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Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
CHAPTER 3
The Accounting Information System
Brief A B
Study Objectives Questions Exercises Exercises Problems Problems BYP
5. Prepare a trial balance. 19, 20, 21, 11, 12, 13 9, 10, 11, 7A, 8A, 7B, 8B, 4, 5, 7
22, 23 12 9A, 10A, 9B, 10B,
11A 11B
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
ANSWERS TO QUESTIONS
1. An accounting information system is a system of collecting and processing transaction data
and communicating financial information to decision-makers. Some factors that shape
these systems are the type of business and its transactions, the size of the company, the
amount of data, and the information that management and other users need.
2. Only events that cause a change in an asset, liability, or shareholders’ equity account are
recorded as accounting transactions. Other events, such as the agreement to provide a
service, do not immediately impact an asset, liability, or shareholder’s equity account and,
therefore, are not considered an accounting transaction.
3. Accounting transactions are the economic events of the company recorded by accountants
because they affect the accounting equation assets = liabilities + shareholders’ equity.
(a) Winning an award is not an accounting transaction, as it does not affect the
accounting equation. The award did not involve the receipt of an asset, such as cash.
(b) Supplies purchased on account is an accounting transaction because it affects the
accounting equation (assets are increased because supplies were received and
liabilities are increased because accounts payable were incurred).
(c) A shareholder dying is not an accounting transaction, as it does not affect the
accounting equation.
(d) Paying a cash dividend to shareholders is an accounting transaction as it does affect
the accounting equation (shareholders’ equity is decreased and assets (cash) are
decreased).
(e) The agreement to provide legal services to the company is not an accounting
transaction as it does not affect the accounting equation. No expense has been
incurred yet and no liabilities like accounts payable have been affected.
4. Yes, a business can enter into a transaction in which only the left side of the accounting
equation is affected. An example would be a transaction where an increase in one asset is
offset by a decrease in another asset. A decrease in the Accounts Receivable account
which is offset by an increase in the Cash account is a specific example (that is, a
customer paying for goods previously purchased on account).
5. (a) Decrease assets and decrease shareholders' equity (an expense has been
increased).
(b) Increase assets and increase liabilities.
(c) Increase assets and increase shareholders' equity (common shares has increased).
(d) Decrease shareholders' equity (an expense has been increased) and decrease
assets.
(e) Increase one asset (cash) and decrease another asset (accounts receivable).
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
6. Natalie is incorrect. A debit balance only means that debit amounts or transactions
affecting an account exceed the credit amounts or transactions in an account. Conversely,
a credit balance only means that credit amounts are greater than debit amounts in an
account. Thus, a debit or credit balance is neither favourable nor unfavourable.
7. Shareholders' equity consists of different components, and they do not all move in the
same direction. Shareholders’ equity is usually comprised of share capital (which is
increased by credits) and retained earnings. Retained earnings can be further subdivided
into revenues and expenses and dividends which are then added to opening retained
earnings. Revenues are increased by credits while expenses and dividends are increased
by debits.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
11. (a) A general journal is a book of original entry, in which transactions are recorded in
chronological order.
(b) The general journal facilitates the recording process by documenting the debit and
credit effects on specific accounts. The general journal discloses the complete effect
of a transaction in one place, including an explanation and, where applicable,
identification of the source document. The general journal provides a chronological
record of transactions and it helps to prevent and locate errors, because the debit
and credit amounts for each entry can be quickly compared.
12. (a) Including a date in a journal entry is important because it is necessary to identify
which accounting period is affected by a transaction. Other transactions may follow
which are based on the date of the journal entry. For example, the date a sales
invoice is recorded may determine when the date of payment for the invoice is due.
(b) Recording debit entries first is important because it visually separates the accounts
involved in the left side of the transaction.
(c) Indenting credit entries is important because the indentation differentiates debits
from credits and decreases the chance of switching the debit and credit amounts by
mistake.
(d) Including a brief explanation to the journal entry is important because it provides the
background information that might be necessary to interpret the transaction
recorded.
13. While the account title choices suggested by Meghan provide details of the type of truck
the company purchased, the title of the account used to record the purchase should be
more generic to include all types of trucks that can be owned and used by the business.
Ambiguous or multiple account titles with similar names can lead to incorrect financial
reporting. Unless the business is intending on purchasing more than one type of truck the
name of the account that should be used is Trucks or Vehicles.
14. This would not be efficient because the journal provides a record that shows both “sides” of
the transaction along with a description of the transaction. This information is vital to the
understanding of the event. Furthermore, if there is a large volume of transactions, a
company will not post individual transactions to the general ledger; instead totals of
transactions are posted. For example, if 1,000 sales transactions occurred in a month, only
one amount (the total of sales for the month) would be posted to the sales account in the
general ledger (there would still be 1,000 journal entries in the general journal, however).
15. Posting should be done on a timely basis, at least monthly, so that account balances can
be monitored and reconciled.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
17. (a) The chart of accounts is a list of a company’s accounts. The chart of accounts is
important, particularly for a company that has a large number of accounts because it
helps organize the accounts and identify their location in the ledger.
(b) Numbering the accounts helps identify and sort the accounts.
18. Cash, supplies, prepaid insurance, unearned revenue, common shares, dividends, service
revenue, and income tax expense.
19. (a) A trial balance is a list of accounts and their balances at a point in time. The primary
purpose of a trial balance is to prove the mathematical equality of debits and credits
after all journalized transactions have been posted. A trial balance also facilitates the
discovery of errors in journalizing and posting. In addition, it is useful in preparing
financial statements.
(b) The trial balance is prepared using the account balances from the general ledger.
20. While it does not matter in what order the accounts are listed in the trial balance, it is usual
for the accounts in the trial balance to be listed in the same order as they are listed in the
general ledger (asset accounts, liability accounts, and shareholders’ equity accounts,
including share capital, retained earnings, dividend, revenue, and expense accounts). This
makes it easier to compare the trial balance accounts to the general ledger accounts, as
well as later to prepare the financial statements from the trial balance.
21. The retained earnings account in the trial balance shows the beginning balance of the
period as it has not yet been updated for the effect that the revenues, expenses, and
dividends have on retained earnings for the current accounting period. (Note to instructors:
This chapter only includes references to a pre-closing trial balance; the post-closing trial
balance is not introduced until Chapter 4.)
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(1) Analyze the business transactions and determine their effects on the accounting
equation and also determine when and how to record the transactions.
(2) Journalize the transactions in the general journal to record the effects of the
transactions on the accounts involved in the transactions.
(3) Post to the general ledger accounts to provide an accumulation of the effect of
several journalized transactions in the individual accounts.
(4) Prepare a trial balance to prove that the sum of the debit account balances equals
the sum of the credit account balances after posting.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) Basic The asset account Supplies is increased by $250; the liability
Analysis account Accounts Payable is increased by $250.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 3 June 12: Billed J. Kronsnoble $300 for welding work done.
Transaction 4 June 22: Received cash from J. Kronsnoble for work billed on
June 12.
(a) Basic The asset account Cash is increased by $300; the Asset
Analysis account Accounts Receivable is decreased by $300.
Accounts
Receivable
-$300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 6 June 28: Received cash of $200 from K. Jones as a deposit for
welding work to be done in July.
(a) Basic The asset account Cash is increased by $200; the liability
Analysis account Unearned Revenue is increased by $200.
(a) Basic The asset account Cash is decreased by $250; the liability
Analysis account Accounts Payable is decreased by $250.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(c) Debit−Credit Debits increase expenses: debit Income Tax Expense $100.
Analysis Credits decrease assets: credit Cash $100.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
28 Cash....................................................... 200
Unearned Revenue ........................ 200
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Accounts Receivable
Supplies
June 2 250
Accounts Payable
Unearned Revenue
June 28 200
Common Shares
June 1 2,500
Service Revenue
June 12 300
June 30 100
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a)
May 5 Billed clients $3,200 for services provided on account
May 12 Collected $1,900 from customer on account
May 15 Purchased supplies on account $200
May 20 Received $2,000 from client for services provided
May 25 Paid salaries of $2,500
May 28 Paid supplier $200 on account
May 30 Paid income tax of $750
(b)
Cash
May 12 1,900 May 25 2,500
May 20 2,000 May 28 200
May 30 750
Bal. 450
Accounts Receivable
May 5 3,200 May 12 1,900
Bal. 1,300
Supplies
May 15 200
Accounts Payable
May 28 200 May 15 200
Bal. 0
Service Revenue
May 5 3,200
May 20 2,000
Bal. 5,200
Salaries Expense
May 25 2,500
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
CARLAND INC.
Trial Balance
June 30, 2015
Debit Credit
Cash $ 4,400
Accounts receivable 4,000
Trading investments 6,000
Equipment 17,000
Accumulated depreciation—equipment $ 3,600
Accounts payable 3,000
Unearned revenue 150
Common shares 10,000
Retained earnings 12,650
Dividends 200
Service revenue 7,600
Salaries expense 4,000
Rent expense 1,000
Income tax expense 400 _
Totals $37,000 $37,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) No, the trial balance is not correct, because some accounts with debit balances are listed
in the credit column and vice versa.
(b)
BOURQUE LIMITED
Trial Balance
December 31, 2015
Debit Credit
Cash $10,000
Accounts receivable 6,500
Supplies 3,500
Accounts payable $ 1,500
Unearned revenue 2,200
Common shares 5,000
Retained earnings 13,000
Dividends 4,500
Service revenue 20,000
Salaries expense 9,100
Office expense 4,400
Supplies expense 1,200
Rent expense 2,000
Income tax expense 500 _
Totals $41,700 $41,700
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
SOLUTIONS TO EXERCISES
EXERCISE 3-1
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-2
(a)
(b)
Revenues $3,800
Less: Expenses 2,150
Profit $1,650
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-3
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-4
(a) Basic The asset account Cash is increased by $11,000; the shareholders’
Analysis equity account Common Shares is increased by $11,000.
Transaction 2 March 4: Purchased used car for $1,000 cash and $9,000 on
account, for use in the business.
(a) Basic The asset account Vehicles is increased by $10,000; the liability
Analysis account Accounts Payable is increased by $9,000; the asset
account Cash is decreased by $1,000.
Vehicles
+$10,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 5 March 25: Received $1,000 cash from customers billed on March
10.
(a) Basic The asset account Cash is increased by $1,000; the Asset account
Analysis Accounts Receivable is decreased by $1,000.
Accounts
Receivable
-$1,000
Transaction 6 March 27: Paid amount owing for used car purchased on March.
(a) Basic The liability account Accounts Payable is decreased by $9,000; the
Analysis asset account Cash is decreased by $9,000.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 7 March 30: Received $700 cash from a customer for services to be
performed in April.
(a) Basic The asset account Cash is increased by $700; the liability account
Analysis Unearned Revenue is increased by $700.
(a) Basic The asset account Cash is decreased by $500; the Dividends
Analysis account is increased by $500.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-5
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-6
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-7
Cash
Mar. 2 11,000 Mar. 4 1,000
25 1,000 13 225
30 700 27 9,000
31 500
Mar. 31 Bal. 1,975
Accounts Receivable
Mar. 10 2,300 Mar. 25 1,000
Mar. 31 Bal. 1,300
Vehicles
Mar. 4 10,000
Accounts Payable
Mar. 27 9,000 Mar. 4 9,000
Mar. 31 Bal. 0
Unearned Revenue
Mar. 30 700
Common Shares
Mar. 2 11,000
Dividends
Mar. 31 500
Service Revenue
Mar. 10 2,300
Advertising Expense
Mar. 13 225
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-8
(a), (b), and (c)
(a) Basic The asset account Cash is increased by $20,000; the shareholders’
Analysis equity account Common Shares is increased by $20,000.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) Basic The asset account Equipment is increased by $12,000; the Asset
Analysis account Cash is decreased by $5,000 and the liability account
Bank Loan Payable increased by $7,000.
Equipment
+$12,000
(a) Basic The asset account Supplies is increased by $500; the liability
Analysis account Accounts Payable is increased by $500.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) Basic The asset account Cash is increased by $4,500; the liability
Analysis account Unearned Revenue is increased by $4,500.
Transaction 6 Sept. 30: Paid amount owing for supplies purchased Sept. 10.
(a) Basic The liability account Accounts Payable is decreased by $500; the
Analysis asset account Cash is decreased by $500.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) Basic The asset account Cash is increased by $5,000; the Asset account
Analysis Accounts Receivable is decreased by $5,000.
Accounts
Receivable
-$5,000
25 Cash................................................... 4,500
Unearned Revenue ..................... 4,500
30 Cash................................................... 5,000
Accounts Receivable .................. 5,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(e)
Cash
Sept. 1 20,000 Sept. 4 5,000
Sept. 25 4,500 Sept. 30 500
Sept. 30 5,000
Bal. 24,000
Accounts Receivable
Sept. 2 9,000 Sept. 30 5,000
Bal. 4,000
Supplies
Sept. 10 500
Bal. 500
Equipment
Sept. 4 12,000
Bal. 12,000
Accounts Payable
Sept. 30 500 Sept. 10 500
Bal. 0
Unearned Revenue
Sept. 25 4,500
Bal. 4,500
Common Shares
Sept. 1 20,000
Bal. 20,000
Service Revenue
Sept. 2 9,000
Bal. 9,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-9
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Bal. 2,400
Dividends
Aug. 7 1,800
14 1,450
Equipment
Bal. 3,250
Aug. 11 4,000
Salaries Expense
Unearned Revenue
Aug. 30 2,000
Aug. 16 900
Aug. 11 2,500
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(c)
KANG, INC.
Trial Balance
August 31, 2015
Debit Credit
Cash $2,400
Accounts receivable 750
Equipment 4,000
Unearned revenue $ 900
Bank loan payable 2,500
Common shares 3,000
Dividends 500
Service revenue 3,250
Salaries expense 2,000 _
Totals $9,650 $9,650
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-10
(b)
HOLLY CORP.
Trial Balance
October 31, 2015
Debit Credit
Cash $ 4,200
Accounts receivable 2,240
Supplies 400
Equipment 2,000
Accounts payable $ 900
Income tax payable 180
Bank loan payable 5,000
Common shares 2,000
Dividends 300
Service revenue 3,390
Salaries expense 500
Advertising expense 400
Rent expense 1,250
Income tax expense 180 0
Totals $11,470 $11,470
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-11
(a)
SPEEDY DELIVERY SERVICE, INC.
Trial Balance
July 31, 2015
Debit Credit
Cash $ 8,000
Trading investments 20,000
Accounts receivable 14,000
Prepaid insurance 200
Equipment 99,000
Accumulated depreciation—equipment $ 21,400
Accounts payable 9,500
Salaries payable 800
Bank loan payable, due 2017 39,000
Common shares 38,000
Retained earnings, Aug. 1, 2014 20,850
Dividends 800
Service revenue 75,000
Salaries expense 25,000
Depreciation expense 9,700
Rent expense 9,000
Repairs and maintenance expense 5,700
Vehicles expense 4,750
Interest expense 3,600
Insurance expense 1,800
Income tax expense 3,000 0
Totals $204,550 $204,550
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Revenues
Service revenue $75,000
Expenses
Salaries expense $25,000
Depreciation expense 9,700
Rent expense 9,000
Repair and maintenance expense 5,700
Vehicles expense 4,750
Interest expense 3,600
Insurance expense 1,800
Total expenses 59,550
Profit before income tax 15,450
Income tax expense 3,000
Profit $12,450
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Assets
Current assets
Cash $ 8,000
Trading investments 20,000
Accounts receivable 14,000
Prepaid insurance 200
Total current assets $ 42,200
Property, plant, and equipment
Equipment $99,000
Less: Accumulated depreciation 21,400
Total property, plant, and equipment 77,600
Total assets $119,800
Current liabilities
Accounts payable $9,500
Salaries payable 800
Total current liabilities $ 10,300
Non-current liabilities
Bank loan payable, due 2017 39,000
Total liabilities 49,300
Shareholders' equity
Common shares $38,000
Retained earnings 32,500
Total shareholders’ equity 70,500
Total liabilities and shareholders’ equity $119,800
(c) If the amount of the retained earnings was not known, it would be more difficult to prepare
the three financial statements in part (b) above. However, the beginning balance of
retained earnings could either be derived from the trial balance or worked backwards from
a balanced statement of financial position.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
EXERCISE 3-12
1. No $400 Debit
2. Yes 0 n/a
3. Yes 0 n/a
4. No 500 Credit
5. No 225 Debit
6. No 9 Credit
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
SOLUTIONS TO PROBLEMS
PROBLEM 3-1A
(a)
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-2A
(a)
Note: The August 27th transaction does not affect the accounting equation and is therefore not recorded in the accounting records.
(b)
HILLS LEGAL SERVICES INC.
Income Statement
Month Ended August 31, 2015
Revenues
Service revenue $7,500
Expenses
Salaries expense $3,500
Rent expense 900
Advertising expense 275
Utilities expense 275
Total expenses 4,950
Profit before income tax 2,550
Income tax expense 500
Profit $2,050
Common Retained
Shares Earnings Total Equity
(b) (Continued)
Assets
Current assets
Cash $6,225
Accounts receivable 1,300
Supplies 500
Total current assets $ 8,025
Property, plant, and equipment
Equipment 6,200
Total assets $14,225
Current liabilities
Accounts payable $2,475
Bank loan payable 2,000
Total liabilities $ 4,475
Shareholders' equity
Common shares $4,800
Retained earnings 4,950
Total shareholders’ equity 9,750
Total liabilities and shareholders' equity $14,225
PROBLEM 3-3A
(a)
(1) (2)
Increases Normal
Account with Balance
(1) (2)
Account Classification Financial Statement
Note: Beginning of the year equity amounts such as opening common shares or opening
retained earnings balances are shown on the statement of changes in equity and do not appear
on the statement of financial position as only end of year amounts for equity accounts would
appear on that statement.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-4A
(a)
(1) Basic The asset account Supplies is increased by $600; the liability
Analysis account Accounts Payable is increased by $600.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(1) Basic The asset account Cash is increased by $30,000; the asset
Analysis account Accounts Receivable is increased by $20,000; the
shareholders’ equity account Service Revenue is increased by
$50,000.
Accounts
Receivable
+$20,000
(1) Basic The asset account Cash is decreased by $500; the Dividends
Analysis account is increased by $500.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) (Continued)
Transaction 5 Feb. 18: Received cash of $2,000 from a customer as a deposit for
services to be provided next month.
(1) Basic The asset account Cash is increased by $2,000; the liability
Analysis account Unearned Revenue is increased by $2,000.
Transaction 6 Feb. 20: Paid amount owing from the supplies purchased on Feb.
2.
(1) Basic The asset account Cash is decreased by $600; the liability account
Analysis Accounts Payable is decreased by $600.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 7 Feb. 23: Collected $20,000 of the amount owing from the Feb. 6
transaction.
(1) Basic The asset account Cash is increased by $20,000; the Asset
Analysis account Accounts Receivable is decreased by $20,000.
Accounts
Receivable
-$20,000
Transaction 8 Feb. 24: Paid office expenses for the month $22,000.
(1) Basic The expense account Office Expense is increased by $22,000; the
Analysis asset account Cash is decreased by $22,000.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 10 Feb. 28: Paid interest of $50 on the bank loan signed Feb. 3.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-5A
20 Dividends......................................................... 1,000
Cash ......................................................... 1,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-6A
(a)
Apr. 1 Cash ................................................................ 10,000
Equipment ....................................................... 6,000
Common Shares ...................................... 16,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Apr. 30 500
Accounts Receivable
Bal. 500
Apr. 10 900 Apr. 21 500
Apr. 10 900
Supplies Apr. 20 1,500
Bal. 1,900
Salaries Expense
Bal. 6,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-7A
Cash
Accounts Payable
Feb. 28 Bal. 15,000 Mar. 2 10,000
Mar. 9 16,300 Mar. 12 17,000 Mar. 12 17,000 Feb. 28 Bal. 12,000
Mar. 20 16,600 Mar. 13 12,000 Mar. 13 12,000 Mar. 2 17,000
Mar. 25 18,400 Mar. 19 950
Bal. 0
Mar. 30 1,245 Mar. 23 3,000
Mar. 27 4,200
Mar. 30 2,000
Mar. 30 3,000
Mortgage Payable
Bal. 15,395
Mar. 30 1,250 Feb. 28Bal. 118,000
Bal. 116,750
Accounts Receivable
Mar. 30 1,245
Bal. 1,245 Common Shares
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Concession Revenue
Mar. 30 2,490
Bal. 2,490
Rent Expense
Mar. 2 27,000
Mar. 23 3,000
Bal. 30,000
Salaries Expense
Mar. 27 4,200
Bal. 4,200
Advertising Expense
Mar. 19 950
Bal. 950
Interest Expense
Mar. 30 750
Bal. 750
Mar. 30 3,000
Bal. 3,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
Mar. 2 Rent Expense .................................................. 27,000
Accounts Payable ..................................... 17,000
Cash ......................................................... 10,000
2 No entry.
5 No entry.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(d)
THE STAR THEATRE, INC.
Trial Balance
March 31, 2015
Debit Credit
Cash $ 15,395
Accounts receivable 1,245
Land 85,000
Buildings 77,000
Equipment 20,000
Mortgage payable $116,750
Common shares 40,000
Retained earnings 27,000
Fees earned 51,300
Concession revenue 2,490
Rent expense 30,000
Salaries expense 4,200
Advertising expense 950
Interest expense 750
Income tax expense 3,000 00
Totals $237,540 $237,540
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-8A
Cash
Apr. 30 5,000 Common Shares
May 7 1,500 May 1 1,000 Apr. 30 5,000
8 1,200 4 1,100
15 800 14 1,200
Bal. 5,000
22 1,000 21 1,000
29 1,700 25 400
31 50 Retained Earnings
31 1,200 Apr. 30 11,400
31 150
Bal. 5,100 Bal. 11,400
Service Revenue
Supplies
May 8 1,200
Apr. 30 500
15 800
Bal. 500
15 700
22 1,000
Equipment
29 1,700
Apr. 30 24,000 29 600
Bal. 6,000
Bal. 24,000
Salaries Expense
Accounts Payable May 14 1,200
Apr. 30 2,100 31 1,200
May 4 1,100 May 22 700 Bal. 2,400
21 1,000 25 500
Bal. 1,200
Rent Expense
Bank Loan Payable May 1 1,000
Apr 30 10,000 Bal. 1,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Bal. 50
PROBLEM 3-8A (Continued)
(a) (Continued)
Income Tax Expense
Utilities Expense
May 31 150
May 25 400
Bal. 150
Bal. 400
Interest Expense
May 31 50
(b)
May 1 Rent Expense .................................................. 1,000
Cash ......................................................... 1,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b) (Continued)
May 25 Advertising Expense ........................................ 500
Accounts Payable ....................................... 500
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(d)
PAMPER ME SALON INC.
Trial Balance
May 31, 2015
Debit Credit
Cash $ 5,100
Supplies 500
Equipment 24,000
Accounts payable $ 1,200
Bank loan payable 10,000
Unearned revenue 1,200
Common shares 5,000
Retained earnings 11,400
Service revenue 6,000
Salaries expense 2,400
Rent expense 1,000
Supplies expense 700
Advertising expense 500
Utilities expense 400
Interest expense 50
Income tax expense 150
Totals $34,800 $34,800
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-9A
(a)
TAGGAR ENTERPRISES INC.
Trial Balance
June 30, 2015
Debit Credit
Cash $ 1,800
Accounts receivable 3,000
Merchandise inventory 5,100
Prepaid insurance 900
Land 7,400
Buildings 15,000
Accumulated depreciation—buildings $ 4,000
Equipment 3,000
Accumulated depreciation—equipment 1,000
Long-term investments 3,550
Accounts payable 1,500
Income tax payable 100
Mortgage payable, due 2021 15,000
Common shares 5,000
Retained earnings, July 1, 2014 6,250
Sales 25,000
Cost of goods sold 13,700
Office expense 3,300
Interest expense 100
Income tax expense 1,000
Totals $57,850 $57,850
(b) When debits equal credits in a trial balance, there is some assurance that certain types
of errors may have been caught. However, there is no guarantee that errors do not exist
because entries may have been omitted completely, duplicated or recorded to incorrect
accounts.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-10A
Sales $25,000
Expenses
Cost of goods sold $13,700
Office expense 3,300
Interest expense 100
Total expenses 17,100
Profit before income tax 7,900
Income tax expense 1,000
Profit $ 6,900
Common Retained
Shares Earnings Total Equity
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Assets
Current assets
Cash $1,800
Accounts receivable 3,000
Merchandise inventory 5,100
Prepaid insurance 900
Total current assets $10,800
Long-term investments 3,550
Property, plant, and equipment
Land $ 7,400
Buildings $15,000
Less: Accumulated depreciation 4,000 11,000
Equipment $3,000
Less: Accumulated depreciation 1,000 2,000
Total property, plant, and equipment 20,400
Total assets $34,750
Current liabilities
Accounts payable $1,500
Income tax payable 100
Current portion of mortgage payable 1,250
Total current liabilities $ 2,850
Non-current liabilities
Mortgage payable 13,750
Total liabilities 16,600
Shareholders’ equity
Common shares $ 5,000
Retained earnings 13,150
Total shareholders' equity 18,150
Total liabilities and shareholders' equity $34,750
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-11A
CANTPOST LTD.
Trial Balance
June 30, 2015
Debit Credit
Note that the opening retained earnings balance is zero, as this is the company’s first year of
operations. The retained earnings balance given in the problem is the ending retained earnings
balance, which was included in the trial balance in error.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-1B
(a)
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-2B
(a)
Note: The transactions on September 4th (hired a part-time office assistant) and 25th (sent a statement) do not affect the accounting
equation and are therefore not recorded in the accounting records.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
CORSO CARE CORP.
Income Statement
Month Ended September 30, 2015
Revenues
Service revenue $5,000
Expenses
Rent expense $1,200
Salaries expense 750
Advertising expense 300
Utilities expense 175
Total expenses 0 2,425
Profit before income tax 2,575
Income tax expense 350
Profit $2,225
Common Retained
Shares Earnings Total Equity
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b) (Continued)
Assets
Current assets
Cash $6,750
Accounts receivable 2,350
Supplies 350
Total current assets $ 9,450
Property, plant, and equipment
Equipment 8,550
Total assets $18,000
Current liabilities
Accounts payable $1,525
Bank loan payable 2,500
Total liabilities $ 4,025
Shareholders' equity
Common shares $4,800
Retained earnings 9,175
Total shareholders’ equity 13,975
Total liabilities and shareholders' equity $18,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-3B
(a)
(1) (2)
Increases Normal
Account with Balance
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
(1) (2)
Account Classification Financial Statement
Note: Beginning of the year equity account balances such as opening retained earnings are
shown on the statement of changes in equity and do not appear on the statement of financial
position as only end of year amounts for equity accounts would appear on that statement.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-4B
(a)
(1) Basic The asset account Cash is increased by $10,000; the shareholders’
Analysis equity account Common Shares account is increased by $10,000.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) (Continued)
(1) Basic The asset account Cash is increased by $30,000; the liability
Analysis account Bank Loan Payable is increased by $30,000.
(1) Basic The asset account Vehicles is increased by $40,000; the Asset
Analysis account Cash is decreased by $40,000.
Vehicles
+$40,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(1) Basic The asset account Cash is increased by $5,000; the liability
Analysis account Unearned Revenue is increased by $5,000.
Transaction 6 Jan. 12: Billed customers $20,000 for services performed during
the month.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(1) Basic The asset account Supplies is increased by $500; the Asset
Analysis account Cash is decreased by $500.
Supplies
+$500
Transaction 8 Jan 20: Provided $1,500 of services to the customer who paid in
advance on January 9.
(1) Basic The liability account Unearned Revenue decreased by $1,500; the
Analysis revenue account Service Revenue is increased by $1,500.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 9 Jan. 23: Collected $5,000 owing from customers from the January
12 transaction.
(1) Basic The asset account Cash is increased by $5,000; the Asset account
Analysis Accounts Receivable is decreased by $5,000.
Accounts
Receivable
-$5,000
Transaction 10 Jan 26: Received a bill for utilities of $125, due Feb. 26.
(1) Basic The expense account Utilities Expense is increased by $125; the
Analysis liability account Accounts Payable increased by $125.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(1) Basic The expense account Rent Expense is increased by $1,500; the
Analysis asset account Cash is decreased by $1,500.
(1) Basic The expense account Salaries Expense is increased by $4,000; the
Analysis asset account Cash is decreased by $4,000.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Transaction 13 Jan 31: Paid interest of $300 on the bank loan from the Jan. 6
transaction.
(1) Basic The expense account Interest Expense is increased by $300; the
Analysis asset account Cash is decreased by $300.
Transaction14 Jan. 31: Paid income tax for the month $3,600.
(1) Basic The expense account Income Tax Expense is increased by $3,600;
Analysis the asset account Cash is decreased by $3,600.
(3) Debit−Credit Debits increase expenses: debit Income Tax Expense $3,600.
Analysis Credits decrease assets: credit Cash $3,600.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
Jan. 2 Cash ................................................................ 10,000
Common Shares ...................................... 10,000
19 Supplies........................................................... 500
Cash ......................................................... 500
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-5B
17 Dividends.............................................................. 600
Cash .............................................................. 600
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-6B
(a) May 1 Cash ........................................................................... 20,000
Common Shares .................................................. 20,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
Cash
Accounts Receivable
Supplies
May 4 750
Bal. 750
Accounts Payable
Unearned Revenue
May 12 3,500
Bal. 3,500
Common Shares
May 1 20,000
Bal. 20,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Dividends
May 29 250
Bal. 250
Service Revenue
May 11 2,725
15 2,350
Bal. 5,075
Salaries Expense
May 29 2,000
Bal. 2,000
Rent Expense
May 1 950
Bal. 950
Office Expense
May 25 275
Bal. 275
May 29 300
Bal. 300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-7B
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
11 Cash............................................................................ 1,950
Fees Earned ........................................................ 1,950
25 Cash............................................................................ 7,300
Fees Earned ........................................................ 7,300
30 Cash............................................................................ 560
Accounts Receivable................................................... 560
Concession Revenue (20% × $5,600) ................. 1,120
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Debit Credit
Cash $ 5,140
Accounts receivable 560
Prepaid rent 700
Land 100,000
Buildings 80,000
Equipment 25,000
Accounts payable $ 2,950
Mortgage payable 123,000
Common shares 50,000
Retained earnings 31,000
Fees earned 9,250
Concession revenue 1,120
Salaries expense 1,900
Rent expense 1,550
Advertising expense 620
Interest expense 850
Income tax expense 1,000 0000 000
Totals $217,320 $217,320
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-8B
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Debit Credit
Cash $ 6,200
Equipment 2,000
Accounts payable $ 100
Unearned revenue 2,200
Common shares 1,000
Retained earnings 6,000
Fees earned 17,500
Rent expense 14,400
Salaries expense 2,000
Advertising expense 800
Supplies expense 200
Office expense 100
Income tax expense 1,100 _
Totals $26,800 $26,800
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-9B
(a)
ASIAN IMPORTERS LIMITED
Trial Balance
January 31, 2015
(thousands)
Debit Credit
Cash $ 6,000
Accounts receivable 30,200
Merchandise inventory 74,250
Prepaid insurance 3,950
Land 42,500
Buildings 39,500
Accumulated depreciation—buildings $ 13,000
Equipment 10,900
Accumulated depreciation—equipment 3,600
Goodwill 7,600
Accounts payable 46,300
Other current liabilities 12,200
Bank loan payable (due 2018) 10,050
Mortgage payable 19,750
Common shares 32,900
Retained earnings, February 1, 2014 37,050
Dividends 1,850
Sales 370,000
Cost of goods sold 244,200
Office expense 67,750
Interest expense 2,150
Income tax expense 14,000 00000 0
Totals $544,850 $544,850
(b) When debits equal credits in a trial balance, there is some assurance that certain types
of errors may have been caught. However, there is no guarantee that errors do not exist
because entries may have been omitted completely, duplicated or recorded to incorrect
accounts.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-10B
Revenues
Sales $370,000
Expenses
Cost of goods sold $244,200
Office expense 67,750
Interest expense 2,150
Total expenses 314,100
Profit before income tax 55,900
Income tax expense 14,000
Profit $ 41,900
Common Retained
Shares Earnings Total Equity
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Assets
Current assets
Cash $ 6,000
Accounts receivable 30,200
Merchandise inventory 74,250
Prepaid expenses 3,950
Total current assets $114,400
Property, plant, and equipment
Land $42,500
Buildings $39,500
Less: Accumulated depreciation 13,000 26,500
Equipment $10,900
Less: Accumulated depreciation 3,600 _7,300 76,300
Goodwill 7,600
Total assets $198,300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
PROBLEM 3-11B
MESSED UP LTD.
Trial Balance
May 31, 2015
Debit Credit
Note that the opening retained earnings balance is zero, as this is the company’s first year of
operations. The retained earnings balance given in the problem is the ending retained earnings
balance, which was included in the trial balance in error.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(a) (b)
Type of Increase Decrease Normal
Account account with with Balance
Accounts payable and Credit Debit Credit
Liability
accrued liabilities
Accounts receivable Asset Debit Credit Debit
Cash Asset Debit Credit Debit
Shareholder’s Equity
Dividends Debit Credit Debit
(dividend)
Shareholders’ Equity
Income tax expense Debit Credit Debit
(expense)
Inventory Asset Debit Credit Debit
Land Asset Debit Credit Debit
Shareholders’ Equity Credit Debit Credit
Sales
(revenue)
(c)
1. Dividends are increased (debited) and Cash is decreased (credited)
2. Income Tax Expense is increased (debited) or Income Tax Payable decreased
(credited) and Cash is decreased (credited)
3. Inventory is increased(debited) and Accounts Payable is increased (credited)
4. Land is increased (debited) and Bank Loan Payable is increased (credited)
5. Accounts Receivable is increased (debited) and Sales is increased (credited)
(d)
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b) The users of CREIT (Canadian Real Estate Investment Trust) financial statements would
include the shareholders of the company, potential investors, management, lenders,
customers, competitors, and tax authorities. The users of First Pro’s financial statements
would be similar to those of CREIT. However, since it is a privately held company there
would be fewer shareholders and they would likely be more actively involved in the day to
day management of First Pro. Because of this, First Pro would not be required to disclose
its financial results publicly and users such as competitors and customers would not have
access to the financial results.
Different users will have different information needs and this will influence the type of
accounting standards used by the company. For example, at First Pro the shareholder’s
will have an intimate knowledge of the operations and would not need the additional
disclosures required by IFRS. At CREIT, the shareholders are not actively involved in the
business and would need the additional disclosures in order to make the financial
information more transparent and to allow users to properly assess the performance of the
business. Consequently, there is much more disclosed in the notes to the financial
statements when a company is complying with IFRS.
(c) CREIT would likely have more a sophisticated reporting system for the following reasons:
- Its operations are in Canada and in the U.S., and therefore it would need to
collect information in a variety of currencies.
- It must comply with IFRS and therefore it would need to collect and report
additional information that would not be required under ASPE.
- It is required to disclose its financial statements to the public within specific timing
deadlines and therefore must collect information in a very efficient manner.
(d) No, it would be very difficult to collect the necessary information without a journal or
ledger. Companies of almost any size will use a journal and ledger as the foundation of
their accounting records.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b) A spreadsheet can help, in a small business like Uncle Bob’s Repairs, to organize
information. However, it lacks the date, specific account title for multiple expenses, and
explanation for each entry that one would find in a traditional general journal. It could
assist in posting, although again it lacks any cross-referencing to allow transactions to be
traced back to the source if required. Finally, use of a spreadsheet, while convenient for
very small businesses, would be limiting in terms of growth in the number of accounts and
transactions.
(c)
UNCLE BOB'S REPAIRS LTD.
Income Statement
Year Ended August 31, 2015
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Current assets
Cash $ 3,100
Accounts receivable 39,400
Prepaid rent 3,500
Total assets $46,000
Current liabilities
Accounts payable $ 4,000
Income tax payable 6,200
Unearned revenue 2,000
Total liabilities $12,200
Shareholders' equity
Common shares $10,000
Retained earnings 23,800
Total shareholders’ equity 33,800
Total liabilities and shareholders’ equity $46,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Uncle Bob would not be pleased to find out that operating cash flows were not positive.
This can often happen during the first year that a company operates.
The other two cash transactions not shown above are financing activities: the issue of
common shares for $10,000 and the payment of dividends for $1,000. The net increase
to cash of $9,000 allowed the company to have a positive cash balance $3,100 (−$5,900
+ $9,000) at the end of the year.
(e) The bank would want collateral for any loan given to the company. Usually such
collateral consists of property, plant, or equipment and this company has none of these.
It may be possible to secure a loan with accounts receivable but the company did not
have this type of asset when it was first formed.
(f) No, the company does not have enough cash to pay the income tax. The company
would have to collect some accounts receivable if it hoped to pay the income tax.
(g) The government levies income tax on corporations which are considered legal entities
separate from their shareholders. Uncle Bob would pay income tax only on the dividends
he received from the company.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Note to instructors: All of the material supplementing this group activity, including a suggested
solution, can be found in the Collaborative Learning section of the Instructor Resource site
accompanying this textbook as well as in the Prepare and Present section of WileyPLUS.
Ron Hollister
The other students in the group who will be graded for Ron’s work
The other students in the class
The professor
The College or University attended by Ron
Future employers of the graduates of the school
(b) By adding $810 to the General and Administrative Expense account, the account total is
intentionally misstated. By not locating the error causing the imbalance, some other
account or accounts may also be misstated by a net amount of $810. Although the
assignment will not affect external users of a real financial report, it is intended to resemble
a real life situation and Ron’s reaction, had it been in a real life situation, is unethical. Ron
did not advise his fellow team members of the action he has taken to avoid detection. They
will be affected by his actions and had no means of agreeing to the strategy taken to
address the problem. The adding of the $810 to the General and Administrative Expense
account is not by itself unethical but his failure to inform other group members that he was
changing amounts that they had prepared is wrong. Although Ron is not likely in breach of
any rule or directive issued by the school concerning academic integrity, the professor and
the other group members will not agree with the strategy used by Ron. They will wonder if
this is the type of action Ron would take while at a future job. Such actions would then
affect others who are not part of the school community and the reputation of the school
would be diminished. This in turn could affect society’s opinion of the past and future
graduates of the school.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(d) External users of the financial information prepared by Ron could potentially be affected by
the errors that remain undetected. It is highly likely that another account is wrong on the
financial statements. The consequences are more far reaching and so the behaviour is
more serious. Deception for personal benefit is clearly viewed as unethical.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b) A system can be organized in different ways. The system can make use of computers, filing
cabinets, and/or a safety deposit box. Many individuals use a combination of all three of
these systems.
(c) You must report the lost documentation to cancel and replace it. Cancelling the lost
information is critical to help avoid identify theft. Steps to take include:
Contact your bank for lost credit card information
Contact the local police to report the lost wallet
Contact the appropriate retailer to report other lost store credit cards
Contact the appropriate ministry of transportation office for a replacement drivers
license
Contact the appropriate ministry for a replacement birth certificate
Contact Citizenship and Immigration Canada for details in replacing a citizenship
certificate
Contact the appropriate department responsible for health to replace your health card
Contact Passport Canada to replace a passport
Apply for a replacement social insurance number and card.
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Cash Equipment
June Bal. 42,000
June Bal. 39,004 16 2,520
18 500 June 2 15,360 Bal. 44,520
19 300 16 2,520
30 3,250 Accumulated Depreciation—Equipment
Bal. 18,674 June Bal. 14,000
Unearned Revenue
Supplies June 19 100 June Bal. 100
June Bal. 1,875 18 500
5 2,500 Bal. 500
Bal. 4,375
Bank Loan Payable
Prepaid Insurance June Bal. 22,500
June Bal. 12,000
2 15,360 Mortgage Payable
Bal. 27,360 June Bal. 53,200
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Rent Revenue
June Bal. 6,000
Sales
June Bal. 638,768
19 400
23 2,040
30 2,550
Bal. 643,758
Salaries Expense
June Bal. 287,532
30 3,250
Bal. 290,782
Freight Out
June Bal. 18,000
Utilities Expense
June Bal. 12,000
27 100
Bal. 12,100
Advertising Expense
June Bal. 9,000
Interest Expense
June Bal. 5,299
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(c)
KOEBEL’S FAMILY BAKERY LTD.
Trial Balance
June 30, 2014
Debit Credit
Cash $18,674
Accounts receivable 10,490
Merchandise inventory 16,250
Supplies 4,375
Prepaid insurance 27,360
Land 100,000
Buildings 165,000
Accumulated depreciation—buildings $137,500
Equipment 44,520
Accumulated depreciation—equipment 14,000
Vehicles 52,500
Accounts payable 6,140
Unearned revenue 500
Bank loan payable 22,500
Mortgage payable 53,200
Common shares 300
Retained earnings 66,788
Dividends 30,000
Rent revenue 6,000
Sales 643,758
Sales returns and allowances 5,000
Cost of goods sold 102,386
Salaries expense 290,782
Freight out 18,000
Utilities expense 12,100
Advertising expense 9,000
Property tax expense 5,950
Interest expense 5,299
Income tax expense 33,000 00
Total $950,686 $950,686
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
3 Cash .......................................................................................................................
1000 50,000
Bank Loan Payable ........................................................................................
3100 50,000
5 Equipment ..............................................................................................................
2000 40,000
Cash...............................................................................................................
1000 20,000
Accounts Payable ..........................................................................................
3000 20,000
11 Supplies ..................................................................................................................
1200 1,000
Accounts Payable ..........................................................................................
3000 1,000
24 Cash ......................................................................................................................
1000 10,000
Accounts Receivable .................................................................................
1100 10,000 t
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(b)
Cash #1000
Jan. 2 15,000 Jan. 4 3,000
3 50,000 5 20,000
24 10,000 10 500
13 3,000
15 7,500
20 1,000
30 6,000
31 7,500
31 1,000
31 1,200
Jan. 31 Bal. 24,300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Supplies #1200
Jan. 11 1,000
Jan. 31 Bal. 1,000
Equipment #2000
Jan. 5 40,000
Jan. 31 Bal. 40,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(c)
SOFTWARE ADVISORS LIMITED
Trial Balance
January 31, 2015
Debit Credit
1000 Cash $ 24,300
1100 Accounts receivable 23,000
1200 Supplies 1,000
1300 Prepaid insurance 6,000
2000 Equipment 40,000
3000 Accounts payable $ 21,000
3100 Bank loan payable 49,300
4000 Common shares 15,000
5000 Service revenue 33,000
7000 Advertising expense 3,500
7100 Salaries expense 15,000
7200 Interest expense 300
7300 Office expense 1,000
7400 Rent expense 3,000
9000 Income tax expense 1,200 0
$118,300 $118,300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(d)
(1)
SOFTWARE ADVISORS LIMITED
Income Statement
Month Ended January 31, 2015
Revenues
Service revenue $33,000
Expenses
Salaries expense $15,000
Advertising expense 3,500
Rent expense 3,000
Office expense 1,000
Interest expense 300
Total expenses 22,800
Profit before income tax 10,200
Income tax expense 1,200
Profit $ 9,000
(2)
Balance, January 1 $ 0 $ 0 $ 0
Issued common shares 15,000 15,000
Profit 0 9,000 9,000
Balance, January 31 $15,000 $9,000 $24,000
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
(d) (Continued)
(3)
SOFTWARE ADVISORS LIMITED
Statement of Financial Position
January 31, 2015
Assets
Current assets
Cash $24,300
Accounts receivable 23,000
Supplies 1,000
Prepaid insurance 6,000 $54,300
Property, plant, and equipment
Equipment 40,000
Total assets $94,300
Current liabilities
Accounts payable $21,000
Non-current liabilities
Bank loan payable 49,300
Total liabilities 70,300
Shareholders’ equity
Common shares $15,000
Retained earnings 9,000 24,000
Total liabilities and shareholders’ equity $94,300
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
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