Solution manual Financial accounting 6th kieso kimmel ch05

Solution manual Financial accounting 6th kieso kimmel ch05 . Solution manual Financial accounting 6th kieso kimmel ch05 Solution manual Financial accounting 6th kieso kimmel ch05 Solution manual Financial accounting 6th kieso kimmel ch05 Solution manual Financial accounting 6th kieso kimmel ch05 Solution manual Financial accounting 6th kieso kimmel ch05 Solution manual Financial accounting 6th kieso kimmel ch05

www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition CHAPTER Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Questions Brief Exercises Exercises Identify the differences between service and merchandising companies 1, 2, 3, 1, 1A, 2A,*11A 1B, 2B, *11B Prepare entries for purchases under a perpetual inventory system 5, 6, 7, 8, 9, 10 3, 4, 2, 3, 4, 6, *13 2A, 3A, 4A, 5A 2B, 3B, 4B, 5B 4, Prepare entries for sales under a perpetual inventory system 7, 8, 9, 10, 11, 12 4, 2, 3, 5, 6, *13 2A, 3A, 4A, 5A 2B, 3B, 4B, 5B 4 Prepare a single-step and a multiple-step income statement 13, 14, 15, 16, 17 7, 8, 7, 8, 9, 10 5A, 6A, 7A, 9A 5B, 6B, 7B, 9B 1, 3, Calculate the gross profit 18, 19, 20, margin and profit margin 10, 11 6, 9, 10, 11 8A, 9A, 10A, *14A 8B, 9B, 10B, *14B 1, 2, 3, 4, 6, Prepare entries for purchases and sales under a periodic inventory system and calculate cost of goods sold (Appendix 5A) *12, *13, *14, *15, *16 *12, *13, *14, *15 *11A, *12A, *13A, *14A, *15A *11B, *12B, *13B, *14B, *15B Study Objectives *21, *22, *23 A Problems B Problems BYP Solutions Manual 5-1 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Identify appropriate inventory system Moderate 15-20 2A Record purchase and sales transactions Moderate 20-30 3A Record purchase and sales transactions Moderate 20-30 4A Record and post purchase and sales transactions; prepare trial balance Simple 30-40 5A Record and post transactions and prepare partial financial statements Simple 30-40 6A Prepare single- and multiple-step income statements Moderate 20-30 7A Record and post adjusting entries; prepare adjusted trial balance and financial statements Moderate 35-45 8A Calculate profitability ratios and comment Moderate 15-20 9A Calculate amounts and assess profitability Complex 30-40 10A Calculate ratios and comment Simple 20-30 *11A Record purchase and sales transactions; discuss inventory systems Moderate 20-30 *12A Record purchase and sales transactions Moderate 20-30 *13A Record and post purchase and sales transactions; prepare trial balance Simple 30-40 *14A Prepare partial income statement; calculate gross profit Simple 20-30 *15A Prepare financial statements Moderate 40-50 Identify appropriate inventory system Moderate 15-20 1B Solutions Manual 5-2 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE (Continued) Problem Number 2B Description Record purchase and sales transactions Difficulty Level Moderate Time Allotted (min.) 20-30 3B Record purchase and sales transactions Moderate 20-30 4B Record and post purchase and sales transactions; prepare trial balance Simple 30-40 5B Record and post transactions and prepare partial financial statements Simple 30-40 6B Prepare single- and multiple-step income statements Moderate 20-30 7B Record and post adjusting entries; prepare adjusted trial balance and financial statements Moderate 35-45 8B Calculate profitability ratios and comment Moderate 15-20 9B Calculate amounts and assess profitability Complex 30-40 10B Calculate ratios and comment Simple 20-30 *11B Record purchase and sales transactions; discuss inventory systems Moderate 20-30 *12B Record purchase and sales transactions Moderate 20-30 *13B Record and post purchase and sales transactions; prepare trial balance Simple 30-40 *14B Prepare partial income statement; calculate gross profit Simple 20-30 *15B Prepare financial statements Moderate 40-50 Solutions Manual 5-3 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ANSWERS TO QUESTIONS (a) The operating cycle is the time it takes to go from cash to cash in producing revenues (b) The normal operating cycle for a merchandising company is likely to be longer than that of a service company because in a merchandising company inventory must first be purchased and sold, and then the receivables must be collected whereas in a service company the services only need to be provided (not purchased first and then stored until sold) and then the receivables must be collected (a) The income measurement process of a merchandising company is the same as the service company in that profit is arrived at by deducting expenses from revenues (b) The income measurement process of a merchandising company differs from that of a service company in that its revenue is derived from sales revenue, not service revenue In addition, cost of goods sold is deducted from sales revenue to determine gross profit, before operating and other expenses similar to both types of companies are deducted (or other revenues are added) The company needs to compare the cost of the detailed record keeping required in a perpetual inventory system to the benefits of having the additional information about the inventory One of the benefits of a perpetual inventory system is the ability to answer questions from customers about merchandise availability In a used clothing business, this may not be of much benefit unless each inventory item is unique Another benefit is the monitoring of inventory quantities in order to avoid running out of stock Again, this may not be of benefit since the company does not order recurring or similar merchandise, and may not have a supplier to order from But if the company is selling used clothing on consignment it will need to track each item in order to determine which consignor to pay when an item is sold The company should carefully determine the cost of the detailed record keeping required, in particular for a new company A perpetual inventory system requires more record keeping and therefore is more expensive to use For example, a perpetual inventory system usually requires an investment in a point of sale system that is integrated with the inventory system A physical count is an important control feature By using a perpetual inventory system, a company knows what should be on hand Performing a physical count and checking it to the perpetual records is necessary to detect any errors in record keeping and/or shortages in stock The reason for recording the purchase of merchandise for resale in a separate account is to enable a company to determine its cost of goods sold and gross profit This information is useful in managing costs and setting prices Solutions Manual 5-4 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) (a) The value of the purchase discount to Butler Roofing is $100.00 ($10,000 × 1%) (b) Failing to take advantage of the discount terms, is like paying the supplier an extra $100 in order to settle a $9,900 invoice 20 days later This works out to 1.01% [$100 ÷ $9,900] every 20 days On an annual basis this amounts to 18.4% [($100 ÷ $9,900 × (365 ÷ 20)] The company should record the sale as revenue in June, when it is sold to a customer The merchandise purchased should be recorded as an asset, merchandise inventory, in April It should be recorded as cost of goods sold (an expense) in June when the inventory is sold and the revenue is recognized This is necessary in order to match the cost with the related revenue (a) FOB shipping point means that the goods are placed free on board by the seller at the point of shipping The buyer pays the freight costs from the point of shipping to the buyer’s destination because title passes at shipping point FOB destination means the goods are delivered by the seller to their destination where the title passes The seller pays for shipping to the buyer’s destination (b) FOB shipping point will result in a debit to the Merchandise Inventory account by the buyer because title has transferred at shipping point and the inventory is now owned by the buyer FOB destination will result in a debit to Freight Out by the seller because they are paying for the freight In a perpetual inventory system, purchase returns are credited to the Merchandise Inventory because the items purchased have been returned to the vendor and are no longer available to be sold to customers Sales returns are not debited directly to the Sales account because this would not provide information about the goods returned This information can be useful in making decisions Debiting returns directly to sales may also cause problems in comparing sales for different periods 10 (a) A quantity discount gives a reduction in the price according to the volume of the purchase A purchase discount is offered by a seller to a buyer for early payment of an invoice When the buyer pays the invoice within the discount period, the amount of the discount decreases the Merchandise Inventory account A sales discount is the same as a purchase discount but from the seller’s point of view (b) Quantity discounts are not recorded or accounted for separately but become part of the recorded sales price When collected within the discount period, the seller records the discount as a debit to the Sales Discounts account, which is a contra revenue account to Sales Buyers record purchase discounts when taken as a credit to Merchandise Inventory under the perpetual system or Purchase Discounts when using the periodic system Solutions Manual 5-5 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 11 If the inventory is not resaleable, it cannot be included in inventory since it cannot be resold and it has no value The cost remains in cost of goods sold since it is a cost of doing business If the inventory is resaleable, it still has value to the company In this case, the inventory is debited to inventory again and the cost of goods sold is credited 12 By shipping more product than was ordered, customers will be annoyed with Agnew Inc and there will be damage done to customer relationships Goods that are returned will cost additional freight charges Annoyed customers could possibly refuse the whole order which will result in a lost sale It is not an ethical tactic to implement this procedure as the objective is obviously to manipulate sales results and boost profit in the current year 13 In a single-step income statement, all data are classified into two categories: (1) revenues and (2) expenses It is referred to as a single-step income statement because only a single step—subtracting expenses from revenues—is needed to determine profit before income tax A multiple-step income statement requires several steps to determine profit before income tax First, cost of goods sold is deducted from sales to determine gross profit Operating expenses are then deducted to calculate profit from operations Finally, other revenues and expenses are added or deducted to determine profit before income tax The deduction of income tax to calculate profit (loss) is the same under both formats In addition, both formats produce the same profit amount for the period 14 Shoppers Drug Mart uses a multiple-step income statement 15 (a) When classifying expenses by their nature, they are reported in accordance with their natural classification (for example, salaries, deprecation, and so on) When classifying expenses by their function, they are reported according to the activity (business function) for which they were incurred (for example, cost of goods sold, administrative, selling) (b) It does not matter whether a single-step or multiple-step income statement is prepared, expenses must be classified either by nature or by function 16 Because the Katz Group is a private enterprise, it can follow Accounting Standards for Private Enterprises (ASPE) Companies following ASPE can classify their expenses in whatever manner is useful to them Shoppers, which follows IFRS must classify its expenses by their nature or their function 17 Interest expense is a non-operating expense because it relates to how a company’s operations are financed This is not always within the company’s control and is usually not a decision of the general manager but of the chief financial officer Solutions Manual 5-6 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) 18 The difference between gross profit margin and profit margin is that the gross profit margin measures the amount by which the selling price exceeds the cost of goods sold while the profit margin measures the extent to which sales cover all expenses (including the cost of goods sold) 19 Factors affecting a company’s gross profit margin include the selling price and the cost of the merchandise Recall that gross profit = net sales − cost of goods sold Selling products with a higher price or “mark-up” or selling products with a lower cost would result in an increased gross profit margin Selling products with a lower price (perhaps dues to increased competition that results in lower selling prices) or selling products with a higher cost (perhaps due to price increases from suppliers and shippers) would result in a lower gross profit margin 20 High gross profit Computer services and software companies Pharmaceutical manufacturers Luxury goods retailers Low gross profit Low-price retail companies such as Walmart Grocery stores Forestry and wood products *21 Accounts Purchase Returns and Allowances Purchase Discounts Freight In *22 (a) Added/Deducted Deducted Deducted Added (b) Normal Balance Credit Credit Debit Periodic System Cost of Goods Sold = Beginning Inventory + Cost of Goods Purchased (Purchases – Purchase Discounts – Purchase Returns and Allowances + Freight In) – Ending Inventory Ending inventory as well as cost of goods sold for the period, is calculated at the end of period Perpetual System Cost of Goods Sold = the cost of the item(s) sold Cost of goods sold is calculated at the time of each sale and recorded as an increase (debit) to the Cost of Goods Sold account and a decrease (credit) to the Merchandise Inventory account Solutions Manual 5-7 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition Answers to Questions (Continued) *23 The calculation of cost of goods sold is shown in detail in the income statement of a company using the periodic system In a perpetual system, it is one line and amount only Periodic System Cost of Goods Sold = Add the cost of goods purchased (where the cost of goods purchased is equal to purchases less purchases discounts and purchases returns and allowances plus freight in) to the cost of goods on hand at the beginning of the period (beginning inventory) The result is the cost of goods available for sale Subtract the cost of goods on hand at the end of the period (ending inventory) from the cost of goods available for sale The result is the cost of goods sold Perpetual System Cost of Goods Sold = one number, which is the total of cost of goods sold as previously determined and recorded for all sales Solutions Manual 5-8 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-1 (a) The company with the most efficient operating cycle is Company A as it uses the fewest number of days in its cycle to obtain cash (b) The company which is most likely a service company is Company A as it does not have to manufacture or deliver inventory and consequently takes the fewest number of days to obtain cash Company C, with the highest number of days in its operating cycle is likely the manufacturing company and the merchandising company would be in the middle (Company B) with neither the highest nor the lowest number of days in its operating cycle BRIEF EXERCISE 5-2 (a) [1] Profit before tax = $100 – $65 = $35 [2] Profit = $35 (from [1]) – $9 = $26 [3] Cost of goods sold = $100 – $60 = $40 [4] Operating expenses = $60 – $35 = $25 [5] Income tax expense = $35 – $26 = $9 (b) Company A is the service company, since it has no cost of goods sold Company B is the merchandising company, since it has cost of goods sold Solutions Manual 5-9 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition BRIEF EXERCISE 5-3 Beginning Balance Purchases Freight in Ending Balance Purchases Merchandise Inventory 25,000 100,000 12,000 Purchase returns 4,400 Purchase discounts 2,400 93,000 Cost of goods sold 18,000 Merchandise Inventory 100,000 Accounts Payable Purchase Returns Accounts Payable Merchandise Inventory 12,000 Purchase Discounts Accounts Payable ($100,000 – $12,000) Merchandise Inventory ($88,000 × 5%) Cash 88,000 Freight In Merchandise Inventory Accounts Payable 2,400 Cost of Goods Sold Merchandise Inventory 93,000 Cost of Sales 100,000 12,000 4,400 83,600 2,400 93,000 BRIEF EXERCISE 5-4 Pocras Corporation (Buyer): Aug 24 Merchandise Inventory Accounts Payable 900 900 Wydell Inc (Seller): Aug 24 24 Accounts Receivable Sales 900 Cost of Goods Sold Merchandise Inventory 590 900 590 Solutions Manual 5-10 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (d) Date Account Titles March 31 31 31 31 31 Debit Utilities Expense Accounts Payable 10,000 Salaries Expense Salaries Payable 10,000 Interest Expense Interest Payable 9,000 Depreciation Expense Accumulated Depreciation—Equipment ($145,000 ÷ 10 years = $14,500) 14,500 Income Tax Expense Income Tax Payable 50,000 Credit 10,000 10,000 9,000 14,500 50,000 Solutions Manual 5-122 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) Cash Feb 28 Bal Mar Supplies 65,000 Feb 28 Bal 7,500 Mar 31 Bal 7,500 125,000 Mar 196,000 285,000 5,000 12 12,500 14 269,500 19 176,400 16 45,000 Feb 28 Bal 5,000 20 255,000 27 50,000 Mar 31 Bal 5,000 30 5,000 Prepaid Rent Mar 31 Bal 348,400 Equipment Accounts Receivable Feb 28 Bal 350,000 Mar 200,000 Mar 125,000 13 20,000 19 180,000 Feb 28 Bal 145,000 Mar 31 Bal 145,000 Accumulated Depreciation —Equipment Mar 31 Bal 225,000 Merchandise Inventory 13 300,000 Mar 14,000 28 Bal 29,000 Mar 31 14,500 Mar 31 Bal 43,500 Accounts Payable Feb 28 Bal 2,750,000 Mar Feb 4,000 200,000 25,000 140,000 14 5,500 20 179,000 Feb Mar 200,000 Mar 25,000 14 275,000 Mar 28 Bal 1,550,000 300,000 31 10,000 31 Bal 1,360,000 Mar 31 Bal 2,510,500 Solutions Manual 5-123 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) (Continued) Salaries Payable Mar 31 Mar 31 10,000 Bal 10,000 Interest Payable Mar 31 Mar 31 9,000 Bal 9,000 Bal 35,000 Unearned Revenue Feb 28 Mar 12 Mar 31 12,500 Bal 47,500 Bank Loan Payable – Non-Current Feb 28 Bal 450,000 Mar 31 Bal 450,000 Income Tax Payable Mar 31 50,000 Mar 31 Bal 50,000 Common Shares Feb 28 Bal 200,000 Mar 31 Bal 200,000 Feb 28 Bal 550,500 50,000 Mar 31 CE 570,900 Retained Earnings Mar 31 CE Mar 31 Bal 1,071,400 Solutions Manual 5-124 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) (Continued) Dividends Feb 28 Bal 50,000 Mar 31 Bal 50,000 Mar 31 CE Mar 31 Bal 50,000 Sales Feb 28 Bal 5,479,400 Mar 285,000 200,000 20 255,000 Mar 31 Bal 6,219,400 Mar 31 CE 6,219,400 Mar 31 Bal Sales Returns and Allowances Feb 28 Bal 107,000 Mar 13 20,000 Mar 31 Bal 127,000 Mar 31 Mar 31 Bal CE 127,000 Sales Discounts Feb 28 Bal Mar 19 65,000 3,600 Mar 31 Bal 68,600 Mar 31 CE Mar 31 Bal 68,600 Solutions Manual 5-125 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) (Continued) Advertising Expense Feb 28 Bal 75,000 Mar 31 Bal 75,000 Mar 31 CE Mar 31 Bal 75,000 Cost of Goods Sold Feb 28 Bal 3,843,900 Mar 200,000 Mar 140,000 20 179,000 13 14,000 Mar 31 Bal 4,348,900 Mar 31 CE 4,348,900 Mar 31 Bal Freight Out Feb 28 Bal 180,000 Mar 5,000 Mar 31 Bal 185,000 Mar 31 CE Mar 31 Bal 185,000 Depreciation Expense Feb 28 Bal Mar 31 14,500 Mar 31 Bal 14,500 Mar 31 CE Mar 31 Bal 14,500 Solutions Manual 5-126 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) (Continued) Interest Expense Feb 28 Bal 27,000 Mar 31 9,000 Mar 31 Bal 36,000 Mar 31 CE 36,000 Mar 31 Bal Office Expense Feb 28 Bal 26,000 Mar 31 Bal 26,000 Mar 31 CE 26,000 Mar 31 Bal Rent Expense Feb 28 Bal 55,000 Mar 30 5,000 Mar 31 Bal 60,000 Mar 31 CE 60,000 Mar 31 Bal Salaries Expense Feb 28 Bal 360,000 Mar 16 45,000 27 50,000 31 10,000 Mar 31 Bal 465,000 Mar 31 CE 465,000 Mar 31 Bal Solutions Manual 5-127 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (a), (b), (d) and (g) (Continued) Travel Expense Feb 28 Bal 12,500 Mar 31 Bal 12,500 Mar 31 CE Mar 31 Bal 12,500 Utilities Expense Feb 28 Bal Mar 31 Mar 31 20,000 10,000 Bal 30,000 Mar 31 CE Mar 31 Bal 30,000 Income Tax Expense Feb 28 Bal Mar 31 150,000 50,000 Mar 31 Bal 200,000 Mar 31 CE Mar 31 Bal 200,000 Income Summary Mar 31 CE 5,648,500 Mar 31 CE 6,219,400 CE Bal 570,900 Solutions Manual 5-128 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (c) HERITAGE FURNITURE LIMITED Trial Balance March 31, 2015 Debit $ 348,400 225,000 2,510,500 7,500 5,000 145,000 Cash Accounts receivable Merchandise inventory Supplies Prepaid rent Equipment Accumulated depreciation—equipment Accounts payable Unearned revenue Bank loan payable—non-current Common shares Retained earnings Dividends Sales Sales returns and allowances Sales discounts Advertising expense Cost of goods sold Freight out Interest expense Office expense Rent expense Salaries expense Travel expense Utilities expense Income tax expense Solutions Manual Credit $ 29,000 1,350,000 47,500 450,000 200,000 550,500 50,000 6,219,400 127,000 68,600 75,000 4,348,900 185,000 27,000 26,000 60,000 455,000 12,500 20,000 150,000 $8,846,400 5-129 000000v $8,846,400 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (e) HERITAGE FURNITURE LIMITED Adjusted Trial Balance March 31, 2015 Debit $ 348,400 225,000 2,510,500 7,500 5,000 145,000 Cash Accounts receivable Merchandise inventory Supplies Prepaid rent Equipment Accumulated depreciation—equipment Accounts payable Salaries payable Interest payable Unearned revenue Bank loan payable—non-current Income tax payable Common shares Retained earnings Dividends Sales Sales returns and allowances Sales discounts Cost of goods sold Advertising expense Freight out Depreciation expense Interest expense Office expense Rent expense Salaries expense Travel expense Utilities expense Income tax expense Solutions Manual Credit $ 43,500 1,360,000 10,000 9,000 47,500 450,000 50,000 200,000 550,500 50,000 6,219,400 127,000 68,600 4,348,900 75,000 185,000 14,500 36,000 26,000 60,000 465,000 12,500 30,000 200,000 $8,939,900 5-130 000000v $8,939,900 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (f) HERITAGE FURNITURE LIMITED Income Statement Year Ended March 31, 2015 Sales revenue Sales Less: Sales returns and allowances Sales discounts Net sales Cost of goods sold Gross profit Operating expenses Salaries expense Freight out Advertising expense Rent expense Utilities expense Office expense Depreciation expense Travel expense Total operating expenses Profit from operations Other revenues and expenses Interest expense Profit before income tax Income tax expense Profit Solutions Manual 5-131 $6,219,400 $127,000 68,600 195,600 6,023,800 4,348,900 1,674,900 $465,000 185,000 75,000 60,000 30,000 26,000 14,500 12,500 868,000 806,900 36,000 770,900 200,000 $ 570,900 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (f) HERITAGE FURNITURE LIMITED Statement of Changes in Equity Year Ended March 31, 2015 Common Shares Balance, April 1, 2014 Issued common shares Profit Dividends Balance, March 31, 2015 Solutions Manual $199,000 1,000 00 00000 $200,000 5-132 Retained Earnings $ 550,500 570,900 (50,000) $1,071,400 Total Equity $ 749,500 1,000 570,900 (50,000) $1,271,400 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (f) (Continued) HERITAGE FURNITURE LIMITED Statement of Financial Position March 31, 2015 Assets Current assets Cash Accounts receivable Merchandise inventory Supplies Prepaid rent Property, plant and equipment Equipment Less: Accumulated depreciation Total assets $ 348,400 225,000 2,510,500 7,500 5,000 $145,000 43,500 Liabilities and Shareholders’ Equity Current liabilities Accounts payable Salaries payable Interest payable Unearned revenue Income tax payable Current portion of bank loan payable Total current liabilities Non-current liabilities Bank loan payable Total liabilities Shareholders’ equity Common shares $ 200,000 Retained earnings 1,071,400 Total liabilities and shareholders’ equity Solutions Manual 5-133 $3,096,400 101,500 $3,197,900 $1,360,000 10,000 9,000 47,500 50,000 45,000 1,521,500 405,000 1,926,500 1,271,400 $3,197,900 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (g) Date Account Titles Debit Sales Income Summary 6,219,400 31 Income Summary Sales Returns and Allowances Sales Discounts Advertising Expense Cost of Goods Sold Freight out Depreciation Expense Interest Expense Office Expense Rent Expense Salaries Expense Travel Expense Utilities Expense Income Tax Expense 5,648,500 31 Income Summary Retained Earnings 570,900 31 Retained Earnings Dividends 50,000 March 31 Solutions Manual 5-134 Credit 6,219,400 127,000 68,600 75,000 4,348,900 185,000 14,500 36,000 26,000 60,000 465,000 12,500 30,000 200,000 570,900 50,000 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition COMPREHENSIVE CASE: CHAPTERS 1─5 (Continued) (h) HERITAGE FURNITURE LIMITED Post-Closing Trial Balance March 31, 2015 Debit $ 348,400 225,000 2,510,500 7,500 5,000 145,000 Cash Accounts receivable Merchandise inventory Supplies Prepaid rent Equipment Accumulated depreciation—equipment Accounts payable Salaries payable Interest payable Unearned revenue Bank loan payable—non-current Income tax payable Common shares Retained earnings Solutions Manual 000000000 $3,241,400 5-135 Credit $ 43,500 1,360,000 10,000 9,000 47,500 450,000 50,000 200,000 1,071,400 $3,241,400 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited www.downloadslide.net 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 (MMXIII xi FI) Solutions Manual 5-136 Chapter Copyright © 2014 John Wiley & Sons Canada, Ltd Unauthorized copying, distribution, or transmission of this page is strictly prohibited ...www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE Problem... transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ASSIGNMENT CHARACTERISTICS TABLE (Continued)... transmission of this page is strictly prohibited www.downloadslide.net Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition ANSWERS TO QUESTIONS (a) The operating