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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions

2. Explain the relationships between adjustments and (a) the time period assumption (from chapter 3), (b) the revenue principle, and (c) the matching principle.
1. Briefly explain the purposes of adjustments.
CP3-7 Analyzing Transactions and Preparing an Unadjusted Trial Balance Assume you recently started a new company that rents machines for making frozen drinks such as smoothies, frozen juices, tea slush, and iced cappuccinos. For $100, your business will deliver a machine, provide supplies (straws
CP3-6 Analyzing Changes in Accounts and Preparing a Trial Balance: Critical Thinking Stephen Hordichuk organized Hordichuk Painting Service Company as a sole proprietorship on January 20, 2010. The following is a schedule of the cumulative account balances immediately after each of the first ten
CP3-5 Analyzing a Mini-Case: Ethical Decision Making Mike Lynch is the manager of an upstate New York regional office for an insurance company. As the regional manager, his pay package includes a base salary, commissions, and a bonus when the region sells new policies in excess of its quota. Lately
CP3-4 Examining a Real-Life Example: Ethical Decision Making Read the excerpt from a September 2, 2002, article in Fortune magazine and answer the questions that follow it.Required: 1. In this chapter, you learned that when a company incurs a cost, its accountants have to decide whether to record
CP3-3 Examining the Income Statement: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. (See CP1-3
CP3-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. Did The Home Depot’s total revenues increase or
PB3-6 Analyzing the Effects of Transactions Using T-Accounts and Preparing an Unadjusted Trial Balance Margaret Foster established Body and Soul in Cortland, New York, on March 1, 2010. The company provides massage therapy and other spa services. You have been hired as the new business manager. The
PB3-5 Analyzing the Effects of Transactions Using T-Accounts and Preparing an Unadjusted Trial Balance Jessica Pothier opened FunFlatables on June 1, 2011. The company rents out moon walks and inflatable slides for parties and corporate events. The business also has obtained the use of an abandoned
PB3-4 Recording Journal Entries John Cirba established Cirba Moving & Storage on April 1, 2010. The following transactions occurred during the business’s most recent quarter.a. Received $100,000 from John Cirba to establish the sole proprietorship.b. Purchased three moving vans costing $80,000
PB3-3 Recording Journal Entries Diana Mark is the president of ServicePro, a sole proprietorship that provides temporary employees for not-for-profit organizations. ServicePro has been operating for five years; its revenues are increasing with each passing year. You have been hired to help Diana in
PB3-2 Recording Nonquantitative Journal Entries The following is a series of accounts for Cohen & Sons Consulting, owned and managed by Alan Cohen. The company has been operating for five years. The accounts are listed alphabetically and numbered for identification. Following the accounts is a
PB3-1 Recording Nonquantitative Journal Entries Abercrombie & Fitch Co. is a specialty retailer of casual apparel. The company’s brand was established in 1892. It was first publicly traded in 1996 and was spun off from The Limited in 1998. The following is a series of accounts for
PA3-6 Analyzing the Effects of Transactions Using T-Accounts and Preparing an Unadjusted Trial Balance Randy Ellis established Spicewood Stables in Dripping Springs, Texas, on April 1, 2010. The company provides stables, care for animals, and grounds for riding and showing horses. You have been
PA3-5 Analyzing the Effects of Transactions Using T-Accounts and Preparing an Unadjusted Trial Balance Barbara Jones, a textbook editor, opened Barb’s Book Fixing on February 1, 2010. The business specializes in editing accounting textbooks. You have been hired as manager. Your duties include
PA3-4 Recording Journal Entries Robin Harrington established Time Definite Delivery on January 1, 2011. The following transactions occurred during the company’s most recent quarter.a. Received $80,000 from Robin Harrington to establish the sole proprietorship.b. Provided delivery service to
PA3-3 Recording Journal Entries Ryan Olson organized MeToo, a company providing online networking management services on MySpace, Facebook, Friendster, and other electronic social networks. Ryan believes that college and high school students make up his target market. You have been hired to record
PA3-2 Recording Nonquantitative Journal Entries The following is a series of accounts for Jay’s Laundry Services owned and managed by Jay Lewis. The company has been operating for two years. The accounts are listed alphabetically and numbered for identification. Following the accounts is a series
PA3-1 Recording Nonquantitative Journal Entries The following list includes a series of accounts for B-Ball Stores, a sole proprietorship owned by Ralph Ball. The business has been operating for three years. These accounts are listed alphabetically and numbered for identification. Following the
E3-22 Comprehensive Exercise In 2002, Brad McQuaid and Jeff Butler founded Sigil Games Online, Inc. (now owned by Sony Online Entertainment) with the mission of creating massively multiplayer online (MMO) games. Its “vanguard” product has been the game Vanguard: Saga of Heroes, released in
E3-21 Determining Financial Statement Effects of Various Transactions John “Bum” Andrews founded EZ Reader in January 2010 to provide a service in which an employee follows a student around reading assigned textbook chapters aloud so that the student will not have to. Selected transactions for
E3-20 Inferring Income Statement Transactions and Creating Financial Statements An analysis of transactions made during July 2009 by Zelkind Tech Services, an Internet service provider owned by Josh Zelkind, during its first month of operations, follows. Increases and decreases in owner’s equity
E3-19 Creating an Unadjusted Trial Balance Based on the transactions posted to T-accounts in E3-18, create an unadjusted trial balance for Sifuentes Consulting for the month ended January 31, 2011.
E3-18 Posting to T-Accounts For each transaction in E3-16 (including the example), post the effects to the appropriate T-accounts and determine ending account balances. Beginning account balances have been given. An example is provided. +Dr Cash (A) Cr- 1/1/11 10,000 9,500 +Dr Accounts Receivable
E3-17 Preparing Journal Entries For each transaction in E3-16 (including the example), write the journal entry using the format shown in this chapter.
E3-16 Determining Financial Statement Effects of Several Transactions Sifuentes Consulting, owned and managed by José Sifuentes, provides marketing consulting services. In January 2011, Sifuentes Consulting posted the following transactions.a. (Example) Received $9,500 cash for consulting services
E3-15 Finding Financial Information as an Investor You are evaluating your current portfolio of investments to determine those that are not performing to your expectations. You have all of the companies’ most recent annual reports. Required: For each of the following, indicate where you would
E3-14 Inferring Transactions and Computing Effects Using T-Accounts The Washington Post Company is best known for publishing The Washington Post but also publishes Newsweek magazine and owns Kaplan, Inc. (admissions test preparation services among other services) and various television stations and
E3-13 Inferring Operating Transactions and Preparing an Unadjusted Trial Balance Virtual Golf Center, owned by Mike McCall, operates indoor golf simulators that allow individual customers and golf club members to experience courses such as Pebble Beach and Augusta without leaving their own
E3-12 Preparing an Unadjusted Trial Balance Refer to E3-11. Required: Use the balances in the completed T-accounts in E3-11 to prepare an unadjusted trial balance at the end of January 2010.
E3-11 Recording Journal Entries and Posting to T-Accounts Ricky’s Piano Rebuilders, owned by Jon Ricky, has been operating for one year (2009). At the start of 2010, its income statement accounts had zero balances and its balance sheet account balances were as follows:Cash $ 6,000 Building $
E3-10 Recording Journal Entries Rowland & Sons Air Transport Service has been in operation for three years. The following transactions occurred in February 2009: Feb. 1 Paid $200 for rent of hangar space in February. Feb. 2 Purchased fuel costing $450 on account for the next flight to Dallas. Feb.
E3-9 Recording Journal Entries Greek Peak is a ski resort in upstate New York. The company sells lift tickets, ski lessons, and ski equipment. It operates several restaurants and rents townhouses to vacationing skiers. The following hypothetical December 2011 transactions are typical of those that
E3-8 Recording Journal Entries Sysco, formed in 1969, is America’s largest marketer and distributor of food service products, serving nearly 250,000 restaurants, hotels, schools, hospitals, and other institutions. The following transactions are typical of those that occurred in a recent year.
E3-6 Determining Financial Statement Effects of Various Transactions The following transactions occurred during a recent year:a. (Example) Received cash investment from owner.b. Borrowed cash from local bank.c. Purchased equipment on credit.d. Earned revenue and collected cash.e. Incurred expenses,
E3-5 Identifying Expenses Under accrual basis accounting, expenses are recognized when incurred, which means the activity giving rise to the expense has occurred. The following transactions occurred in January 2009:a. American Express pays its salespersons $3,500 in commissions related to December
E3-4 Identifying Expenses Under accrual basis accounting, expenses are recognized when incurred, which means the activity giving rise to the expense has occurred. Assume the following transactions occurred in January 2010:a. Gateway pays its computer service technicians $90,000 in salary for the
E3-3 Identifying Revenues According to the revenue principle, revenues should be recognized when they are earned, which happens when the company performs acts promised to the customer. For most businesses, this condition is met at the point of delivery of goods or services. The following
E3-2 Identifying Revenues According to the revenue principle, revenues should be recognized when they are earned, which happens when the company performs acts promised to the customer. For most businesses, this condition is met at the point of delivery of goods or services. The following
E3-1 Matching Definitions with Terms Match each definition with its related term by entering the appropriate letter in the space provided. Term Definition ____ 1. Expenses A. Record expenses when incurred in earning revenue. ____ 2. Matching principle B. Liability account used to record the
M3-18 Preparing an Income Statement Henry and Richard Bloch founded H&R Block in 1955. Henry, who served as a navigator on a B-17 bomber in World War II, and Richard, who founded his first business in the 4th grade and attended Wharton at age 16, built H&R Block into the world’s largest
M3-17 Preparing an Income Statement The following accounts are from a recent set of financial statements of Time Warner, Inc. Dollars are in millions.Required: Assume that the year ended on December 31, 2010. Prepare a classified income statement for the year. Note that some accounts listed are not
M3-16 Preparing an Income Statement from a Trial Balance The following unadjusted trial balance as of December 31, 2010, is for Buckeroo U!, a sole proprietorship owned by Tim Carey. The company specializes in horse-breaking services and rodeo lessons.Required: Using the unadjusted trial balance
M3-15 Preparing an Income Statement Given the transactions in M3-13 and M3-14 (including the examples), prepare an income statement based on unadjusted account balances for Swing Hard for the month ended February 28, 2009.
M3-14 Determining the Financial Statement Effects of Operating Activities Involving Expenses The following transactions are February 2009 activities of Swing Hard, a sole proprietorship owned by Doris Heald. The business offers indoor golfing lessons. For each of the following transactions,
M3-13 Determining the Financial Statement Effects of Operating Activities Involving Revenues The following transactions are February 2009 activities of Swing Hard, a sole proprietorship owned by Doris Heald. The business offers indoor golfing lessons. For each of the following transactions,
M3-12 Recording Expenses For each transaction in M3-10, write the journal entry using the format shown in the chapter.
M3-11 Recording Revenues For each transaction in M3-9, write the journal entry using the format shown in the chapter.
M3-10 Identifying Expenses The following transactions are February 2009 activities of Swing Hard, a sole proprietorship owned by Doris Heald. The business offers indoor golfing lessons. If an expense is to be recognized in February, indicate the amount. If an expense is not to be recognized in
M3-7 (including the examples), prepare an income statement based on unadjusted account balances for Ben’s Extreme Bowling Center for the month ended July 31, 2011. M3-9 Identifying Revenues The following transactions are February 2009 activities of Swing Hard, a sole proprietorship owned by Doris
M3-8 Preparing an Income Statement Given the transactions in M3-6 and
M3-7 Determining the Financial Statement Effects of Operating Activities Involving Expenses The following transactions are July 2011 activities of Ben’s Extreme Bowling Center owned by Ben Baxter, who owns and operates several bowling centers. For each of the following transactions, complete the
M3-6 Determining the Financial Statement Effects of Operating Activities Involving Revenues The following transactions are July 2011 activities of Ben’s Extreme Bowling Center owned by Ben Baxter, who owns and operates several bowling centers. For each of the following transactions, complete the
M3-5 Recording Expenses For each transaction in M3-3, write the journal entry using the format shown in the chapter.
M3-4 Recording Revenues For each transaction in M3-2, write the journal entry using the format shown in the chapter.
M3-3 Identifying Expenses The following transactions are July 2011 activities of Ben’s Extreme Bowling Center owned by Ben Baxter, who owns and operates several bowling centers. If an expense is to be recognized in July, indicate the amount. If an expense is not to be recognized in July, explain
M3-2 Identifying Revenues The following transactions are July 2011 activities of Ben’s Extreme Bowling Center owned by Ben Baxter, who owns and operates several bowling centers. If revenue is to be recognized in July, indicate the amount. If revenue is not to be recognized in July, explain why.
M3-1 Reporting Cash Basis versus Accrual Basis Income Mostert Music Company had the following transactions in March:a. Sold music lessons to customers for $10,000; received $6,000 in cash and the rest on account.b. Paid $600 in wages for the month.c. Received a $200 bill for utilities that will be
10. Which of the following is the entry a law firm would record when it receives a payment from a new client that will be earned when the firm provides services in the future?a. Debit to Accounts Receivable; credit to Legal Services Revenue.b. Debit to Unearned Revenue; credit to Legal Services
9. Webby Company reported the following amounts on its income statement: Service Revenues, $31,600; Interest Expense, $300; and Net Income, $1,600. If the only other account reported on the income statement was for “selling expenses,” what is its amount?a. $ 2,200b. $29,700c. $30,000d. $30,900
8. Which account is least likely to be debited when revenue is recorded?a. Accounts Payableb. Accounts Receivablec. Cashd. Unearned Revenue
7. When expenses exceed revenues in a given period (and there are no gains or losses),a. Owner’s equity will not be impacted.b. Owner’s equity will be increased.c. Owner’s equity will be decreased.d. One cannot determine the impact on owner’s equity without additional information.
6. When should a company report the cost of an insurance policy as an expense?a. When the company first signs the policy.b. When the company pays for the policy.c. When the company receives the benefits from the policy over its period of coverage.d. When the company receives payments from the
5. How will a manager’s decision to record a payment as an asset rather than as an expense affect net income for the business in the current period?a. Net income will be higher.b. Net income will be lower.c. Net income will not be affected by this decision.d. The effect cannot be determined.
4. When should businesses that sell gift certificates to customers report revenue?a. When the gift certificate is sold and cash is received.b. When the gift certificate is used by the customer.c. At the end of the year in which the gift certificate is sold.d. None of the above.
3. The matching principle controlsa. Where on the income statement expenses should be presented.b. How costs are allocated between Cost of Goods Sold (sometimes called Cost of Sales) and general and administrative expenses.c. The ordering of current assets and current liabilities on the balance
2. Which of the following accounts normally has a debit balance?a. Unearned Revenue.b. Rent Expense.c. Retained Earnings.d. Sales Revenue.
1. Which of the following items is not a specific account in a company’s chart of accounts?a. Accounts Receivable.b. Net Income.c. Revenue.d. Unearned Revenue.
15. What are three limitations of the income statement that often lead to misconceptions?
14. For each of the following situations, indicate whether it represents an accounting error and explain why it is or is not an error. Also indicate whether a trial balance would indicate that an error exists for each situation.a. Cash received from a customer who is paying on his or her account
13. What is the difference between Wages Payable and Wages Expense?
12. What is the difference between Accounts Receivable and Revenue?
11. Complete the following table by entering either increase or decrease in each cell: Item Debit Credit Revenues Expenses
10. Complete the following table by entering either debit or credit in each cell: Item Increase Decrease Revenues Expenses
9. Explain why revenues are recorded as credits and expenses as debits.
8. Explain why owner’s equity increases by revenues and decreases by expenses.
7. Explain the matching principle.
6. When is revenue typically recognized under accrual basis accounting?
5. What does it mean to “recognize” an accounting transaction?
4. Why is it appropriate to use a cash basis of accounting in your personal life but not in the business world?
3. Define accrual basis accounting and contrast it with cash basis accounting.
2. When accounting was developed in the 14th and 15th centuries, businesses had very short lives. For instance, a business might have been created for a single shipment of goods from Europe to North America. After delivering the goods and distributing profits among those who financed the shipment,
1. Indicate the income statement equation and define each element.
CP2-7 Preparing and Analyzing a Balance Sheet: Decision Making as a Financial Analyst Your best friend from home writes you a letter about an investment opportunity that has come her way. Her neighbor Josh Dewey is establishing a new business and has asked her to lend the business $20,000 (her
CP2-6 Evaluating the Reliability of a Balance Sheet: Financial Analysis and Critical Thinking Betsey Jordan asked a local bank for a $50,000 loan to expand her small company. The bank asked Betsey to submit a financial statement of the business to supplement the loan application. Betsey prepared
CP2-5 Analyzing a Mini Case: Ethical Reasoning, Critical Thinking, and Communication You work as an accountant for a small land development company that desperately needs additional financing to continue in business. Your company’s president is meeting with the manager of a local bank at the end
CP2-4 Examining Real-Life Fraud: Ethical Reasoning, Critical Thinking, and Communication In the world of financial fraud, the “Ponzi scheme” is famous. Here is the story behind how the scam received its name. Charles Ponzi started the Security Exchange Company on December 26, 1919. He thought
CP2-3 Examining the Balance Sheet: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. (See CP1-3 in
CP2-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. Use the companies’
CP2-1 Finding and Analyzing Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. What is the company’s fiscal year-end?
PB2-6 Using Technology for Analyzing Transactions and Preparing a Balance Sheet Assume that you recently obtained a part-time accounting position at the corporate office of Estée Lauder headquartered in New York. Estée Lauder is one of the world’s leading manufacturers and marketers of quality
PB2-5 Recording and Posting Transactions; Preparing and Interpreting the Balance Sheet Starbucks is a coffee company—a big coffee company. During a 10-year period, the number of Starbucks locations increased from 165 to more than 5,800 stores—an average increase of 43 percent every year. The
PB2-4 Determining Financial Statement Effects of Various Transactions Steve Limberg established The Swimmer’s Cove, a sole proprietorship selling swimming apparel and equipment, in 2006. At December 31, 2011, the accounting records reflected total assets of $850,000 and total liabilities of
PB2-3 Recording and Posting Transactions; Preparing and Interpreting the Balance Sheet Ethan Allen Interiors is a leading manufacturer and retailer of home furnishings with 315 retail stores in the United States and abroad. The following is adapted from Ethan Allen’s June 30, 2007, balance sheet
PB2-2 Recording and Posting Transactions; Preparing and Interpreting the Balance Sheet Susan Engel established Boston Bed & Breakfast as a sole proprietorship on July 1, 2009. The company’s chart of accounts included the following: Accounts Payable Notes Payable Building S. Engel, Capital Cash
PB2-1 Determining Financial Statement Effects of Various Transactions Swish Watch Repair Company owned by Jacob Swish repairs expensive watches for customers. The company has been in business for three years. At the end of the most recent year, 2009, the accounting records reported total assets of
PA2-6 Using Technology for Analyzing Transactions and Preparing a Balance Sheet Assume that you recently obtained a part-time accounting position at the corporate headquarters of Elizabeth Arden in Miami Lakes, Florida. Elizabeth Arden is a leading marketer and manufacturer of prestige beauty
PA2-5 Recording and Posting Transactions; Preparing and Interpreting the Balance Sheet Peta Plastics Company has been operating for three years as a sole proprietorship owned and managed by James Peta. The December 31, 2009, account balances are: Cash $ 35,000 Land $ 35,000 Accounts Receivable

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