. photocopiers, document binding machine and computers3. amounts owing by the business to
The chart of accounts of Pellham Poster Printers contained the following accounts: Cash at Bank; Accounts Receivable; Equipment; Accounts Payable; K. Pellham, Drawings; Printing Fees; Salaries Expense and Advertising Expense. Ignore GST.The following transactions occurred during the month of
The accounts below appear in the chart of accounts of Brightspark Electrical Services. Show whether the normal balance is a debit or a credit. Indicate whether the account would appear in the balance sheet or in the income statement, and under what classification, e.g. liability, asset, equity,
The following transactions were undertaken by Massenburg Personnel Services during the month of February 2016. Ignore GST.1. Invoiced a client for providing advice on current employment legislation, $2400. 2. Paid salaries to staff, $3600.3. Paid an
For each of the following transactions, indicate whether the accounts affected are an asset, a liability, an equity, an income or an expense. Also indicate whether the accounts are being increased or decreased and whether the increase or decrease is a debit or credit. Ignore GST.1.
The following is a list of ledger account titles extracted from the general ledger of J. Wendall, marketing consultant:Wages and SalariesInterestCash at BankJ. Wendall, CapitalAccounts PayableLand (Under Mortgage)FurnitureAccounts ReceivableMotor VehiclesRentMortgage PayableConsultancy
The accountant of a goldmining company in Western Australia has to make a decision about whether to record an accounting transaction or not. The goldmining company discovered an extremely rich seam of gold as a result of exploration activities, 50 kilometres away from its already existing mines.
Explain why when a business pays GST on the purchase of goods or services it records this as GST Receivable and an asset. When a business provides goods or services which are taxable it records the GST component of the transaction as GST Payable, a liability.
Explain the fact that errors can exist even though the sum of the debit account balances may equal the sum of the credit account balances in the trial balance.
Recently, a new student of accounting was overheard making the following remarks: ‘Why are we learning how to use the double-entry system of recording in the accounting cycle? Surely there are good computer packages available these days which can handle all of these details.’ Provide a suitable
Give an example of a transaction that results in:(a) An increase in one asset and an increase in a liability(b) A decrease in one asset but no change in the total assets(c) An increase in one asset and an increase in equity(d) A decrease in one asset and a decrease in a liability(e) A decrease in
Why are journals required as part of the recording process? Would not a set of ledger accounts be sufficient?
Your friend is having difficulty grasping the rules of debits and credits. Using the idea that in some countries vehicles must travel on the left hand side of the road while in others they must travel on the right hand side of the road to explain the rules of debit and credit.
One often hears the statement: ‘Debits are bad and credits are good for the business.’ Do you agree? Why or why not?
The owner of a very small, part-time business is very disorganised and doesn’t like filing invoices, accounts and receipts. ‘What is the point of keeping all that paper work?’, he asks. ‘Once the details have been recorded in the accounting system why waste time and space filing
Indicate whether each of the following events is an internal transaction, an external transaction, or a non-transaction event. Explain your answer in each case:(a) Receipt of money from a customer in payment of services to be provided early in the next accounting period.(b) Equipment is used to
Refer to the latest financial report of Apple on its website, http://investor.apple.com. Answer the following questions using the consolidated balance sheet and notes to the consolidated financial statements.RequiredA. State the accounting equation for Apple in dollar figures at the end of the
Read the following article and answer the questions.A BHP Billiton mining deal being investigated for alleged corruption was personally overseen by Cambodian strong man Hun Sen, diplomatic cables reveal. The mining giant’s aborted attempt to establish a bauxite mine in Cambodia and its
The ownership structure of professional service firms, such as accounting firms, can vary. In an exploratory study, Pickering (2012) compares the performance of accounting firms with different ownership structures. In groups of three or four, consider the following issues related to Pickering
Read the following article from Australian CPA.While rugby stars are heroes to many, when checking the books they become a complex intangible. Rosalind Whiting and Kyla Chapman investigate the merits of Human Resource Accounting in professional sport.Australia, New Zealand and rugby union — a
Toby and Talea McKellar are the joint owners of Beaut Beach Caravan Park, which is near a swimming beach popular during the summer months. The park provides not only camping facilities for caravans and tents but also up-market cabins with kitchenettes and ensuites. For the year ended 30June 2016,
Jones’ Mower Repairs began operations on 1 August 2016 and completed the following transactions during the first month.1. Darren Jones deposited $35 000 of his personal funds in a current account at a bank opened in the name of the business.2. Mower repair equipment was
The following schedule shows the effect of several transactions on the accounting equation of Preya Palit and the balance of each item in the equation after each transaction. Write a sentence to explain the nature of each transaction.Assets=Liabilities+EquityCash at Bank+Accounts Receivable+Office
Month-end balance sheet amounts for the legal practice of Adam Booth, a local lawyer, for 3consecutive months of 2016 are shown below. The information is complete except for the balance in the Capital account.OctoberNovemberDecemberCash at bankAccounts receivablePrepaid insuranceOffice
For each of the following, describe a transaction that would have the stated effect on the accounting equation:1. Increase an asset and increase a liability2. Decrease one asset and increase another asset3. Decrease an asset and decrease equity4.
Identify by letter the assumption or characteristic of information which best represents the situations given.A. Accounting entity assumptionB. Accrual basis assumptionC. Going concern assumptionD. Period assumptionE. RelevanceF. Faithful representationG. MaterialityH. Comparability
A friend who has established a new dance studio, Hip and Hop, has asked you to give some advice as to the contents of financial statements. Transactions of Hip Hop include:(a) contribution of cash by your friend to the business(b) purchase of studio sound equipment on credit(c)
Classify each of the following activities as being either operating, investing or financing for the purpose of preparing a statement of cash flows. Indicate whether there is an inflow (I) or outflow (O) of cash:(a) Sale of land and buildings for cash(b) Payment of wages to employees(c) Withdrawal
Equity balances for Sen Widyaya appearing in the balance sheets of Widyaya’s Window Washing Services as at 30 June 2016, 2015 and 2014 are set out below:30 June 201630 June 201530 June 2014EQUITYSen Widyaya, Capital$27300$30000$28000During 2014–15, Sen withdrew $25000 for personal use and also
Sarah Hodge is a self-employed piano teacher operating her business from home. She keeps her accounting records for business activities completely separate from her records for personal activities. At 30 June 2015, Sarah had business assets and liabilities worth $62 500 and $41 000 respectively. At
During the year ended 30 June 2016, Skilled Services, a provider of temporary secretary personnel, had collected receipts from clients for a total value of $250 000. Wages of $136 000 had been paid to the temporary workers, rental of office space and electricity costs were $12 000 and $13 700
Financial items for George Karatsis IT Services on 31 May 2016 are presented below in alphabetical order.Accounts payableAccounts receivableBuildingCash at bank$640007000052000061000LandMortgage payableOffice equipmentOffice supplies$25000071000018000034000Required:A. Prepare a balance sheet
Eric Lu began a small business on 1 July 2015 by depositing $250000 into a business bank account. On 30 June for the next 3 years, the assets and liabilities of the business were as follows:30 JuneTotal assetsTotal liabilities201620172018$580000650000740 000$350000370000420000Required:By
List the effect of each of the following transactions upon any or all of the four financial statements of a business. Apart from indicating the financial statement(s) involved, use appropriate phrases such as ‘increase total assets’, ‘decrease equity’, ‘increase income’, ‘decrease
The following events occurred during the month of September 2016 for the business of Eliza’s Webdesign Service:Sept.124678Eliza deposited $40000 cash into the business bank account.A computer, telephone system and printer were purchased at a cost of $10000 cash.A part-time receptionist was hired
Toby and Talea McKellar are the joint owners of Beaut Beach Caravan Park, which is near a swimming beach popular during the summer months. The park provides not only camping facilities for caravans and tents but also up-market cabins with kitchenettes and ensuites. For the year ended 30June 2016,
Jones’ Mower Repairs began operations on 1 August 2016 and completed the following transactions during the first month.1. Darren Jones deposited $35 000 of his personal funds in a current account at a bank opened in the name of the business.2. Mower repair equipment was
The following schedule shows the effect of several transactions on the accounting equation of Preya Palit and the balance of each item in the equation after each transaction. Write a sentence to explain the nature of each transaction.Assets=Liabilities+EquityCash at Bank+Accounts Receivable+Office
Month-end balance sheet amounts for the legal practice of Adam Booth, a local lawyer, for 3consecutive months of 2016 are shown below. The information is complete except for the balance in the Capital account.OctoberNovemberDecemberCash at bankAccounts receivablePrepaid insuranceOffice
For each of the following, describe a transaction that would have the stated effect on the accounting equation:1. Increase an asset and increase a liability2. Decrease one asset and increase another asset3. Decrease an asset and decrease equity4.
Identify by letter the assumption or characteristic of information which best represents the situations given.A. Accounting entity assumptionB. Accrual basis assumptionC. Going concern assumptionD. Period assumptionE. RelevanceF. Faithful representationG. MaterialityH. Comparability
A friend who has established a new dance studio, Hip and Hop, has asked you to give some advice as to the contents of financial statements. Transactions of Hip Hop include:(a) contribution of cash by your friend to the business(b) purchase of studio sound equipment on credit(c)
Classify each of the following activities as being either operating, investing or financing for the purpose of preparing a statement of cash flows. Indicate whether there is an inflow (I) or outflow (O) of cash:a) Sale of land and buildings for cashb) Payment of wages to employeesc) Withdrawal of
Equity balances for Sen Widyaya appearing in the balance sheets of Widyaya’s Window Washing Services as at 30 June 2016, 2015 and 2014 are set out below:30 June 201630 June 201530 June 2014EQUITYSen Widyaya, Capital$27300$30000$28000During 2014–15, Sen withdrew $25000 for personal use and also
Sarah Hodge is a self-employed piano teacher operating her business from home. She keeps her accounting records for business activities completely separate from her records for personal activities. At 30 June 2015, Sarah had business assets and liabilities worth $62 500 and $41 000 respectively. At
During the year ended 30 June 2016, Skilled Services, a provider of temporary secretary personnel, had collected receipts from clients for a total value of $250 000. Wages of $136 000 had been paid to the temporary workers, rental of office space and electricity costs were $12 000 and $13 700
Financial items for George Karatsis IT Services on 31 May 2016 are presented below in alphabetical order.Accounts payableAccounts receivableBuildingCash at bank$640007000052000061000LandMortgage payableOffice equipmentOffice supplies$25000071000018000034000Required:A. Prepare a balance sheet
‘Faithful representation’ is a fundamental characteristic of financial information. This term replaced ‘reliable’ in the 2010 revisions to the Conceptual Framework. Discuss the rationale for this change.
Management expert Professor Henry Mintzberg has argued that a manager’s work can be characterised by ten common roles falling into three categories: informational (managing by information), interpersonal (managing through people), and decisional (managing through action). Provide an example of
Your doctor knows that you are studying accounting. He has recently received the annual report for a company in which he is a shareholder. The financial report within the annual report is lengthy and your doctor requests your advice as to whether he should contact the company to complain that the
Distinguish between the concepts of consistency and comparability and discuss if the same accounting method should always be applied consistently in financial statements.
List and define the fundamental and enhancing characteristics of financial information.
Discuss the significance of the following assumptions in the preparation of an entity’s financial statements:(a) Entity assumption(b) Accrual basis assumption(c) Going concern assumption(d) Period assumption
Moonshine Enterprises hired an accountant at the rate of $1000 per week. The person is to commence duty on 1 February. Explain if the business has a liability in respect of the accountant’s salary as at 1 February.
As the accountant at a local council, explain to the Chief Executive Officer if the land under roads is an asset that should be recorded on the Council’s balance sheet.
A local football club has won the premiership for the past four years. Accordingly, the club has a very strong supporter base. Rationalise if the players would be regarded as an asset of the business to be recognised on the balance sheet.
Discuss whether an asset needs to be legally owned to be recorded as an asset on the balance sheet.
Analyse why the cash received from the sale of a good is income yet the cash contributed by the owner is not income.
The coach of the local football team was trying to motivate the team before a big match. He said: ‘Our team is like any organisation. We must have goals, we must practise the usual management functions, and we must make use of all relevant information’. Do you agree with the coach? Explain your

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