Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition CHAPTER The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems BYP Analyze the effects of transactions on the accounting equation 1, 2, 3, 4, 1, 1, 2, 4, 1A, 2A, 4A 1B, 2B, 4B 1, 3, 4, Define debits and credits and explain how they are used to record transactions 6, 7, 8, 9, 10 2, 3, 3, 4, 3A, 4A 2, Journalize transactions 11, 12, 13, 14, 15 5, 6, 5, 6, 4A, 5A, 4B, 5B, 6A, 7A, 8A 6B, 7B, 8B 3, 4, 6, Post transactions 14, 15, 16, 17, 18 8, 9, 10 7, 8, 9, 6A, 7A, 8A 6B, 7B, 8B 3, 4, Prepare a trial balance 19, 20, 21, 22, 23 11, 12, 13 9, 10, 11, 12 7A, 8A, 9A, 10A, 11A 4, 5, 3B, 4B 7B, 8B, 9B, 10B, 11B Solutions Manual 3-1 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Analyze effects of transactions Moderate 25-30 2A Analyze transactions and prepare financial statements Moderate 40-50 3A Identify normal balance and statement classification Simple 20-30 4A Analyze and record transactions Moderate 30-40 5A Record transactions Moderate 30-40 6A Record and post transactions Moderate 40-50 7A Record and post transactions; prepare trial balance Moderate 40-50 8A Record and post transactions; prepare trial balance Moderate 40-50 9A Prepare trial balance Moderate 20-30 10A Prepare financial statements Moderate 20-30 11A Prepare corrected trial balance Complex 40-50 1B Analyze effects of transactions Moderate 25-30 2B Analyze transactions and prepare financial statements Moderate 40-50 3B Identify normal balance and statement classification Simple 20-30 4B Analyze and record transactions Moderate 30-40 5B Record transactions Moderate 30-40 6B Record and post transactions Moderate 40-50 7B Record and post transactions; prepare trial balance Moderate 40-50 8B Record and post transactions: prepare trial balance Moderate 40-50 Solutions Manual 3-2 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE (Continued) Problem Number 9B Description Prepare trial balance Difficulty Level Moderate Time Allotted (min.) 20-30 10B Preparefinancial statements Moderate 20-30 11B Prepare corrected trial balance Complex 40-50 Solutions Manual 3-3 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ANSWERS TO QUESTIONS 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 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, not immediately impact an asset, liability, or shareholder’s equity account and, therefore, are not considered an accounting transaction Accounting transactions are the economic events of the company recorded by accountants because they affect the accounting equation assets = liabilities + shareholders’ equity (a) (b) (c) (d) (e) 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 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) A shareholder dying is not an accounting transaction, as it does not affect the accounting equation 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) 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 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) (a) (b) (c) (d) (e) Decrease assets and decrease shareholders' equity (an expense has been increased) Increase assets and increase liabilities Increase assets and increase shareholders' equity (common shares has increased) Decrease shareholders' equity (an expense has been increased) and decrease assets Increase one asset (cash) and decrease another asset (accounts receivable) Solutions Manual 3-4 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 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 Shareholders' equity consists of different components, and they 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 Account (a) Normal Balance 10 Accounts Receivable Accounts Payable Equipment Dividends Supplies Service Revenue Unearned Revenue Income Tax Expense Prepaid Rent Bank Loan Payable (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Debit Supplies and credit Accounts Payable Debit Accounts Payable and credit Cash Debit Cash and credit Bank Loan Payable Debit Salaries Expense and credit Cash Debit Cash and credit Unearned Revenue Debit Prepaid Expense and credit Cash Debit Accounts Receivable and credit Revenue Debit Cash and credit Accounts Receivable Debit Dividends and credit Cash Debit Income Tax Expense and credit Cash 10 (a) (b) (c) (d) (e) (f) (g) Cash Accounts Receivable Dividends Accounts Payable Service Revenue Salaries Expense Unearned Revenue Debit balance Credit balance Debit balance Debit balance Debit balance Credit balance Credit balance Debit balance Debit balance Credit balance (b) Statement Classification Statement of financial position (Asset) Statement of financial position (Liability) Statement of financial position (Asset) Statement of changes in equity Statement of financial position (Asset) Income statement (Revenue) Statement of financial position (Liability) Income statement (Expense) Statement of financial position (Asset) Statement of financial position (Liability) Both debit and credit entries Both debit and credit entries Debit entries only Both debit and credit entries Credit entries only Debit entries only Both debit and credit entries Solutions Manual 3-5 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 11 (a) (b) 12 (a) (b) (c) (d) A general journal is a book of original entry, in which transactions are recorded in chronological order 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 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 Recording debit entries first is important because it visually separates the accounts involved in the left side of the transaction 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 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 Solutions Manual 3-6 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 16 (a) (b) 17 (a) (b) The general ledger is the entire group of accounts maintained by a company, including all the asset, liability, and shareholders' equity accounts, including share capital, retained earnings, dividend, revenue, and expense accounts The general ledger is often arranged in the order in which accounts are presented in the financial statements, beginning with the statement of financial position accounts The asset accounts come first, followed by liability accounts, and then shareholders’ equity accounts, including the share capital, retained earnings, dividend, revenue, and expense accounts 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 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) (b) 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 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.) Solutions Manual 3-7 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 22 (a) (b) (c) The trial balance will not balance because two debits were posted instead of a debit to Supplies and a credit to Accounts Payable Total debits will exceed total credits by an amount that is equal to twice the value of the entry that was not posted correctly The trial balance will still balance as a debit and a credit have been recorded for the same amount Total debits will equal total credits No, the trial balance will not balance as the amount posted as a debit is greater than the amount posted as a credit The total debits will be higher by the difference in the two amounts posted 23 The first four steps in the accounting cycle are: (1) (2) (3) (4) Analyze the business transactions and determine their effects on the accounting equation and also determine when and how to record the transactions Journalize the transactions in the general journal to record the effects of the transactions on the accounts involved in the transactions Post to the general ledger accounts to provide an accumulation of the effect of several journalized transactions in the individual accounts Prepare a trial balance to prove that the sum of the debit account balances equals the sum of the credit account balances after posting Solutions Manual 3-8 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 3-1 Assets Transaction 10 Total Cash Accounts Receivable = Supplies +$250 Prepaid Insurance Liabilities = Accounts Payable +$250 + Unearned Revenue Common + Shares +$500 –$300 +5,000 –400 +500 −250 –100 +300 $4,750 +$500 −$300 +$5,000 −$400 −500 −250 +$100 + $0 TOTAL ASSETS = $5,100 Solutions Manual Shareholders’ Equity Retained Earnings + – – Revenues Expenses Dividends +$250 + $100 = $0 +$300 −300 + $0 + $5,000 +300 + $800 – $300 TOTAL LIABILITIES + SHAREHOLDERS’ EQUITY = $5,100 3-9 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited – $400 Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BRIEF EXERCISE 3-2 (a) Debit Effect Credit Effect (b) Normal Balance (c) Statement Classification Accounts payable Decrease Increase Credit Advertising expense Increase Decrease Debit Statement of financial position Income statement Service revenue Decrease Increase Credit Income statement Accounts receivable Increase Decrease Debit Unearned revenue Decrease Increase Credit Cash Increase Decrease Debit Dividends Increase Decrease Debit Common shares Decrease Increase Credit Prepaid insurance Increase Decrease Debit 10 Equipment Increase Decrease Debit 11 Retained earnings Decrease Increase Credit 12 Income tax expense Increase Decrease Debit Statement of financial position Statement of financial position Statement of financial position Statement of changes in equity Statement of changes in equity/Statement of financial position Statement of financial position Statement of financial position Statement of changes in equity/Statement of financial position Income statement Solutions Manual 3-10 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-5 ETHICS CASE 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 (a) The stakeholders in this situation are: 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 (c) Ron's alternatives are: Discuss the situation with the teammates and reach a consensus that it is better to miss the deadline but find the error causing the imbalance and suffer the corresponding penalty for submitting the assignment late Discuss the situation with teammates and reach a consensus to tell the professor of the imbalance and ask for an extension of time or suffer the consequences Discuss the situation with teammates and potentially get their assistance to locate the error causing the imbalance as a team effort so that the assignment can still submitted by the deadline Solutions Manual 3-110 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-5 (Continued) (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 Solutions Manual 3-111 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-6 “ALL ABOUT YOU” ACTIVITY (a) It is important to keep your personal and financial documents, such as passports, bank account information, credit cards, insurance policies, and income tax information, up to date so that they are current and accessible if you wish to travel, apply for a job, loan, or bank account, pay bills on time, prepare your income tax return, and so on (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 Solutions Manual 3-112 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-7 SERIAL CASE (b) June Prepaid Insurance Cash 15,360 Supplies Accounts Payable 2,500 16 Equipment Cash 2,520 18 Cash Unearned Revenue 500 19 Cash Unearned Revenue Sales 300 100 15,360 2,500 2,520 500 400 20 No entry Not an accounting transaction 23 Accounts Receivable Sales 2,040 27 Utilities Expense Accounts Payable 100 30 Salaries Expense Cash 3,250 30 Accounts Receivable Sales 2,550 2,040 100 3,250 2,550 Solutions Manual 3-113 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-7 (Continued) (a) and (c) Cash June Bal 18 19 Bal 39,004 500 June 300 16 30 18,674 15,360 2,520 3,250 Accounts Receivable June Bal 5,900 23 2,040 30 2,550 Bal 10,490 June Bal 16 Bal Accumulated Depreciation—Equipment June Bal 14,000 June Bal Merchandise Inventory June Bal 16,250 June Bal Bal June Bal Bal Supplies 1,875 2,500 4,375 June 19 Prepaid Insurance 12,000 15,360 27,360 Land June Bal 100,000 Buildings June Bal 165,000 Accumulated Depreciation—Buildings June Bal 137,500 Equipment 42,000 2,520 44,520 June Bal Vehicles 52,500 Accounts Payable June Bal 27 Bal 3,540 2,500 100 6,140 Unearned Revenue 100 June Bal 18 Bal 100 500 500 Bank Loan Payable June Bal 22,500 Mortgage Payable June Bal 53,200 Common Shares June Bal 300 Retained Earnings June Bal 66,788 Dividends 30,000 Solutions Manual 3-114 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-7 (Continued) (a) and (c) (Continued) Rent Revenue June Bal 6,000 Sales June Bal 19 23 30 Bal 638,768 400 2,040 2,550 643,758 Sales Returns and Allowances June Bal 5,000 June Bal Cost of Goods Sold 102,386 June Bal 30 Bal Salaries Expense 287,532 3,250 290,782 June Bal Freight Out 18,000 June Bal 27 Bal Utilities Expense 12,000 100 12,100 Advertising Expense June Bal 9,000 June Bal Property Tax Expense 5,950 June Bal Interest Expense 5,299 June Bal Income Tax Expense 33,000 Solutions Manual 3-115 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BYP 3-7 (Continued) (c) KOEBEL’S FAMILY BAKERY LTD Trial Balance June 30, 2014 Cash Accounts receivable Merchandise inventory Supplies Prepaid insurance Land Buildings Accumulated depreciation—buildings Equipment Accumulated depreciation—equipment Vehicles Accounts payable Unearned revenue Bank loan payable Mortgage payable Common shares Retained earnings Dividends Rent revenue Sales Sales returns and allowances Cost of goods sold Salaries expense Freight out Utilities expense Advertising expense Property tax expense Interest expense Income tax expense Total Debit $18,674 10,490 16,250 4,375 27,360 100,000 165,000 Credit $137,500 44,520 14,000 52,500 6,140 500 22,500 53,200 300 66,788 30,000 6,000 643,758 5,000 102,386 290,782 18,000 12,100 9,000 5,950 5,299 33,000 $950,686 00 $950,686 Solutions Manual 3-116 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (a) Date Account Titles Ref Debit Credit Jan Cash 1000 15,000 Common Shares (1,000 × $15) 4000 15,000 Cash 1000 50,000 Bank Loan Payable 3100 50,000 Rent Expense 7400 3,000 Cash 1000 3,000 Equipment 2000 40,000 Cash 1000 20,000 Accounts Payable 3000 20,000 10 Advertising Expense 7000 500 Cash 1000 500 t 11 Supplies 1200 1,000 Accounts Payable 3000 1,000 13 Advertising Expense 7000 3,000 Cash 1000 3,000 t 15 Salaries Expense 7100 7,500 Cash 1000 7,500 17 Accounts Receivable 1100 15,000 Service Revenue 5000 15,000 t 20 Office Expense 7300 1,000 Cash 1000 1,000 t 24 Cash 1000 10,000 Accounts Receivable 1100 10,000 t 30 Prepaid Insurance 1300 6,000 Cash 1000 6,000 Solutions Manual 3-117 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (a) (Continued) Date Account Titles Ref Debit Credit Jan 30 Accounts Receivable 1100 18,000 Service Revenue 5000 18,000 t 31 Salaries Expense 7100 7,500 Cash 1000 7,500 31 Interest Expense 7200 300 Bank Loan Payable 3100 700 Cash 1000 1,000 31 Income Tax Expense 9000 1,200 Cash 1000 1,200 (b) Cash Jan Jan #1000 15,000 Jan 3,000 50,000 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 31 Bal 24,300 Accounts Receivable Jan Jan 17 15,000 Jan 30 18,000 31 Bal 23,000 #1100 24 10,000 Solutions Manual 3-118 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (b) (Continued) Supplies Jan 11 1,000 Jan 31 Bal 1,000 Prepaid Insurance Jan 30 6,000 Jan 31 Bal 6,000 Equipment Jan Jan 31 Bal 40,000 40,000 Jan Jan 700 Jan Jan #3000 20,000 11 1,000 31 Bal Bank Loan Payable 31 #1300 #2000 Accounts Payable Jan #1200 21,000 #3100 50,000 31 Bal 49,300 Common Shares #4000 Jan 15,000 Jan 31 Bal 15,000 Solutions Manual 3-119 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (b) (Continued) Service Revenue Jan Jan Advertising Expense Jan Jan 10 500 13 3,000 31 Bal 3,500 Salaries Expense Jan Jan 15 7,500 31 7,500 31 Bal #5000 17 15,000 30 18,000 31 Bal 33,000 #7000 #7100 15,000 Interest Expense Jan 31 300 Jan 31 Bal 300 Office Expense Jan 20 1,000 Jan 31 Bal 1,000 Rent Expense Jan 3,000 Jan 31 Bal 3,000 Income Tax Expense Jan 31 1,200 Jan 31 Bal 1,200 #7200 #7300 #7400 #9000 Solutions Manual 3-120 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (c) 1000 1100 1200 1300 2000 3000 3100 4000 5000 7000 7100 7200 7300 7400 9000 SOFTWARE ADVISORS LIMITED Trial Balance January 31, 2015 Debit Cash $ 24,300 Accounts receivable 23,000 Supplies 1,000 Prepaid insurance 6,000 Equipment 40,000 Accounts payable Bank loan payable Common shares Service revenue Advertising expense 3,500 Salaries expense 15,000 Interest expense 300 Office expense 1,000 Rent expense 3,000 Income tax expense 1,200 $118,300 Credit $ 21,000 49,300 15,000 33,000 $118,300 Solutions Manual 3-121 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (d) (1) SOFTWARE ADVISORS LIMITED Income Statement Month Ended January 31, 2015 Revenues Service revenue Expenses Salaries expense Advertising expense Rent expense Office expense Interest expense Total expenses Profit before income tax Income tax expense Profit $33,000 $15,000 3,500 3,000 1,000 300 22,800 10,200 1,200 $ 9,000 (2) SOFTWARE ADVISORS LIMITED Statement of Changes in Equity Month Ended January 31, 2015 Common Shares Balance, January Issued common shares Profit Balance, January 31 $ 15,000 $15,000 Retained Earnings $ 9,000 $9,000 Total Equity $ 15,000 9,000 $24,000 Solutions Manual 3-122 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS – (Continued) (d) (Continued) (3) SOFTWARE ADVISORS LIMITED Statement of Financial Position January 31, 2015 Assets Current assets Cash Accounts receivable Supplies Prepaid insurance Property, plant, and equipment Equipment Total assets $24,300 23,000 1,000 6,000 $54,300 40,000 $94,300 Liabilities and Shareholders’ Equity Current liabilities Accounts payable Non-current liabilities Bank loan payable Total liabilities Shareholders’ equity Common shares Retained earnings Total liabilities and shareholders’ equity $21,000 49,300 70,300 $15,000 9,000 24,000 $94,300 Solutions Manual 3-123 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Legal Notice Copyright Copyright © 2014 by John Wiley & Sons Canada, Ltd or related companies All rights reserved The data contained in these files are protected by copyright This manual is furnished under licence and may be used only in accordance with the terms of such licence The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made available on a network, used to create derivative works, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of John Wiley & Sons Canada, Ltd (MMXV v F4) Solutions Manual 3-124 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited ... 100 Cash Unearned Revenue 30 0 Unearned Revenue Service Revenue 30 0 250 500 30 0 5,000 400 500 250 100 30 0 30 0 Solutions Manual 3- 16 Chapter Copyright © 2014 John Wiley &... Financial Accounting, Sixth Canadian Edition EXERCISE 3- 7 Cash Mar Mar 11,000 Mar 1,000 25 1,000 13 225 30 700 27 9,000 31 500 25 1,000 31 Bal 1,975 Accounts Receivable Mar 10 2 ,30 0 Mar Mar 31 ... 14,000 200 99,000 $ 21,400 9,500 800 39 ,000 38 ,000 20,850 800 75,000 25,000 9,700 9,000 5,700 4,750 3, 600 1,800 3, 000 $204,550 $204,550 Solutions Manual 3- 43 Chapter Copyright © 2014 John Wiley