check figures pll3e final

List of Check Figures and Solution Hints

to accompanyPhillips/ Libby/Libby:

Fundamentals of Financial Accounting, 3e

Chapter 1

Mini-ExercisesM1-1 (5) IFRS = International

Financial Reporting Standards

M1-2 (2) F, (8) GM1-3 (2) I, (9) EM1-4 (7) LM1-5 (3) AM1-6 (8) SEM1-7 (10) AM1-8 (3) SEM1-9 (4) AM1-10 (7) I/S, SREM1-11 (4) (O)M1-12 (1) (I)M1-13 Retained earnings, 12/31/10

= $46,000M1-14 Net income = $645, Total

assets = $16,772

ExercisesE1-1 (c) $3,500 + $1,300 – $500 =

$4,300E1-2 (d) $3,200 + $15,700 –

$7,200 - $5,300 = $6,400E1-3 (1) Total liabilities =

$314,597, (2) stockholdersE1-4 (1) Total assets = $122,400,

(4) 14,550E1-5 (f) Dividends, SEE1-6 (1) Total expenses =

$662,000E1-7 Total expenses = $130,825E1-8 (A) Net income = $18,000

(C) Stockholders' equity = $78,000

E1-9 (1) Net income = $40,500, (2) Total assets = $96,800

E1-10 (1) $18,000E1-11 (3) FE1-12 (4) (O)

Coached ProblemsCP1-1 (1) Net income = $21,950,

(3) Total assets = $115,500CP1-2 (3) StockholdersCP1-3 (1) Net income = $58,806,

(3) Total assets = $1,595,925

Group ProblemsPA1-1 (1) Net income = $23,450,

(3) Total assets = $113,850PA1-2 (1) Profitable since NI =

$23,450PA1-3 (1) Net income = $100, (3)

Total assets = $2,259, (4) Cash used in financing activities = ($4)

PB1-1 (1) Net income = $25,150, (3) Total assets = $118,400

PB1-2 (4) Cash increase of $13,900PB1-3 (1) Net income = $81,282,

(3) Total assets = $1,039,731, (4) Cash used in financing activities = ($11,681)

Skill Development CasesS1-1S1-2

(4) Cash = $519 (million)(2) Lowe’s revenue of $48,230 (million) was lower than the $71,288 (million) reported by Home Depot

S1-3 Solutions vary depending on company and/or accounting period selected

S1-4 (1) Separate entity conceptS1-5 (1) An independent audit is

an absolute mustS1-6 (1) Based on historical cost,

Ashley’s net worth = $1,550. Based on market value, Ashley’s net worth = $2,150

S1-7 Net income = $51, Total assets = $3,754

Continuing CaseCC1 (1) Net income = $2,400,

(3) Total assets = $73,930

Chapter 2

Mini-ExercisesM2-1 Stockholders’ equity: debits

© 2010, The McGraw-Hill Companies, Inc.Fundamentals of Financial Accounting, 3/e

decrease, credits increase M2-2 Assets: increased with

debits, decreased with credits

M2-3 (2) CM2-4 (4) NCA, (11) SEM2-5 (2) CL, credit, (7) SE creditM2-6 (1) CL, credit, (6) NCA, debitM2-7 (2) No, (6) YesM2-8 (1)Yes, (3) No, lacks

exchangeM2-9 (b) Cash (+A) +$4,630,

Contributed Capital (+SE) +$4,630

M2-10 (b) dr Cash (+A) $4,630 cr Contributed Capital (+SE) $4,630

M2-11 (a) Debit (left side) Cash account for $3,940, Credit (right side) Notes Payable account for $3,940

M2-12 Ending balance in Cash account = $8,008 debit, Total current assets = $9,080

M2-13 (a) dr Cash (+A) $55,000 cr Contributed Capital (+SE) $55,000, (e) No transaction

M2-14 (d) dr Accounts Payable (-L) $1,500 cr Cash (-A) $1,500

M2-15 (b) No transaction, (e) dr Equipment (+A) $2,200 cr Cash (-A) $1,000 cr Notes Payable (+L) $1,200

M2-16 (c) dr Cash (+A) $400 cr Accounts Receivable (-A) $400

M2-17 Total current assets = $3,600, Total assets = $50,500, Total current liabilities = $2,500

M2-18 (1) Total assets = $2,076,280, Total stockholders’ equity = $44,881,000

M2-19 2.0, yesM2-20 (a) Decrease, 1.87 vs. 2.0,

(c) Increase, 2.13 vs. 2.0M2-21 (a) Decrease, 1.96 vs. 2.0,

(c) Increase, 2.20 vs. 2.0

ExercisesE2-1 (1) E, (10) DE2-2 (1) (b) Cash (-A), Equipment

(+A), (2) Equipment =

$21,000, Land = $50,000, Cost principle

E2-3 (4) CA debit, (10) CL creditE2-4 (a) Cash (+A) $10,000,

Contributed Capital (+SE) $10,000

E2-5 (1) (c) No effectE2-6 (b) dr Cash (+A) $7,000 cr

Notes Payable (+L) $7,000E2-7 (1) (a) dr Equipment (+A)

$216.3 cr Cash (-A) $211.3 cr Notes Payable (+L) $5.0

E2-8 (1) Ending cash balance = $57,000 debit, (2) Liabilities = $9,000

E2-9 (1) (6) Purchased land by signing note, (2) Total assets = $77,000

E2-10 (1) (3) Borrowed money by signing note, (2) Total assets = $76,000

E2-11 (a) dr Cash (+A) $60,000 cr Contributed Capital (+SE) $60,000, (c) No transaction

E2-12 (1) (e) Not a business transaction, Ending balance of Equipment = $22,000, (3) Ending balance of Cash = $36,000, (4) Total assets = $70,000

E2-13 (c) Used cash to purchase supplies costing $1,500

E2-14 (1) 5.22 at 9/30/08, 6.02 at 12/31/07, (3) 6.87

Coached ProblemsCP2-1 (2) Total cash = $28,000, (4)

(c) $120,000 - $80,000 = $40,000, (5) Liabilities

CP2-2 (1) (b) Cash (+A) $30,000, Notes Payable (+L) $30,000, (2) (b) dr Cash (+A) $30,000 cr Notes Payable (+L) $30,000,(3) Total Cash = $105,000 debit, Total Notes Payable = $147,000 credit(4) Total assets = $679,000

CP2-3 (1) (a) Equipment (+A) $21,000, Cash (-A) $5,000, Notes Payable (+L) +$16,000, (2) (b) dr Cash (+A) $20,000 cr Contributed Capital (+SE) $20,000, (3) Ending Cash balance =


$64,000 debit, (5) Total assets = $412,000

Group ProblemsPA2-1 (1) Ending Cash = $12,000,

Ending Notes Payable = $149,000, (3) (c) $749,000 - $349,000 = $400,000, (4) Stockholders’ equity

PA2-2 (1) (e) Supplies (+A ) $30,000, Accounts Payable (+L) $30,000, (2)(b) dr Cash (+A) $90,000 cr Notes Payable (+L) $90,000,(3) Ending Cash = $234,000 debit, (4) Total assets = $1,071,000, (5) Stockholders’ Equity

PA2-3 (1) (e) No effect, (2) (c) dr Property, Plant, and Equipment (+A) $11 cr Cash (-A) $2 cr Long-term Debt (+L) $9, (3) Ending cash = $79 debit, (4) Event (e) is not a transaction since it lacks an exchange, (5) Total assets = $771

PB2-1 (1) Ending Cash = $87,000, Ending Notes Payable = $218,000, (3) (b) $1,780,000 + $218,000 = $1,998,000, (4) Liabilities

PB2-2 (1) (d) Equipment (+A) $90,000, Cash (-A) $90,000, (2) (c) dr Factory Building (+A) $166,000 cr Cash (-A) $66,000 cr Notes Payable (+L) $100,000, (3) Ending Cash = $594,000 debit, (4) Total assets = $2,041,000

PB2-3 (1) (e) no effect, (2) (c) dr Property, Plant, and Equipment (+A) $20,700 cr Cash (-A) $11,200 cr Long-term Debt (+L) $9,500, (3) Ending Cash = $259,700 debit, (5) Total assets = $5,687,200

Skill Development CasesS2-1 (2) Assets =

$41,164,000,000S2-2 (2) Lowe’s Current Ratio =

1.2S2-3 Solutions vary depending on

company and/or accounting period selected

S2-4 (1) Total Assets = $15,000S2-5 (3) ConservatismS2-6 Inclusion of the owner’s

personal residence as a business asset

S2-7 Ending Cash = $19,300 debit, Ending Property and Equipment = $58,800 debit

Continuing CaseCC2 (1) (b) dr Land (+A) $9,000

cr Cash (-A) $2,000 cr Notes Payable (+L) $7,000, (2) Ending Cash = $59,650 debit, (3) Total Assets = $87,650, (4) 93.3

Chapter 3

Mini-ExercisesM3-1 Cash income = $6,400,

accrual income = $9,200M3-2 (b) $250M3-3 (g) $5,475M3-4 (b) dr Accounts receivable

(+A) $250, (d) cr Unearned revenue (+L) $1,500

M3-5 (e) dr Repairs and maintenance expense (+E, -SE) $1,500

M3-6 (b) Assets +$250, Liabilities = NE, SE (Service revenue) +$250

M3-7 (e) Assets -$1,500, Liabilities = NE, SE (Repairs and maintenance expense -$1,500

M3-8 Net income = $2,775M3-9 (e) $125M3-10 (h) $800M3-11 (d) dr Cash (+A) $2,250 cr

Unearned revenue (+L) $2,250

M3-12 (g) dr Accounts payable (-L) $1,750 cr Cash (-A) $1,750

M3-13 (b) dr Cash (+A) $25,000 cr Contributed capital (+SE) $25,000

M3-14 (e) dr Accounts receivable (+A) $180 cr Service revenue (+R, +SE) $180

M3-15 (e) dr Supplies (+A) $2,500 cr Donations revenue (+R, +SE)


$2,500M3-16 (b) dr Accounts receivable

(+A) $2,000 cr Repair/service revenue (+R, +SE) $2,000

M3-17 (a) Assets +$15,000, Liabilities = NE, SE (Lesson revenue) +$15,000

M3-18 (h) Assets = NE, Liabilities +$800, SE (Utilities expense) - $800

M3-19 Net income = $9,575M3-20 Net income = $42,120, Total

assets = $151,850M3-21 Net income = $4,387

ExercisesE3-1 (5) BE3-2 (d) $100,000 (=1,000

installations x $100 per installation)

E3-3 (a) No revenue; stock issuance is a financing activity

E3-4 (c) $1,000E3-5 (a) No expense in January

when paid. Expense (and liability) recorded in December. In January, decrease liability, decrease cash

E3-6 (b) Assets = +$5,000, Liabilities = +$5,000, SE = NE

E3-7 (d) Assets increase and decrease $18,600. Liabilities = NE, SE = NE

E3-8 (a) dr Cash (+A), $80,000 cr Notes payable (+L) $80,000

E3-9 (b) dr Equipment (+A) $20,000 cr Cash (-A) $20,000

E3-10 2/2 dr Fuel expense (+E, -SE) $450 cr Accounts payable (+L) $450

E3-11 (2) (c) dr Cash (+A) $14,500 cr Piano rebuilding revenue (+R, +SE) $14,500(3) Ending Cash = $14,800

E3-12 Total debits = $89,150, Total credits = $89,150

E3-13 (1)(c) Purchased $1,000 of supplies, paying $200 cash and putting the balance on account(2) Total debits = $111,800

E3-14 (2) 12/31 Balance of unearned revenue = $253

E3-15 (f) Assets = NE, Liabilities (Accounts payable) +$1,250, SE (+Utilities expense) -$1,250

E3-16 (e) dr Supplies (+A) +$1,000 cr Accounts payable (+L) $1,000

E3-17 Ending Cash balance = $45,500 debit

E3-18 Total debits =$81,950E3-19 (1) (g) Paid $3,000 of the

accounts payable balance, (2) Net income = $2,540, Total assets = $15,800

E3-20 (f) Utilities expense E + Debit, Utilities (or Accounts) payable L + Credit

E3-21 (1) Assets (Cash) +$50,000, Assets (Accounts receivable) -$50,000, Liabilities = NE, SE = NE,(2)(c) dr Equipment (+A) $33,500 cr cash (-A) $10,000 cr Notes payable (+L) $23,500,(3) Ending balance of Cash account = $1,286,500 debit,(4) Total debits = $4,440,050,(5) Net income = $(143,350),(7) Total assets = $4,046,700

Coached ProblemsCP3-1 (h) Debit: 13, Credit: 3CP3-2 (c) 5/1 dr Prepaid Insurance

(+A) $2,400 cr Cash (-A) $2,400

CP3-3 (1) and (2) Ending Cash balance = $13,910 debit(3) Total debits = $27,800, Total credits = $27,800

Group ProblemsPA3-1 (d) Debit: 11, Credit: 5PA3-2 4/8 dr Advertising expense

(+E, -SE) $400 cr cash (-A) $400

PA3-3 (1) and (2) Ending Cash balance = $134,560(3) Total debits = $303,670, Total credits = $303,670

PB3-1 (d) Debit: 3, Credit: 11PB3-2 (c) dr Equipment (+A)

$82,000 cr Long-term notes payable (+L) $82,000

PB3-3 (1) and (2) Ending Cash


balance = $23,500(3) Total debits = $68,100, Total credits = $68,100

Skill Development Cases3-1 (1) Revenues decreased by

$6,061,000,000 which is a decrease of 7.8% ((-6,061 / 77,349) x 100) from the previous year

3-2 (2) Cost of sales = $31,729,000,000, which is an increase over the previous year of $173,000,000, or 0.5% ((173 / 31,556) x 100)


S3-4 (3) Current year net income will be higher than it should be since some expenses were avoided by recording them as assets. The following year’s net income will be lower when those assets are expensed

S3-5 You should not comply with Mr. Lynch’s request since to act in ways that benefit management to the detriment of stockholders is inappropriate and could be considered fraud

S3-6 (1)(d) Purchased land for $18,000; $14,000 was paid in cash and a note was signed for the remainder(2) Total debits = $136,000, Total credits = $136,000

S3-7 Ending Cash balance = $9,555 debit, Total debits on unadjusted trial balance = $11,350

Continuing CaseCC3 May 4, no transaction,

May 19, dr cash (+A) $1,900 cr Unearned revenue (+L) $1,900

Chapter 4Mini-ExercisesM4-1 (4) B, FM4-2 (5) BM4-3 (3) AM4-4 (2) dr Interest receivable (+A)

$250 cr Interest revenue (+R +SE) $250

M4-5 (a) Assets = NE, Liabilities (Unearned rent revenue) -$400, SE (Rent revenue) +$400

M4-6 (b) dr Insurance expense(+E, -SE) $100 cr Prepaid insurance (-A) $100 ($100 = 1/24 x $2,400)

M4-7 (c) Assets (Interest receivable) +$100, Liabilities = NE, SE(Interest revenue) +$100

M4-8 (c) dr Interest receivable (+A) $100 cr Interest revenue (+R +SE) $100 ($100 = 1/12 x $1,200)

M4-9 (b) Sept 30 dr Cash (+A) $6,000 cr Unearned revenue (+L) $6,000,Oct 31 AJE dr Unearned revenue (-L) $3,000 cr Admissions revenue (+R +SE) $3,000

M4-10 (a) Dec 30 dr Cash (+A) $12,000 cr Unearned revenue (+L) $12,000, Jan 31 AJE dr Unearned revenue (-L) $1,000 cr Subscriptions revenue (+R +SE) $1,000

M4-11 Total debits = $6,200, Total credits = $6,200

M4-12 Net income = $4,910M4-13 Ending Retained earnings

balance = $5,610M4-14 Total assets = $17,930M4-15 After closing, all revenue,

expense, and dividends declared account balances should be zero. Retained earnings should have been credited for $4,910 which reflects the net income in the first closing entry. In the second closing entry, Retained earnings should have been debited for $300 which reflects the dividends declared

M4-16 Ending balance in the Supplies account after adjustment = $1,300 debit

M4-17 Ending balance in the Accumulated depreciation


account after adjustment = $6,000 credit

M4-18 Ending balance in the Prepaid insurance account after adjustment = $3,600 debit

M4-19 Ending balance in the Unearned revenue account after adjustment = $2,500 credit

M4-20 Ending balance in the Wages expense account after adjustment = $21,200 debit

M4-21 Ending balance in the Interest payable account after adjustment = $500 credit

M4-22 Ending balance in the Dividends declared account after adjustment = $200 debit

M4-23 Total debits = $77,600M4-24 (e) CJE: 12/31/10 dr Retained

earnings (-SE) $10,000 cr Insurance expense (-E) $10,000

ExercisesE4-1 (1) Total debits = $3,288,990E4-2 (2) Five balance sheet

accounts may need adjustment. One example is Accounts receivable which corresponds to Sales revenue on the income statement

E4-3 (c) Sept 1 No journal entry,Sept 30 dr Accounts receivable (+A) $2,000 cr Rent revenue (+R +SE) $2,000

E4-4 (2) Both transactions are accruals

E4-5 (b) 12/31/09 dr Interest receivable (+A) $3,000 cr Interest revenue (+R +SE) $3,000

E4-6 (1) Insurance expense on the income statement = $3,600 ((12/24) x $7,200)

E4-7 (b) dr Shipping supplies expense (+E –SE) $5,000 cr Shipping supplies (-A) $5,000

E4-8 (a) Office supplies $100 on the balance sheet, Supplies expense $750 on the income statement

E4-9 (f) Assets (Accounts receivable) +$750, Liabilities

= NE, SE (Repair shop revenue (+R +SE) +$750

E4-10 (b) Debit = C $600, Credit = Q $600

E4-11 (1) Income tax payable is increased with a credit for accrual of additional income taxes payable and decreased with a debit for cash paid on accrued income taxes payable

E4-12 Correct amounts: net income = $4,620, Total assets = $82,000, Total liabilities = $57,380

E4-13 (1) (c) dr Depreciation expense (+E –SE) $23,000 cr Accumulated depreciation (+xA –A) $23,000

E4-14 (2) (d) dr Income tax expense (+E –SE) $800 cr Income tax payable (+L) $800(3) Total debits = $89,700

E4-15 (1) (b) dr Depreciation expense (+E –SE) $4 cr Accumulated depreciation (+xA –A) $4(2) Total debits = $189

E4-16 Net income = $19, Ending Retained earnings = $23, Total assets = $124

E4-17 The closing entry should close revenue and expense account balances to Retained earnings (Retained earnings will get credited for $19)

E4-18 (f) (1) Billed customers for advertising services, (2) Assets (Accounts receivable) +$10,000, Liabilities = NE, SE (Advertising revenue) + $10,000

Coached ProblemsCP4-1 (1) Retained earnings =

$80,226, Total debits = $540,627,(2) Debit revenue accounts, credit expense accounts, credit Retained Earnings for $21,709,(3) Total credits = $228,938

CP4-2 (1)(g) Assets = NE, Liabilities (Property tax payable) = +$400, SE (Property tax


expense) = -$400, (2) (b) dr Unearned rent revenue (-L) $3,200 cr Rent revenue (+R +SE) $3,200

CP4-3 (g) Assets = NE, Liabilities (Property tax payable) +$400, SE (Property tax expense) $-400

CP4-4 (1) Net income = $13,000, (3) Interest payable +100 (interest owed on note payable), (4) dr Interest expense (+E –SE) $100 cr Interest payable (+L) $100, (5) Net income = $10,710

CP4-5 (1) Cash ending balance = $43 debit, (2)(j) No entry required as no revenue was earned in 2009, (3) Total debits = $279, (4) (p) dr Income tax expense (+E –SE) $8 cr Income tax payable (+L) $8, (5) Total debits = $306, (6) Net income = $28, Ending retained earnings = $19, Total assets = $145, (7)(1) Credit Retained earnings (+SE) $28, (8) Total debits = $157, (9) primarily by stockholders

Group ProblemsPA4-1 (1) Total debits = $9,779,

(2) debit revenue accounts, credit expense accounts, credit Retained earnings $494, (3) Total debits = $3,812

PA4-2 (1) (b) Assets (Supplies) - $700, Liabilities = NE, SE (Supplies expense) = $-700, (2)(b) dr Supplies expense (+E –SE) $700 cr Supplies (-A) $700

PA4-3 (f) Assets = -$2,750, Liabilities = NE, SE (Depreciation expense) = -$2,750, (h) Assets = NE, Liabilities = +$9,435, SE (Income tax expense = -$9,435 ($31,450 x .30)

PA4-4 (1) Net income = $9,700, (2) Wages payable on the balance sheet and Wages expense on the income

statement, (3) Credit Wages payable for $150, (4) (c) dr Wages expense (+E –SE) $150 cr Wages payable (+L) $150, (5) Net income = $2,800

PA4-5 (1)Ending Cash balance = $26 debit, (2) (b) dr Equipment (+A) $25 cr Cash (-A) $25, (3) Total debits = $112, (4) (n) dr Interest expense (+E –SE) $1 cr Interest payable (+L) $1, (5) Total debits = $124, (6) Net income = $6, Ending Retained earnings = $6, Total assets = $66, (7) (1) debit revenue account, credit expense accounts, credit Retained Earnings $6, (8)Total debits = $71, (9) creditors (liabilities)

PB4-1 (1) Total debits = $5,476,(2) debit revenue account, credit expense accounts, credit Retained earnings $85, (3) Total debits = $2,822

PB4-2 (1) (a) Assets = +$2,000, Liabilities = NE, SE (Service revenue) +$2,000, (2) (a) dr Accounts receivable (+A) $2,000 cr Service revenue (+R +SE) $2,000

PB4-3 (c) Assets = NE, Liabilities = +900, SE (Wages expense) -$900

PB4-4 (1) Net income = $6,600, (2) Unearned revenue on the balance sheet should be decreased while Lesson revenue on the income statement should be increased, (3) Note payable = No adjustment required, (4) (b) dr Unearned revenue (-L) $500 cr Lesson revenue (+R +SE) $500, (5) Net income = $4,760

PB4-5 (1) Ending Cash balance = $28 debit, (2) (f) dr Small tools (+A) $3 cr Cash (-A) $3, (3) Total debits = $126, (4) (l) dr Operating expenses (+E –SE) $8 cr Supplies (-A) $8, (5) Total debits = $136,(6) Net income = $12, Ending


Retained earnings = $6, Total assets = $71, (7) (2) dr Retained Earnings (-SE) $10 cr Dividends declared (-D) $10, (8) Total debits = $73, (9) Primarily financed by creditors (liabilities)

Skill Development CasesS4-1 (1) $18,000,000S4-2 (1) Home Depot has

$1,000,000,000 in Advertising expense while Lowe’s had $789,000,000


S4-4 (3) 1999 (Q3) debit Bonus expense (+E –SE) for $7.6 M, 1999 (Q4) credit Bonus expense (-E +SE) for $7.6 M, 2000 (Q1) debit Bonus expense (+E, -SE) $7.6M

S4-5 The change in estimated depreciation expense will increase net income this year but since some depreciation will now extend into next year, net income will be reduced

S4-6 (1)(b) dr Insurance expense (+E –SE) $2,000 cr Prepaid insurance (-A) $2,000, (2) Corrected net income = $10,950, Corrected assets = $67,800, (3) (a) Decrease net income by $27,050

S4-7 Total debits = $267,301, Net income = $11,138, Ending Retained earnings = $38,709, Total assets = $96,786

Continuing CaseCC4 (1) (a) Deferral, (2) (f) dr Cash

(+A) $90 cr Unearned revenue (+L) $90, (3) (d) dr Insurance expense (+E –SE) $1,750 cr Prepaid insurance (-A) $1,750 (7/12 x $3,000)

Chapter 5Mini-ExercisesM5-1 (3) BM5-2 (5) BM5-3 Annual Report = 3

M5-4 Net income = $5,250M5-5 Ending Retained earnings

balance = $48,000M5-6 (c) Assets = NE, Liabilities =

+$1,000, SE (Advertising expense) = -$1,000

M5-7 (b) Debt-to-assets = “+”, Turnover = “-“, Margin = NE

M5-8 (b) Assets = +$4,000, Liabilities = +$4,000, SE = NE

M5-9 (c) Debt-to-assets = “+”, Turnover = “+”, Margin = “-”

M5-10 (e) 80 (from 12/31/09 balance sheet)

M5-11 2010 Contributed capital = $480, Retained earnings = $180

M5-12 Prior year margin = 9.4%, Current year margin = 10.0%

M5-13 Prior year Debt-to-assets = 20.0%, Current year = 16.7%

M5-14 Asset turnover = 0.737M5-15 (a) Asset turnover = 1.14 for

Columbia and 1.53 for Levi Strauss

ExercisesE5-1 (5) DE5-2 (2) FE5-3 (5) A, FE5-4 (1) DE5-5 (8) DE5-6 (1) ComparabilityE5-7 (2) Form 8-KE5-8 2005 Net profit margin =

7.4%E5-9 (3) The annual report is

issued after the 10-KE5-10 (1) 2008 Asset turnover =

2.87, 2008 net profit margin = 3.3%

E5-11 (1) 2008 Asset turnover = 1.98, 2008 net profit margin = 4.5%(3) 2008 Debt-to-assets = 64.2%

E5-12 (a) Assets = -$10, Liabilities = -$10, SE = NE

E5-13 (b) Debt-to-assets = NE, Turnover = NE, Margin = NE

E5-14 (1) 2010 Net income = 41,000, 2010 Ending Retained earnings = $86,000, 2010 Total assets = $400,000, (3) 2010 Debt-to-assets = 25%,


2010 Asset turnover = 1.03, 2010 Net profit margin = 10%

E5-15 (1) On the balance sheet, long-term assets are listed before current assets and stockholders’ equity is listed before liabilities

E5-16 (1) B/S, (6) SSE, (8) I/S

Coached ProblemsCP5-1 (a) Assets +$7,208, Liabilities

= NE, SE (Marketing revenue) = +$7,208

CP5-2 (a) Debt-to-assets = “-”, Turnover = CD, Margin = “+”

CP5-3 (2) Best Buy is more efficient in using its assets to generate sales since its asset turnover is higher than GameStop’s

CP5-4 (1) On the balance sheet, long-term assets are listed before current assets and stockholders’ equity is listed before liabilities(3) 2008 profit margin = 7.9%

Group ProblemsPA5-1 (a) Assets = -$7, Liabilities = -

$7, SE = NEPA5-2 (a) Debt-to-assets = “-”,

Turnover = “+”, Margin = NEPA5-3 (1) Dillard’s relies more on

debt as suggested by its higher debt-to-assets ratio

PA5-4 (1) On the balance sheet, long-term assets are listed before current assets and stockholders’ equity is listed before liabilities,(4) 2010 Asset turnover = 3.83

PB5-1 (d) Assets = +$450, Liabilities = NE, SE (Admissions revenue) = +$450

PB5-2 (b) Debt-to-assets = “+”, Turnover = “+”, Margin = NE

PB5-3 (3) McDonald’s better controls its expenses as suggested by its higher net profit margin

PB5-4 (1) On the balance sheet, long-term assets are listed before current assets and stockholders’ equity is listed before liabilities,(3) 2010 net profit margin =

10.0%

Skill Development CasesS5-1 (1) 2/1/09 Debt-to-assets =

56.8%, (2) 2008-09 Asset turnover = 1.67, (3) 2008-09 Net profit margin = 3.2%

S5-2 (2) Asset turnover = 1.52S5-3 Solutions vary depending on


S5-4 (1) 1998 Q3 Debt-to-assets = 59.6%, (2) 1998 Q3 Debt-to-assets = 60.4%, (6) Auditors brought the fraud to the attention of the directors, which was the appropriate level

S5-5 (1) The debt-to-assets ratio and the asset turnover ratios would decrease while the net profit margin would increase

S5-6 (1) Asset turnover = 1.32S5-7 (3) Debt-to-assets ratios:

Hershey = 90.4%, Tootsie Roll = 21.8%, Rocky Mountain = 25.0%

Continuing CaseCC5 (1) (a) Assets = +$320,

Liabilities = +$320, SE = NE, Revenues = NE, Expenses = NE, Net income = NE(2) (a) Debt-to-assets = “+”, Turnover = “-”, Margin = NE

Chapter 6Mini-ExercisesM6-1 (4) RMM6-2 (3) DM6-3 (4) Document proceduresM6-4 (5) AM6-5 (d) Establish responsibility so

it will be possible to trace errors

M6-6 (1) C M6-7 (a) Segregate duties –

warehouse manager could divert goods

M6-8 (b) “-” on Company booksM6-9 (b) dr Office expenses (+E –

SE) $15 cr Cash (-A) $15M6-10 Perpetual systems provide

more timely information and can estimate inventory


shrinkageM6-11 Shrinkage = $3,000M6-12 FOB Destination; Revenue

would be booked earlier under FOB Shipping point

M6-13 Gross profit = $460M6-14 At time of collection: dr Cash

(+A) $1,960 dr Sales discounts (+xR –SE) $40 cr Accounts receivable (-A) $2,000 ($40 = $2,000 x .02)

M6-15 (b) dr Cash (+A) $686 dr Sales discounts (+xR –SE) $14 cr Accounts receivable (-A) $700 ($14 = $700 x .02)

M6-16 Net income = $5,452M6-17 Gross profit percentage =

40.0%M6-18 Ziehart’s Gross profit

percentage = 67.4%M6-19 2007 Income from

Operations = €815,000, 2008 Income from Operations = €725,000

M6-20 2007 Gross profit percentage = 46.5%, 2008 Gross profit percentage = 47.4%

ExercisesE6-1 (1) Segregation of duties to

prevent or detect unauthorized activities

E6-2 Give receipts to all donors and have volunteers work in pairs

E6-3 (1) (b) Document procedures, (3) lack of separation of duties

E6-4 (1) (b) Segregate duties, document procedures,(2) (1) Step = Request that goods or services be ordered, Documentation = Purchase requisition, Performed by = Sales manager

E6-5 (1) Up-to-date cash balance = $6,370

E6-6 (1) Up-to-date cash balance = $2,680, (2) Entries needed for EFT, Service charge, and NSF check

E6-7 (A) Ending inventory = $500, Shrinkage = $80

E6-8 Shrinkage = $100

E6-9 Net sales = $228E6-10 Feb. 28 dr Accounts

receivable (+A) $50 cr Sales revenue (+R +SE) $50, dr Cost of goods sold (+E –SE) $30 cr Inventory (-A) $30

E6-11 Net sales = $8,850E6-12 July 12 dr Cash (+A) $1,000

cr Sales revenue (+R +SE) $1,000, dr Cost of goods sold (+E –SE) $600 cr Inventory (-A) $600

E6-13 Sales discount = $162E6-14 Dec 6 dr Cash (+A) $5,238

dr Sales discounts (+xR –SE) $162 cr Accounts receivable (-A) $5,400

E6-15 July 12: Gross profit = +$140E6-16 (2) dr Cash (+A) $784 dr

Sales discounts (+xR –SE) $16 cr Accounts receivable (-A) $800

E6-17 (A) Net sales = $7,850, Gross profit = $2,100

E6-18 (1) Gross profit = $110,000, net income = $33,200

E6-19 (2) Gross profit = $485, gross profit percentage = 39.8%

E6-20 (1) 2005: % sales discounts and returns = 6.5%, (2) 2005: Gross profit percentage = 57.2%

Coached ProblemsCP6-1 (1) (a) Strength, (2) (d) entry

should be made after ensuring the register receipt total equals the total on the count sheet and deposit slip

CP6-2 (3) Up-to-date cash balance = $5,875

CP6-3 (1) Deposit in transit of $5,000,(3) Up-to-date cash balance = $20,290

CP6-4 (1) Gross profit = $69,000, (2) Net income = $22,400

CP6-5 (1) Gross profit = $131,130, (4) Gross profit will increase by $3,000 but the gross profit percentage will decrease to 43.8%

CP6-6 (1) (a) Sales = +$230,000, Returns & Allowances = NE,


Discounts = NE, Net sales = +$230,000, CGS = +$175,000, Gross profit = +$55,000

Group ProblemsPA6-1 (1) (a) Weakness: document

procedures, (2) (e) Supplies should be safeguarded by locking the rear door, for example

PA6-2 (1) Up-to-date cash balance = $17,180, (4) Cash = $17,230

PA6-3 (2) Outstanding checks = $3,650, (3) Up-to-date cash balance = $96,070

PA6-4 (2) Net income = $35,000, (3) Gross profit percentage = 30.9%

PA6-5 (1) Net sales $60,340, (3) (d) dr Cash (+A) $4,900 dr Sales Discounts (+xR –SE) $100 cr Accounts receivable (-A) $5,000

PA6-6 (1) (b) Sales revenues = NE, Returns & Allowances = +$10,000, Discounts = NE, Net sales = -$10,000, CGS = NE, Gross profit = -$10,000

PB6-1 (1) (d) Weakness: no documentation

PB6-2 (1) Up-to-date cash balance = $37,240, (4) Cash = $37,290

PB6-3 (1) Deposit in transit = $21,000, Up-to-date cash balance = $122,930

PB6-4 (1) Net income = $79,000, (3) Gross profit percentage = 35.9%

PB6-5 (1) Net sales +$501,000, Gross profit +$275,550, (4) Gross profit percentage will increase to 54.1%

PB6-6 (1) (c) Sales revenues = NE, Returns & Allowances = NE, Discounts = +$2,440, Net sales = -$2,440, CGS = NE, Gross profit = -$2,440

Skill Development CasesS6-1 (2) 2008-09 Gross profit

percentage = 33.7%, (3) Purchases = $46,240

S6-2 (2) Lowe’s current year = 34.2%, The Home Depot’s current year = 33.7%, The Home Depot appears to have lower mark-ups


S6-4 (3) If periodic system used, Famous Footwear would not be able to quantify the amount of shrinkage

S6-5 (1) Net Sales = $90,000, (2) Selling Expenses = $40,000

S6-6 (1) (a) $50 x 12 months = $600, (d) Amount stolen = $4,820

S6-7 (1) Gross profit = $97,500, (2) Net income = $35,100, (3) Gross profit percentage = 28.22%

Continuing CaseCC6 (2) Gross profit = $874,

Company earns 45.1 cents of gross profit per dollar of merchandise sales

Chapter 7Mini-ExercisesM7-1 (b) Winston owns the

inventoryM7-2 Raw materials =

manufacturingM7-3 Purchases = $4,422 millionM7-4 (b) (2) FIFOM7-5 (b) Rising costs = LIFOM7-6 FIFO CGS = $2,300M7-7 (c) Weighted average CGS =

$209,250M7-8 (b) Ending inventory =

$7,050M7-9 Total inventory = $4,750M7-10 Entry should reduce

Inventory by $336MM7-11 Inventory cost = $22,014M7-12 (d) Entry should include a

credit to Cash of $21,364M7-13 (b) Gross profit = $15,000M7-14 (c) NEM7-15 Inventory turnover = 3.1

timesM7-16 Total FIFO value less

adjustment to LIFO basisM7-17 Perpetual FIFO ending


inventory = $175,000M7-18 Perpetual LIFO CGS = $4,650M7-19 2010 Gross profit is

overstated by $10,000M7-20 2009 Gross profit is

overstated by $100,000

ExercisesE7-1 (3) PC Mall’s balance sheetE7-2 (D) Total available = $900E7-3 (B) CGS = $750E7-4 Purchases = $9,010E7-5 (1) Cost of goods available =

$6,580, (3) Weighted average CGS = $2,256

E7-6 (1) Cost of goods available = 20,000 units, (3) LIFO CGS = $114,000, (4) FIFO operating income = $69,000

E7-7 (1) Goods available = $164,500, (3) FIFO CGS = $105,000, (5) Operating income Case A = $9,000, Case B = ($4,000), Case C = $1,200

E7-8 (1) FIFO CGS = $152,800, Weighted average CGS = $153,340

E7-9 (1) Ending inventory Case A = $1,950, Case B = $1,800, Case C = $1,800, Case D = $1,950

E7-10 (1) LCM Valuation = $7,400E7-11 (2) Write-down = $325E7-12 (1) dr Cost of goods sold (+E

–SE) $18M cr Inventory (-A) $18M

E7-13 Cost of inventory = $2,426E7-14 Jan. 14 dr Accounts payable

(-L) $1,200 cr Inventory (-A) $24 cr Cash (-A) $1,176

E7-15 Cost of inventory $3,058E7-16 June 3 dr Inventory (+A)

$3,200 cr Accounts payable (+L) $3,200

E7-17 Inventory turnover = 6.8 times in 2008, Days to sell = 53.7 days in 2008

E7-18 (1) FIFO CGS = $2,050, (2) LIFO inventory turnover = 4.41

E7-19 (2) Purchases = $125,600, (3) LIFO inventory turnover = 13.6 times

E7-20 Perpetual LIFO Ending

inventory = $4,420E7-21 Perpetual FIFO Cost of goods

sold = $96,000E7-22 (3) Second quarter

Operating income = $4,600E7-23 (a) No year-end adjustment

needed, (b) Cost of goods sold = $1,875

Coached ProblemsCP7-1 (1)(c) Cost of goods sold =

$12,400CP7-2 (1) Net income = $27,300CP7-3 (1) (c) -$4,500, (2) entry

should include a credit to Cash for $220,500

CP7-4 Inventory turnover = 7.2 times in 2009

CP7-5 (2) Cost of goods sold = $12,900

CP7-6 (1) Corrected 2009 Gross profit = $25,000 since the increase in ending inventory in 2008 causes cost of goods sold to be understated in 2009

CP7-7 Ending inventory = $12,200

Group ProblemsPA7-1 (1)(d) Cost of goods sold =

$19,834PA7-2 (2) Net income decreased

$5,600PA7-3 (1) (c) -$10,800, (2) (c) entry

should include a credit to Cash for $529,200

PA7-4 (1) Inventory turnover = 7.1 times in 2008

PA7-5 Cost of goods sold = $22,930

PA7-6 (1) 2009 Gross profit = $750,000 since the decrease in ending inventory in 2008 causes cost of goods sold to be overstated in 2009

PA7-7 Dec 31: dr Inventory (+A) $15,490 cr Cost of goods sold (-E +SE) $15,490

PB7-1 (1)(c) Cost of goods sold = $1,130

PB7-2 (2) Net income decreased by $9,450

PB7-3 (1) (c) -$2,440, (2) (c) entry should include a credit to Inventory for $2,440


PB7-4 (1) Days to Sell = 31.7 in 2008

PB7-5 Cost of goods sold = $950PB7-6 Q3 Cost of goods sold =

$2,625PB7-7 Ending inventory = $920

Comprehensive ProblemC7-1 (1) Dec 1 Assets (Inventory)

= + $260, Liabilities (Accounts payable) = +$260, SE = NE, (2)AJE a: dr Selling Expenses (+E –SE) $200 cr Accounts Payable (+L) $200, (3) Ending balance in Accounts payable = $910 credit, (4) Net income = $1,841, Total assets = $13,170, (5) Inventory turnover = 25.6 times

Skill Development CasesS7-1 (3) Inventory turnover ratio

= 4.2 times per year, Days to sell measure = 86.9 days

S7-2 (3) Lowe’s inventory turnover ratio = 4.0 times per year and Days to sell measure = 91.3 days


S7-4 Look for seven pieces of evidence: three related to management action, three related to the company’s books, and one related to inventory levels

S7-5 (1) Cost of goods sold = $147,500, (3) Gross profit = $52,500

S7-6 (2) Ending inventory = $330,000

S7-7 (1) Total LCM = $6,505, (2) LCM adjustment = $560

Continuing CaseCC7 (2) CGS = $753, (3)

Inventory turnover ratio = 7.3 times

Chapter 8Mini-ExercisesM8-1 Gross profit percentage =

33.3%M8-2 National programs only

charge a modest fee to approve, track, and collect accounts thereby reducing the company’s costs and speeding up cash collections

M8-3 (c) Net accounts receivable = $745,000

M8-4 Make two entries: one to reinstate the account (Credit Allowance for doubtful accounts for $500) and one entry to collect the account (Credit Accounts receivable for $500)

M8-5 (b) dr Bad debts expense (+E –SE) $14,000 cr Allowance for Doubtful Accounts (+xA –A) $14,000

M8-6 (b) Assets (Allowance for doubtful accounts) -$10,000, Liabilities = NE, SE (Bad debt expense) = -$10,000

M8-7 Bad debt expense = $1,250M8-8 Required adjustment =

$1,350 creditM8-9 (a) dr Bad debts expense

(+E –SE) $1,250 cr Allowance for Doubtful Accounts (+xA –A) $1,250

M8-10 (a) Interest earned = $5,000M8-11 June 30 Interest revenue =

$700M8-12 April 30 Interest revenue =

$160M8-13 Total current assets =

$31,633M8-14 (a) Turnover ratio = “-”,

Days to collect = “+”M8-15 Factoring fee = $15,000

and reported as “Other” expense

M8-16 (a) Accounts receivable = $800,000, (b) Debit Bad debt expense for $5,000

ExercisesE8-1 (b) Debit Allowance for

doubtful accounts $1,000E8-2 (a) Assets (Allowance for

doubtful accounts) = -$9,750, Liabilities = NE, SE


(Bad debt expense) = -$9,750

E8-3 (3) 2% rate is too low given the Allowance account began 2009 with a $800 balance but $1,500 was written off during the year

E8-4 (a) dr Allowance for doubtful accounts (-xA +A) $300 cr Accounts receivable (-A) $300

E8-5 (a) Assets (Allowance for doubtful accounts = +$300, Accounts receivable = -$300), Liabilities = NE, SE = NE

E8-6 (2) Desired balance = $145,000 credit

E8-7 (3) Adjustment = $2,610 credit

E8-8 (2) Desired balance in the Allowance account = $3,850 credit

E8-9 (d) Income from operations = $500

E8-10 July 1, 2010 entry should have a credit to Interest revenue of $3,500

E8-11 Dec. 31 dr Cash (+A) $3,500 cr Interest receivable (-A) $1,750 cr Interest revenue (+R +SE) $1,750

E8-12 April 30, 2011 entry should contain a credit to Interest revenue of $2,000

E8-13 (2) Receivables turnover ratio = 4.8 times

E8-14 (d) Bad debt expense = $18E8-15 (b) Net credit sales = NE,

Average net accounts receivable = “-”, Receivables turnover = “+”

E8-16 (1) Days to collect = 40.1 E8-17 (2) Receivables turnover

ratio = 13.1E8-18 (2) 2010 Net income =

$1,000

Coached ProblemsCP8-1 (3) Entry should include a

credit to Allowance for doubtful accounts for $1,017,050

CP8-2 (3) Net receivables is not

affected when accounts are written off

CP8-3 (2) Dec. 31, 2009 dr Interest receivable (+A) $1,667 cr Interest revenue (+R +SE) $1,667

CP8-4 (1) (j) Desired ending balance in the Allowance account = $8,390 credit, thus requiring a $2,390 credit as part of the adjusting entry

CP8-5 Hasbro 2008 Receivables turnover = 6.3 times, Days to collect = 57.5

Group ProblemsPA8-1 (3) dr Bad debt expense (+E

–SE) $253 cr Allowance for doubtful accounts (+xA –A) $253

PA8-2 (4) Write-offs = $155PA8-3 (2) Dec 31, 2009 dr Interest

receivable (+A) $2,000 cr Interest revenue (+R +SE) $2,000

PA8-4 (1) (i) Adjustment needed to the allowance account = $478 credit

PA8-5 (1) Coca-cola 2008 receivable turnover = 10.0, Days to collect = 36.5

PB8-1 (4) Debit Allowance for doubtful accounts $15

PB8-2 (1) Ending balance in the Allowance for doubtful accounts = $131 credit

PB8-3 (2) May 31, 2011 entry should have a credit to Interest receivable of $2,000

PB8-4 (1) Desired ending balance in Allowance for doubtful accounts = $11,240 credit

PB8-5 (2) Wal-Mart appears quicker than Target at converting receivables to cash

Comprehensive ProblemC8-1 (2) Estimated uncollectible

accounts = $1,600, (3) Income from operations = $12,400


Skill Development CasesS8-1 (2) Receivables turnover

ratio = 63.9 timesS8-2 (1) No; since Lowe’s sold its

receivables to GE Finance in 2005, it did not report any receivables


S8-4 (3) Net accounts receivable = $700,000

S8-5 (3) Net income = $13,110S8-6 (c) Receivables turnover

ratio = 7.8 timesS8-7 (2) dr Bad debt expense (+E

–SE) $10,060 cr Allowance for doubtful accounts (+xA –A) $10,060

Continuing CaseCC8 (2) Desired balance in the

allowance account = $318 credit, (4) Receivable turnover = 9.8 times

Chapter 9Mini-ExercisesM9-1 (9) E, DM9-2 (6) EM9-3 (7) EM9-4 Book value at the end of the

second year = $120,000M9-5 Book value at the end of the

second year = $112,000M9-6 Book value at the end of the

second year = $50,000M9-7 (b) Year 1 depreciation =

$13,200M9-8 Impairment losses of $2.5

billion are significant since they represent 12.5% of GM’s 2008 operating loss

M9-9 (a) dr Accumulated depreciation (-xA, +A) $4,800 cr Computers (-A) $4,800

M9-10 Gain on sale of store fixtures = $600

M9-11 Expense in the current yearM9-12 Market value of Taste-T’s

assets less liabilities on the date of the offer = $5,600,000

M9-13 Fixed asset turnover ratio =

0.5M9-14 Entry should contain a debit

to Timber inventory of $60,000

M9-15 Book value at end of fifth year = $29,000, New depreciation expense = $3,250 per year

ExercisesE9-1 (1) Total Property, plant,

and equipment = $212E9-2 (4) Book value = $192,000E9-3 (2) Cost = $31,750, (4)

Book value at end of year 2 = $25,950

E9-4 (1) Assets (Accumulated Depreciation) = –$10,000, Liabilities = NE, SE (Depreciation expense) -$10,000

E9-5 (1) Credit Accumulated Depreciation (+xA, -A) $10,000

E9-6 (1) (a) Straight-line book value after Year 4 = $4,000,(b) Units-of-production book value after year 4 = $3,000,(c) Double-declining-balance book value after year 3 = $2,000

E9-7 (a) Straight-line book value after Year 2 = $10,000(b) Units-of-production book value after year 2 = $6,855(c) Double-declining-balance book value after year 2 = $3,000

E9-8 Straight-line depreciation is preferred because it results in higher net income, particularly in the early years of an asset’s life

E9-9 Depreciation expense per year = $2,000

E9-10 Impairment loss = $3,200E9-11 (1) (b) Loss on sale =

$2,000,(4) (c) Entry should include a credit to Gain on disposal for $3,000

E9-12 (2)Trademark is not amortized due to indefinite life, (3) Amortization expense = $15,376


E9-13 (1) Patent book value at end of year = $900,000

E9-14 2006 Fixed asset turnover ratio = 18.4 times

E9-15 (1) Depreciation expense Year 2 Straight-line = $12,000, Units-of-production = $18,000, Double-declining balance = $15,600

E9-16 Book value of oil reserves at the end of year 1 = $2,400,000

E9-17 (1) Depreciable cost = $71,000

Coached ProblemsCP9-1 (1) Machine A total cost =

$8,400, (2) Machine C double-declining-balance depreciation = $3,040

CP9-2 (1) Machine A’s loss on disposal = $10,400

CP9-3 (2) Vehicle partial year depreciation = $4,000, Equipment partial year depreciation = $400, Building partial year depreciation = $1,750

Group ProblemsPA9-1 (1) Total cost of Machine C=

$24,400, (2) Machine B depreciation = $7,000

PA9-2 (1) Machine A’s loss on disposal = $650

PA9-3 (2) Equipment depreciation = $22,000, Licensing rights amortization = $100

PA9-4 2009 Building depreciation = $20,000, truck depreciation = $4,500, and Patent amortization = $2,000

PB9-1 (1) Total cost of Machine B = $10,900, (2) Machine C depreciation = $5,300

PB9-2 (1) Machine A’s gain on disposal = $1,500

PB9-3 (2) Equipment depreciation = $400, Franchise rights amortization = $190

PB9-4 2010 Building depreciation = $7,500, Delivery van depreciation = $3,200, and

Franchise rights amortization = $1,000

Comprehensive ProblemC9-1 (1) (g) Depreciation

expense = $6,000, (i) Bad debt expense = $150, (2) Net income = $350, Total assets = $92,850

Skill Development CasesS9-1 (2) Accumulated

depreciation = $10,243M which is 28.1% of the total cost of property and equipment

S9-2 (2) Accumulated depreciation is 27.8% of the total cost of property reported, (5) Fixed asset turnover = 2.19 times


S9-4 (1) Q1 Year 1 with the entries: Property & equipment, net = $38,614; Sales revenues = $8,825; Operating expenses = $7,628; Operating income = $1,197(2) Fixed asset turnover ratio in Q2 Year 1 = 0.24

S9-5 (1) Straight-line depreciation expense = $7,000; Book value = $28,000, Units of production depreciation = $4,000, Double declining-balance book value = $17,500

S9-6 The two companies’ financial results differ in terms of depreciation expense and other gains (losses). Provide possible explanations for these two differences

S9-7 Straight line method: Depreciation formula for Year 1 in cell D8 is =($C$3-$C$4)/$C$5, Formula for Year 7 EOY-AD in cell E14 is =SUM($D$8:D14), Double declining-balance method: Depreciation


formula for Year 1 in cell D8 is =IF((C8+(($C$3 – C8)*2/$C$5))>$C$3-$C$4,F7-$C$4,($C$3-C8)*2/$C$5), Formula for Year 7 EOY-AD in cell E14 is =C14+D14

Continuing CaseCC9 (1) (a) Book value at end of

Year 4 = $1,400, (b) Book value at end of Year 4 = $1,460, (c) Book value at end of Year 4 = $648, (2) Straight line method = loss of $200, Units-of-production method = gain of $100, double declining-balance method = gain of $1,020, (3) Income before taxes = $3,100 (straight line), $3,280 (units-of-production), and $4,500 (double declining-balance)

Chapter 10Mini-ExercisesM10-1 (b) Performance revenue (+R, +SE)

$75,000M10-2 To record the expense: dr Cost of

goods sold (+E -SE) $3,000 cr Inventory (-A) $3,000

M10-3 Net pay = $80,750M10-4 Credit FICA Payable (+L) $5,250M10-5 Current portion of long-term debt as

of December 31, 2010 = $2,000M10-6 (b) Debit Interest expense (+E -SE)

$10,000M10-7 Long-term debt = $800,000M10-8 The bonds are selling at a discount

since the bond quote is less than 100

M10-9 Bonds payable would be shown as $400,000 (the face amount of $500,000 less the discount on bonds payable of $10,000)

M10-10 Bonds payable would be shown as $515,000 (the face amount of $500,000 plus the premium on bonds payable of $15,000)

M10-11 (b) December 31, 2010 debit Interest expense (+E -SE) $150,000

M10-12 To retire the bonds, the company was required to pay more than their carrying value

M10-13 2009: do not record or disclose the liability because the probability of the liability occurring is remote

M10-14 Numerator for quick ratio: $100,000 - $40,000 - $10,000 = $50,000, Income tax expense for the Times interest earned ratio = $1,960

M10-15 (a) Decreases to 1.15M10-16 (a) Debit Discount on bonds payable

(+xL, -L) $20,000M10-17 (a) Debit Discount on bonds payable

(+xL, -L) $59,000M10-18 (a) Debit Interest expense (+E, -SE)

$5,700

ExercisesE10-1 (1) (b) Assets = NE, Liabilities

(Interest payable) = +$75,000, SE (Interest Expense) = -$75,000

E10-2 (1) Nov. 1, 2010 dr Cash (+A) +$6,000,000 cr Note payable (+L) +$6,000,000

E10-3 (2) Credit Withheld income taxes payable – employees (+L) $50,200

E10-4 (1) (b) Procedure 2 Total labor cost = $850

E10-5 (2) Cash paid = $41,600E10-6 (2) (b) dr Unearned revenue (-L)

$190,000,000 cr Subscription revenue (+R +SE) $190,000,000

E10-7 (3) Debit Interest expense (+E, -SE) $60,000

E10-8 (3) Debit Loss on bond retirement (+E -SE) $4,000

E10-9 (1) Bond issuance increases Cash, Bonds payable, and Premium on bonds payable

E10-10 (1) Quick ratio for 2008 = 0.54, Times interest earned ratio for 2008 = 3.93

E10-11 (1) Credit Premium on bonds payable (+L) $50,328

E10-12 (1) Debit Cash (+A) $300,328E10-13 (2) Debit Interest expense (+E -SE)

$24,026E10-14 (2) Credit Discount on Bonds

Payable (-xL, +L) $1,284E10-15 (2) Debit Interest expense (+E, -SE)

$16,845E10-16 (2) Debit Interest expense (+E, -SE)

$16,845

Coached ProblemsCP10-1 (1) Dec. 20: Assets (Cash) = +$100,

Liabilities (Customer deposit)= +


$100,SE = NE

CP10-2 (3) Total current liabilities = $49,400CP10-3 (1) Payroll tax expense = $11,300,

(2) (a) Credit Unearned rent revenue (+L) $3,600

CP10-4 (1) (b) Case B at 96 Unamortized discount = $8,000

CP10-5 (2) Credit Cash (-A) $1,173.5 millionCP10-6 The lawsuit is considered a

contingent liabilityCP10-7 (2) January 1, 2009 Credit Premium

on bonds payable (+L) $24,000CP10-8 (2) January 1, 2009 Credit Premium

on bonds payable (+L) $24,000CP10-9 (2) January 1, 2009 Credit Bonds

payable, net (+L) $624,000CP10-10

(1) End of year 2011 balance = $6,026

CP10-11

(1) End of year 2011 balance = $6,028

Group ProblemsPA10-1 (1) April 30, 2010: Assets (Cash) = +

$550,000, Liabilities (Note payable) = +$550,000, SE + NE

PA10-2 (1) April 30, 2010 dr Cash (+A) $550,000 cr Note payable (+L) $550,000, (3) Total current liabilities = $616,000

PA10-3 (2) (a) Credit Unearned rent revenue (+L) $3,000

PA10-4 (1) (c) Carrying value of bonds payable for Case B at 97 = $194,000

PA10-5 The fair value is the price at which the bonds sell today

PA10-6 Contingent liabilities are to be recorded only when they are probable and the amount can be reasonably estimated

PA10-7 (5) January 1, 2011: dr Bonds Payable (-L) $600,000 cr Discount on bonds payable (-xL +L) $5,350 crCash (-A) $588,000 cr Gain on bond retirement (+R +SE) $6,650

PA10-8 (5) January 1, 2011: dr Bonds Payable (-L) $600,000 dr Loss on bond retirement (+E -SE) $11,767 Cash (-A) $606,000 cr Discount on bonds payable (-xL +L) $5,767

PA10-9 (5) January 1, 2011: dr Bonds Payable (-L) $594,233 dr Loss on bond retirement (+E -SE) $11,767 Cash (-A) $606,000

PB10-1 (1) January 3: Assets (Inventory) +

$24,000, Liabilities (Accounts payable) = +$24,000, SE = NE(2) January 3 effect decreased

PB10-2 (1) August 1: dr Cash (+A) $8,000 cr Unearned rent revenue (+L) $8,000, (3) Total current liabilities = $98,000,(4) January 3 effect = decreased, Numerator = No change, Denominator = Increased

PB10-3 (1) Payroll tax expense (+E -SE) = $22,000

PB10-4 (1) (c) The carrying value of Case C at 102 = $510,000

PB10-5 (2) Loss would be reported on the income statement between operating income and income before income taxes

PB10-6 (5) January 1, 2011: dr Bonds Payable (-L) $100,000 dr Premium on bonds payable (-L) $690 dr Loss on bond retirement (+E -SE) $1,310 cr Cash (-A) $102,000

PB10-7 (5) January 1, 2011: dr Bonds Payable (-L) $100,000 dr Premium on bonds payable (-L) $718 dr Loss on bond retirement (+E -SE) $282 cr Cash (-A) $101,000

PB10-8 (5) January 1, 2011: dr Bonds Payable (-L) $100,718 dr Loss on bond retirement (+E -SE) $282 cr Cash (-A) $101,000

Skill Development CasesS10-1 (1) 2009 Quick ratio = 0.13S10-2 (2) Lowes' times interest earned

ratio = 13.52S10-3 Solutions vary depending on


S10-4 Most people conclude that the use of the call option is ethical but that corporations have an obligation to provide understandable information to investors

S10-5 The manager has been hired to protect the interests of the investors. Therefore, the manager must place investors first regardless of his or her own personal social conscience

S10-6 (1) Quick ratio = 1.21S10-7 The formula for cell D12:

=$G$11/$D$8S10-8 The formula for cell B12:

=If(A12<$C$8,ROUND(G11*$C$7*12/12,0),F11+C12)


S10-9 The formula for cell C11: =If(A11<$D$8,ROUND(B11*$D$7*12/12,0),D10+$D$4-F10)

Continuing CaseCC10 (1) Dec. 31, 2011: dr Interest

expense (+E -SE) $750 cr Interest payable (+L) $750

Chapter 11Mini-ExercisesM11-1 (4) EM11-2 One right: Stockholders

may vote in stockholders’ meeting

M11-3 33,000 additional shares may be issued

M11-4 Credit Additional Paid-in Capital (+SE) $7,400,000

M11-5 Debit Cash (+A) $7,500,000

M11-6 It is advisable to invest in the common stock

M11-7 (3) Total assets = decreased by $900,000, Total liabilities = no change, Total stockholders’ equity = decreased by $900,000, net income = no change

M11-8 Dividend amount to be paid = $85,000

M11-9 June 14: dr Debit Dividends payable (+L) $200,000 cr Cash (-A) $200,000

M11-10 (1) Stock Dividend: No change in total assets

M11-11 (4) No change in total stockholders’ equity

M11-12 Credit Common stock (+SE) $100,000

M11-13 Total to preferred stockholders $400,000

M11-14 EPS = $2.00M11-15 (e) Assets(Cash) +

$60,000, Liabilities = NE, SE (Common stock) = +$60,000

M11-16 (c) EPS = NE (because preferred stock is excluded from the denominator and preferred dividends are excluded from the numerator), ROE = NE

M11-17 2009 P/E ratio = 25M11-18 (b) Capital, end of year =

$27,000

ExercisesE11-1 Treasury Stock at end of

2008 = 85 million (81+5-1)

E11-2 (2) (a) Credit Additional paid-in capital (+SE) $96,000, (3) Total contributed capital = $166,000

E11-3 Additional paid-in capital, common = $181,000

E11-4 Additional paid-in capital, preferred stock $255,000

E11-5 Retained earnings $38,000

E11-6 (1) (a) dr Cash (+A) $800,000 cr Common stock, no-par (+SE) $800,000, (2) Total stockholders' equity = $1,236,000

E11-7 (2) Number of preferred shares outstanding: 4,700

E11-8 (2) Feb. 1, 2010: dr Treasury stock (+xSE -SE) $8,800 cr Cash (-A) $8,800, (3) Dividends are not paid on treasury stock

E11-9 (1) (b) Assets = "-", Liabilities = "+" and "-", SE = "-"

E11-10 (1) (b) Preferred shares cumulative: $14,400 total, $2.40 per share

E11-11 (1) (a) Debit Dividends declared (-SE) $119,900,000, (2) Ending Retained earnings = $1,600.3 million

E11-12 (1) Additional paid-in capital after stock dividend = $36,000, (3) Large stock dividends are recorded at par value

E11-13 April 30, 2009: Credit Dividends payable (+L) $7,200,000

E11-14 Total stockholders’ equity = $410,000 in all cases


E11-15 Dividends in arrears indicates some financial difficulty

E11-16 Effect of cash dividend (preferred): Assets – No effect on declaration date. On payment date, assets are decreased by the amount of the dividend

E11-17 Stock dividend effect on common – no effect on assets through December 31, 2010 or on February 15, 2011

E11-18 (1) Total contributed capital = $705,000, Total stockholders' equity = $781,000

E11-19 (1) Stockholders equity decreases $60,000,000, (3) Dividends are not paid on treasury stock

E11-20 (1) EPS = $0.10, ROE = 5.0%

E11-21 (1) Jan 15: Assets (Cash) + $50,000, Liabilities = NE, SE (Common stock) +$5,000 (Additional paid-in capital, common stock) + $45,000

E11-22 (1) Case A: Credit Proprietor A, Capital (+OE) $20,000, Case B: Debit Individual revenue accounts (-R) $150,000, Case C: Credit Retained earnings (+SE) $20,000,(2) Case A: A, Capital, December 31, 2010 = $62,000, Case B: Partners’ Equity for B on December 31, 2010 is $39,000, Case C: Retained earnings = $85,000

Coached ProblemsCP11-1 (3) Total Stockholders’

Equity = $746,200CP11-2 (1) 100% stock dividend

was result in moving $600 from Retained earnings to common stock, thus leaving total

stockholders' equity unchanged

CP11-3 (2) Additional paid-in capital = $875,000

CP11-4 (2) Assets: Cash Dividend – Case C: $66,000 decrease, Stock dividends: No assets were disbursed

CP11-5 (1) ROE Aaron = 12.6%

Group ProblemsPA11-1 (3) Total contributed

capital = $37,800,000,Total stockholders’ equity = $36,979,000

PA11-2 (1) March 5, 2010: Credit Dividends payable (+L) $1,000,000

PA11-3 (3) EPS on net income = $3.43

PA11-4 Case A Preferred dividend = $16,800

PA11-5 (2) BusinessWorld P/E ratio = 17.0

PB11-1 (3) Total contributed capital = $4,600,000, Total stockholders’ equity = $4,538,000

PB11-2 (1) May 31, 2009: Debit Retained earnings (-SE) $19,000

PB11-3 (2) Additional paid-in capital = $14,250,000

PB11-4 (1) Case A: Common dividend = $8,800; Case C: Common dividend = $21,400

PB11-5 (2) Sound Jonx PE ratio = 17.0

Comprehensive ProblemC11-1 (1) Assets(Cash) = +

$50,000, Liabilities = NE, SE(Common stock) +$5,000, (Additional paid-in capital-common +$45,000, (2) August 15: dr Cash (+A) $4,600 dr Additional paid-in capital-Treasury stock (-SE) $2,000 cr Treasury stock (-xSE +SE) $6,600, (3) Retained earnings =


$125,400

Skill Development CasesS11-1 (1) Shares outstanding =

1,707,000,000S11-2 (3) Lowe's net earnings

declined throughout the three-year period


S11-4 (4) Yes, this would be a concern because it suggests that management might be acting opportunistically - buying when the stock price is low and selling when the price is high

S11-5 Whether you believe that employees are more important than investors or vice versa, ultimately, most people agree that a balanced perspective is warranted, for short-term returns and long-term payoffs

S11-6 Every investor must consider his or her own financial requirements, stage of life, and acceptable level of risk. For most retired people living on a fixed income, option 2 is the most appropriate choice

S11-7 Responses will vary depending on the company selected and depending on how "surprising" the information in the earnings or dividend announcement is to the investor

Continuing CaseCC11 (2) Common stockholders

would prefer issuance of additional preferred shares to avoid diluting ownership and voting rights in the company (4)

(a) ROE = "+"

Chapter 12Mini-ExercisesM12-1 (3) EM12-2 (5) OM12-3 (2) +M12-4 Case A: Cash provided by

operating activities = $140,000

M12-5

M12-6

Case A: Net cash provided by operating activities = $1,400Net cash provided by (used in) investing activities = $(50)

M12-7 Net cash provided by financing activities = $1,200

M12-8 Net cash provided by investing activities $250

M12-9 (1) NoM12-10 Company reports a net cash

outflow for both years even though they borrowed significant amounts and issued stock. There is very little cash available for the coming year's operations. Thus, they appear to be in big trouble

M12-11 Capital acquisition ratio for 2008-2010 = 1.2

M12-12 Quality of income ratio = 75%

M12-13 (5) OM12-14 Case A: Cash collected from

customers = $71,000, Net cash provided by operating activities = $30,000

M12-15 Case B: Cash payments to suppliers= $(12,040), Net cash provided by operating activities = $3,760

ExercisesE12-1 (1) FE12-2 (4) Net cash provided by

operating activities = $100E12-3 (2) The $200 increase in

cash should be reported as net cash outflow from operating activities

E12-4 (4) Net cash provided by operating activities = $100

E12-5 (5) When converting net


income to cash flow here is how to handle changes in current account balances: subtract increases in noncash current assets and decreases in noncash current liabilities, add back decreases in noncash current assets and increases in current liabilities

E12-6 Net cash flow from operating activities = $170

E12-7 (2) Net cash provided by operating activities = $170, Net cash used in investing activities = $(60), Net cash provided by financing activities = $60

E12-8 Net cash provided by operating activities = $15,500

E12-9 (1) Net cash provided by operating activities = $32,300

E12-10 Net cash flow provided by operating activities = $22,492

E12-11 Accounts receivable increased during the period

E12-12 Unearned revenue increased during the period

E12-13 Net cash used for investing activities $(16,000)

E12-14 (2) Quality of income ratio = 1.4

E12-15 (1) Aztec Cost of goods sold = $175, (2) Aztec Total cash paid = $200, (4) Aztec Inventory increase = $25, Aztec Accounts payable increase = $0

E12-16 Net cash provided by financing activities = $1,105

E12-17 Net cash provided by investing activities $7,074

E12-18 (1) Capital acquisitions ratio = 0.81

E12-19 (2) The average capital acquisitions ratio is 282%. This means that Disney generated nearly three times the financing required to purchase parks, resorts, and other property

E12-20 2008 Quality of income ratio

= 1.2E12-21 (13) Both direct and indirect

methodsE12-22 Net cash provided by


E12-23 Net cash provided by operating activities = $22,492

E12-24 Book value = $2,000E12-25 Cash received from the sale

= $1,000E12-26 Net cash flow provided by

operating activity = $13,700, Net cash flow used in investing activities = $(9,000), Net cash flow used in financing activities = $(6,000)

Coached ProblemsCP12-1 (2) Activity = "O", Cash flow

= "-"CP12-2 Total adjustments = $243CP12-3 (1) Net cash provided by


CP12-4 (1) Net cash provided by operating activities = $3,000

CP12-5 Net cash provided by operating activities = $263

CP12-6 (1) Cash flows from operating activities = $3,000

CP12-7 Cash flows from financing activities = $2,000

Group ProblemsPA12-1 (1) Activity ="I", Cash Flow =

"-"PA12-2 Net cash provided by

operating activities = $8,813PA12-3 (1) Net cash provided by

operating activities $16,000PA12-4 (1) Net cash provided by

financing activities = $1,000PA12-5 Net cash provided by

operating activities = $8,813PA12-6 (1) Net cash used for

investing activities $(500)PA12-7 Net cash provided by

operating activities $2,000PB12-1 (1) Activity = "O", Cash Flow

="+"PB12-2 Net cash provided by

operating activities $25,980


PB12-3 Net cash provided by operating activities = $48,000

PB12-4 (1) Net cash provided by financing activities = $200

PB12-5 Net cash provided by operating activities = $25,980

PB12-6 (1) Net cash used in operating activities = $(1,000)

Skill Development CasesS12-1 (2) Income taxes paid in

cash = $1,265 millionS12-2 (1) Lowe's used the indirect

method to report cash flows from operating activities


S12-4 (2) Since transaction recorded as a regular sale, the company will report the cash as a cash flow from operating activities. Had the transaction been recorded as a loan, the cash received would have been reported as a financing activity

S12-5 (2) If cash is spent on long-lived assets, it is typically classified as an investing activity. If cash is spent on expenses, it is classified as an operating activity

S12-6 The idea will not work. If depreciation expense is increased, net income will decrease by exactly the same amount

S12-7 Net cash flow used in operating activities = $(4,000)

S12-8 The amount of Net cash flow from operating activities is not affected by the method (direct or indirect) in which it is computed

S12-9 (2) Net cash flows from operating activities would decrease by $2,000

Continuing CaseCC12 (1) Net cash provided by

operating activities = $3,269, (2) Capital acquisitions ratio = 0.43

Chapter 13Mini-ExercisesM13-1 Horizontal analysis:

Percentage change in net income = 37.9%

M13-2 Vertical analysis: 2010 net income = 21% of net sales

M13-3 The two most significant changes, in terms of dollar amounts, are revenues and cost of goods sold

M13-4 The increase in net profit margin ratio (20.3% to 21.0%) is an improvement

M13-5 Gross profit percentage = 60%

M13-6 Gross profit percentage = 40%

M13-7 Return on equity = 16.0%M13-8 If inventory decreases, the

inventory turnover ratio will increase

M13-9 Current liabilities = $6,480,000

M13-10 2010 Market price per share = $55

M13-11 (d) Days to collectM13-12 (e) GoodM13-13 Current ratio will increaseM13-14 (1) (a) straight-line yields

lower depreciation which yields higher net income and net profit margin

ExercisesE13-1 (1) Total revenues increased

$52 billion from 2007 to 2008, a 23.5% increase

E13-2 (1) 2008 Gross profit percentage = 37.4%

E13-3 (2) 2008 net income as a percentage of Sales = 1.2%

E13-4 (2) 2008 net profit margin = 1.1%

E13-5 (2) 2008 times interest earned = 4.8

E13-6 (6) = JE13-7 (1) Accounts receivable

turnover = 6.0E13-8 Inventory Turnover: Cintas

turned its inventory over


(i.e., bought and sold) 6.8 times during the year

E13-9 (1) Inventory turnover ratio = 5.3

E13-10 (1) Gross profit percentage of 29.3% means that the company generates 29.3 cents of gross profit on each dollar of sales

E13-11 Current ratio after transaction 1 = 1.67

E13-12 (1) Current assets = Increase, Current liabilities = no change, Current ratio = Increase



E13-15 LIFO higher inventory higher current ratio Company B

Coached ProblemsCP13-1 (1) Sales revenue increased

by $15,000, a 9.1% increaseCP13-2 (1) 2010 Gross profit

percentage = 38.9%, (8) 2010 P/E Ratio = 18.0

CP13-3 (1) (c) 8%CP13-4 (1) (b) 32%CP13-5 (3) Kohl’s appears more

solvent, with debt providing financing for 23% of its assets compared to 45% for J. C. Penney

CP13-6 (1) (6) Armstrong EPS = $3.00, Blair EPS = $4.50

CP13-7 Consider liquidity, level of debt, and growth opportunity

Group ProblemsPA13-1 (1) Change in cash =

$31,500, a175.0% increase

PA13-2 (1) 2010 Gross profit percentage = 52.7%, (6) 2010 Debt-to-assets ratio = 0.40

PA13-3 (3) Simultech’s assets are financed more by liabilities (60%) than by equity (40%)

PA13-4 (1) (e) 4%PA13-5 (2) Pepsi appears more liquidPA13-6 (1) (9) Receivables turnover:

Royale = 7.84, Cavalier = 8.75

PA13-7 Company A appears to be a better choice

PB13-1 (2) 2010 appears to have been a successful year for Tiger Audio. The percentage increase in sales (20%) was greater than that for cost of goods sold (15%) and operating expenses (17.4%). The combined result of these changes was a significant increase in net income (37.2%)

PB13-2 (1) 2010 Gross profit percentage = 42.5%

PB13-3 (1) (c) 35%PB13-4 (1) (f) 7%PB13-5 (4) Analyses suggest Hasbro

and Mattel are fairly evenly matched with respect to profitability, liquidity, and solvency

PB13-6 (1) (1) Net profit margin: Thor = 10.0%, Gunnar = 12.5%

PB13-7 Company A’s ratios suggest that it has a high level of debt, low level of liquidity and a low price/earnings ratio

Skill Development CasesS13-1 Return on Equity = 12.7% in

2008, Inventory turnover ratio = 4.22 in 2008

S13-2 (1) Lumber Liquidators does not control its non-product costs as well as Lowe’s


S13-4 Inaccurate audit reports (either failing to report problems that exist or reporting problems that don’t exist) have negative consequences for parties internal and external to the firm

S13-5 Current ratio after the transaction = 2.26

S13-6 (2) It is impossible to determine which company


will report the higher ratios without knowledge of the average life of the company’s depreciable assets

S13-7 (2) The formula to calculate the percent of total assets represented by Cash is found in Cell I7: =H7/$H$15*100

Continuing CaseCC13 (1) 2011 Quality of income =

1.19, 2011 Asset turnover = 0.99, (2) 2011 Quick ratio = 0.84, (3) 2011 Times interest earned = 1.94

Appendix CMini-ExercisesMC-1 $231,600MC-2 $92,169MC-3 $487,133MC-4 It is much better to save

$15,000 for 20 years

ExercisesEC-1 (1) $15,562EC-2 (1) $58,800EC-3 (3) $10,386EC-4 (2) $1,311EC-5 $83,805

Coached ProblemsCPC-1 Option 1 = $8,513,600

Group ProblemsPAC-1 Option 2 = $589,086PBC-1 Option 3 = $55,308

Appendix DMini-ExercisesMD-1 January 2: dr Investments

(+A) $100,000 cr Cash (-A) $100,000

MD-2 January 2: Assets +/- $100,000

MD-3 December 15: dr Cash (+A) $16,000 cr Investment income (+R +SE) $16,000

MD-4 July 2: Assets +/- $224,000MD-5 July 2: dr Securities available

for sale (+A) $224,000 cr Cash (-A) $224,000

MD-6 December 31: Assets +8,000,

Stockholders’ equity +8,000MD-7 June 23: dr Cash (+A)

$19,800 cr Trading securities (-A) $17,400 cr Gain on sale of investments (+R +SE) $2,400

ExercisesED-1 (1) Equity method since the

company owns 35% of the total shares outstanding of Nueces Corporation

ED-2 December 31, 2009: dr Market valuation allowance (+A) $40,000 cr Unrealized gains and losses on investments (+SE) $40,000

ED-3 December 31, 2010: dr Market valuation allowance (+A) $70,000 cr Unrealized gains and losses on investments (+SE) $70,000

ED-4 (1) 2009 Investments = $240,000

ED-5 December 31, 2009: dr Unrealized gains and losses on investments (-SE) $25,000 cr Market valuation allowance (-A) $25,000

ED-6 December 31, 2010: dr Unrealized loss on trading securities (+E –SE) $15,000 cr Market valuation allowance (-A) $15,000

ED-7 (2) Current assets on the balance sheet: Trading securities, $210,000 in 2010

Coached ProblemsCPD-1 (1) Dec. 31, 2008: Credit

Unrealized gains and losses in equity (+SE) $7,000,(2) Dec. 31, 2008: Credit Unrealized gain on trading securities (+R, +SE) $7,000,(3) Dec. 31, 2008: Credit Equity in Investee Earnings (+R, +SE) $15,000

CPD-2 (1) Case A: The market value method must be used because it only owns 12% of the total outstanding shares of Bart Company

Group Problems


PAD-1 (1) Dec. 31, 2008 Credit Unrealized gains and losses on investments (+SE) $3,000,(2) Dec. 31, 2008 Debit Market valuation allowance (+A) $3,000,(3) Dec. 31, 2008 Debit Investment in Affiliates (+A) $15,000

PAD-2 (2) Case A: (b) no entry, (c) Credit Investment income (+R +SE) $6,000, (d) Debit Unrealized loss on investments (-SE) $20,000, (3) Case B: Income Statement, Equity in Investee Earnings, $120,000

Check Figures prepared by:

Dr. J. Lowell Mooney, CPA, CMA, CFM

Professor of AccountingGeorgia Southern UniversityStatesboro, GA 30460


check figures pll3e final

Documents

gross profit percentage

property tax expense

dr insurance expense

property tax payable

dr interest receivable

dr interest expense

dr unearned revenue

debit bonus expense