Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e,
Solution's ... *3. Describe the content and purpose of a post-closing trial balance.
8, 9. 7 ... 4-3. WEYGANDT FINANCIAL ACCOUNTING, IFRS Version, 2e.
CHAPTER 4.
CHAPTER 4 Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Brief Exercises
Do It!
Exercises
A Problems
B Problems
1, 2, 3, 4, 5
1, 2, 3
1
1, 2, 3, 5, 6, 17
1A, 2A, 3A, 4A, 5A
1B, 2B, 3B, 4B, 5B
Explain the process of closing the books.
6, 7, 11, 12
4, 5, 6
2
4, 7, 8, 11, 19
1A, 2A, 3A, 4A, 5A
1B, 2B, 3B, 4B, 5B
*3.
Describe the content and purpose of a post-closing trial balance.
8, 9
7
4, 7, 8
2A, 3A, 4A, 5A
2B, 3B, 4B, 5B
*4.
State the required steps in the accounting cycle.
10, 11, 12
8
10, 19
5A
5B
*5.
Explain the approaches to preparing correcting entries.
13
9
12, 13
6A
*6.
Identify the sections of a classified statement of financial position.
14, 15, 16, 17, 18, 19
10, 11
3, 9, 14, 15, 16, 17
1A, 2A, 3A, 4A, 5A
*7.
Prepare reversing entries.
10, 20, 21
12
Learning Objectives
Questions
*1.
Prepare a worksheet.
*2.
3, 4
1B, 2B, 3B, 4B, 5B
18, 19
*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix *to the chapter.
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-1
ASSIGNMENT CHARACTERISTICS TABLE Problem Number
Description
Difficulty Level
Time Allotted (min.)
Simple
40–50
1A
Prepare worksheet, financial statements, and adjusting and closing entries.
2A
Complete worksheet; prepare financial statements, closing entries, and post-closing trial balance.
Moderate
50–60
3A
Prepare financial statements, closing entries, and postclosing trial balance.
Moderate
40–50
4A
Complete worksheet; prepare classified statement of financial position, adjusting and closing entries, and post-closing trial balance.
Moderate
50–60
5A
Complete all steps in accounting cycle.
Complex
70–90
6A
Analyze errors and prepare correcting entries and trial balance.
Moderate
40–50
1B
Prepare worksheet, financial statements, and adjusting and closing entries.
Simple
40–50
2B
Complete worksheet; prepare financial statements, closing entries, and post-closing trial balance.
Moderate
50–60
3B
Prepare financial statements, closing entries, and postclosing trial balance.
Moderate
40–50
4B
Complete worksheet; prepare classified statement of financial position, adjusting and closing entries, and post-closing trial balance.
Moderate
50–60
5B
Complete all steps in accounting cycle.
Complex
70–90
Comprehensive Problem: Chapters 2 to 4
4-2
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
WEYGANDT FINANCIAL ACCOUNTING, IFRS Version, 2e CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE Number
LO
BT
Difficulty
Time (min.)
BE1
1
K
Simple
2–4
BE2
1
AN
Moderate
6–8
BE3
1
C
Simple
3–5
BE4
2
AP
Simple
3–5
BE5
2
AP
Simple
4–6
BE6
2
AP
Simple
6–8
BE7
3
C
Simple
2–4
BE8
4
K
Simple
3–5
BE9
5
AN
Moderate
4–6
BE10
6
AP
Simple
4–6
BE11
6
C
Simple
3–5
BE12
7
AN
Moderate
4–6
DI1
1
C
Simple
4–6
DI2
2
AP
Simple
2–4
DI3
6
AP
Simple
6–8
DI4
6
C
Simple
4–6
EX1
1
AP
Simple
12–15
EX2
1
AP
Simple
10–12
EX3
1, 6
AP
Simple
12–15
EX4
2, 3
AP
Simple
12–15
EX5
1
AN
Simple
10–12
EX6
1
AN
Moderate
12–15
EX7
2, 3
AP
Simple
8–10
EX8
2, 3
AP
Simple
10–12
EX9
6
AP
Simple
12–15
EX10
4
C
Simple
3–5
EX11
2
AP
Simple
6–8
EX12
5
AN
Moderate
8–10
EX13
5
AN
Moderate
4–6
EX14
6
AP
Moderate
10–12
EX15
6
C
Simple
5–8
EX16
6
AP
Simple
8–10
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-3
COMPLETING THE ACCOUNTING CYCLE (Continued) Number
LO
BT
Difficulty
Time (min.)
EX17
1, 6
AP
Simple
12–15
EX18
7
AN
Moderate
5–7
EX19
2, 4, 7
AN
Moderate
10–12
P1A
1, 2, 6
AN
Simple
40–50
P2A
1-3, 6
AP
Moderate
50–60
P3A
1-3, 6
AP
Moderate
40–50
P4A
1-3, 6
AN
Moderate
50–60
P5A
1-4, 6
AN
Complex
70–90
P6A
5
AN
Moderate
40–50
P1B
1, 2, 6
AN
Simple
40–50
P2B
1-3, 6
AP
Moderate
50–60
P3B
1-3, 6
AP
Moderate
40–50
P4B
1-3, 6
AN
Moderate
50–60
P5B
1-4, 6
AN
Complex
70–90
BYP1
6
AN
Simple
10–12
BYP2
6
AN
Simple
8–10
BYP3
—
E
Simple
10–12
BYP4
6
AN
Moderate
15–20
BYP5
4
C
Simple
15–20
BYP6
—
E
Moderate
10–15
4-4
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Q4-10 Q4-20 Communication
Broadening Your Perspective
BE4-3 DI4-1
*7. Prepare reversing entries.
Q4-17 Q4-18 BE4-11 DI4-4 E4-15
*6. Identify the sections of a classified statement of financial position.
Q4-14 Q4-15 Q4-16
Q4-13
*5. Explain the approaches to preparing correcting entries.
Q4-10 E4-10
Q4-11 Q4-12 BE4-8
*4. State the required steps in the accounting cycle.
Q4-7
Q4-8 Q4-9 BE4-7
Q4-6 Q4-11 Q4-12
*2. Explain the process of closing the books.
Q4-1 Q4-2 Q4-3 Q4-4 Q4-5
Comprehension
*3. Describe the content and purpose of a post-closing trial balance.
BE4-1
Knowledge
*1. Prepare a worksheet.
Learning Objective
Q4-19 BE4-10 DI4-3 E4-3 E4-9 E4-14
E4-4 E4-7 E4-8 P4-2A
BE4-4 BE4-5 BE4-6 DI4-2 E4-4 E4-7
E4-1 E4-2 E4-3 E4-17 P4-2A
E4-16 E4-17 P4-2A P4-3A P4-2B P4-3B
P4-3A P4-2B P4-3B
E4-8 E4-11 P4-2A P4-3A P4-2B P4-3B
P4-3A P4-2B P4-3B
Application
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
E4-18 E4-19
P4-4B P4-5B
P4-5B
P4-5A P4-1B P4-4B P4-5B
Financial Reporting Comparative Analysis Decision Making Across the Organization
Q4-21 BE4-12
P4-1A P4-4A P4-5A P4-1B P4-4B P4-5B
BE4-9 E4-12 E4-13 P4-6A
E4-19 P4-5A P4-5B
P4-4A P4-5A
E4-19 P4-1A P4-4A P4-5A P4-1B P4-4B
BE4-2 E4-5 E4-6 P4-1A P4-4A
Analysis
Synthesis
Real–World Focus Ethics Case
Evaluation
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
BLOOM’S TAXONOMY TABLE
4-5
ANSWERS TO QUESTIONS 1.
No. A worksheet is not a permanent accounting record. The use of a worksheet is an optional step in the accounting cycle.
2.
The worksheet is merely a device used to make it easier to prepare adjusting entries and the financial statements.
3.
The amount shown in the adjusted trial balance column for an account equals the account balance in the ledger after adjusting entries have been journalized and posted.
4.
The net income of $12,000 will appear in the income statement debit column and the statement of financial position credit column. A net loss will appear in the income statement credit column and the statement of financial position debit column.
5.
Formal financial statements are needed because the columnar data are not properly arranged and classified for statement purposes. For example, the Dividends account is listed with assets.
6.
(1) (2) (3) (4)
7.
Income Summary is a temporary account that is used in the closing process. The account is debited for expenses and credited for revenues. The difference, either net income or net loss, is then closed to the Retained Earnings account.
8.
The post-closing trial balance contains only statement of financial position accounts. Its purpose is to prove the equality of the permanent account balances that are carried forward into the next accounting period.
9.
The accounts that will not appear in the post-closing trial balance are: Depreciation Expense; Dividends; and Service Revenue.
10.
A reversing entry is the exact opposite, both in amount and in account titles, of an adjusting entry and is made at the beginning of the new accounting period. Reversing entries are an optional step in the accounting cycle.
11.
The steps that involve journalizing are: (1) journalize the transactions, (2) journalize the adjusting entries, and (3) journalize the closing entries.
12.
The three trial balances are the: (1) trial balance, (2) adjusted trial balance, and (3) post-closing trial balance.
13.
Correcting entries differ from adjusting entries because they: (1) are not a required part of the accounting cycle, (2) may be made whenever an error is discovered, and (3) may affect any combination of accounts.
4-6
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
(Dr) Individual revenue accounts and (Cr) Income Summary. (Dr) Income Summary and (Cr) Individual expense accounts. (Dr) Income Summary and (Cr) Retained Earnings. (Dr) Retained Earnings and (Cr) Dividends.
Questions Chapter 4 (Continued) *14. The standard classifications used in a statement of financial position are: Assets Intangible Assets Property, Plant, and Equipment Long-term Investments Current Assets
Equity and Liabilities Equity Non-current Liabilities Current Liabilities
*15. The operating cycle of a company is the average time that it takes to purchase inventory, sell it on account, and then collect cash from customers. *16. Current assets are assets that a company expects to convert to cash or use up in one year. Some companies use a period longer than one year to classify assets and liabilities as current because they have an operating cycle longer than one year. Companies usually list current assets in the reverse order in which they expect to convert them into cash. *17. Long-term investments are generally investments in shares and bonds of other companies that are normally held for many years and non-current assets such as land or buildings that a company is not using in its operating activities. Property, plant, and equipment are assets with relatively long useful lives that a company is currently using in operating the business. *18. The two equity accounts and the purpose of each are: (1) Share Capital—Ordinary is used to record investments of assets in the business by the owners (shareholders) through share transactions. (2) Retained Earnings is used to record net income retained in the business. *19.. Samsung’s current liabilities at December 31, 2010 and December 31, 2009 were W 39,944,721 million and W 34,204,424 million respectively. Samsung’s current liabilities were lower than its current assets in both years. *20. After reversing entries have been made, the balances will be Interest Payable, zero balance; Interest Expense, a credit balance. *21. (a) Jan. 10 Salaries and Wages Expense .................................................... Cash ..................................................................................
9,200 9,200
Because of the January 1 reversing entry that credited Salaries and Wages Expense for $3,500, Salaries and Wages Expense will have a debit balance of $5,700 which equals the expense for the current period. (b) Jan. 10 Salaries and Wages Payable ..................................................... Salaries and Wages Expense .................................................... Cash ..................................................................................
3,500 5,700 9,200
Note that Salaries and Wages Expense will again have a debit balance of $5,700.
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-7
SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 4-1 The steps in using a worksheet are performed in the following sequence: (1) prepare a trial balance on the worksheet, (2) enter adjustment data, (3) enter adjusted balances, (4) extend adjusted balances to appropriate statement columns and (5) total the statement columns, compute net income (loss), and complete the worksheet. Filling in the blanks, the answers are 1, 3, 4, 5, 2. The solution to BRIEF EXERCISE 4-2 is on page 4-9. BRIEF EXERCISE 4-3
Account Accumulated Depreciation Depreciation Expense Share Capital—Ordinary Dividends Service Revenue Supplies Accounts Payable
Income Statement Dr. Cr.
Statement of Financial Position Dr. Cr. X
X X X X X X
BRIEF EXERCISE 4-4 Dec. 31 31
31 31
4-8
Service Revenue .............................................. Income Summary......................................
47,000
Income Summary ............................................. Salaries and Wages Expense .................. Supplies Expense .....................................
32,000
Income Summary ............................................. Retained Earnings ....................................
15,000
Retained Earnings ............................................ Dividends ..................................................
2,000
47,000 27,000 5,000 15,000 2,000
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Prepaid Insurance Service Revenue Salaries and Wages Expense Accounts Receivable Salaries and Wages Payable Insurance Expense
Account Titles
25,000
3,000 61,000
Trial Balance Dr. Cr.
(a) 1,300
(c) 800 (b) 1,100 (c)
800
(a) 1,300 (b) 1,100
Adjustments Dr. Cr.
KEO COMPANY Worksheet
1,300
25,800 1,100
1,700
800
62,100
Adjusted Trial Balance Dr. Cr.
1,300
25,800
62,100
Income Statement Dr. Cr.
1,100
1,700
800
Statement of Financial Position Dr. Cr.
BRIEF EXERCISE 4-2
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-9
BRIEF EXERCISE 4-5 Salaries and Wages Expense Bal. 27,000 (2) 27,000
Supplies Expense Bal. 5,000 (2) 5,000
Income Summary (2) 32,000 (1) 47,000 (3) 15,000 47,000 47,000
Service Revenue (1) 47,000 Bal. 47,000
Retained Earnings (4) 2,000 Bal. 30,000 (3) 15,000 Bal. 43,000
Dividends Bal. 2,000 (4) 2,000
BRIEF EXERCISE 4-6 July 31
31
Date 7/31 7/31
Date 7/31 7/31
4-10
Service Revenue ............................................... Income Summary.......................................
19,200
Income Summary .............................................. Salaries and Wages Expense ................... Maintenance and Repairs Expense .........
11,300
Explanation Balance Closing entry
Explanation Balance Closing entry
Service Revenue Ref. Debit
19,200
8,800 2,500
Credit 19,200
Balance 19,200 0
Credit
Balance 8,800 0
19,200
Salaries and Wages Expense Ref. Debit 8,800
8,800
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
BRIEF EXERCISE 4-6 (Continued)
Date 7/31 7/31
Maintenance and Repairs Expense Explanation Ref. Debit Credit Balance 2,500 Closing entry 2,500
Balance 2,500 0
BRIEF EXERCISE 4-7 The accounts that will appear in the post-closing trial balance are: Accumulated Depreciation Share Capital—Ordinary Supplies Accounts Payable
BRIEF EXERCISE 4-8 The proper sequencing of the required steps in the accounting cycle is as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Analyze business transactions. Journalize the transactions. Post to ledger accounts. Prepare a trial balance. Journalize and post adjusting entries. Prepare an adjusted trial balance. Prepare financial statements. Journalize and post closing entries. Prepare a post-closing trial balance.
Filling in the blanks, the answers are 4, 2, 8, 7, 5, 3, 9, 6, 1.
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-11
BRIEF EXERCISE 4-9 1.
2.
Service Revenue .................................................................. Accounts Receivable ...................................................
690
Accounts Payable (€1,850 – €1,580) .................................. Supplies ........................................................................
270
690
270
BRIEF EXERCISE 4-10 KREN COMPANY Partial Statement of Financial Position Current assets Prepaid insurance ................................................................... Supplies.................................................................................... Accounts receivable ................................................................ Short-term investments .......................................................... Cash .......................................................................................... Total current assets .........................................................
£ 3,600 5,200 12,500 4,900 6,700 £32,900
BRIEF EXERCISE 4-11 CL CA PPE PPE CA IA
Accounts payable Accounts receivable Accum. depreciation—buildings Buildings Cash Copyrights
CL LTI PPE CA IA CA
Income taxes payable Debt investments (long-term) Land Inventory Patents Supplies
*BRIEF EXERCISE 4-12 Nov. 1
Salaries and Wages Payable ...................................... Salaries and Wages Expense .............................
1,680 1,680
The balances after posting the reversing entry are Salaries and Wages Expense (Cr.) $1,680 and Salaries and Wages Payable $0.
4-12
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 4-1 Income statement debit column—Utilities Expense Income statement credit column—Service Revenue Statement of financial position debit column—Accounts Receivable Statement of financial position credit column—Notes Payable; Accumulated Depreciation; Share Capital—Ordinary
DO IT! 4-2 Dec. 31
Dec. 31
Income Summary.......................................... Retained Earnings ..................................
47,000
Retained Earnings ........................................ Dividends ................................................
15,000
47,000
15,000
DO IT! 4-3
ZERMATT COMPANY Partial Statement of Financial Position December 31, 2014 Property, plant, and equipment Equipment ................................................... Less: Accumulated depreciation— equipment................................................ Long-term investments Investments in ordinary shares ................. Current assets Inventory...................................................... Accounts receivable ................................... Short-term investments ............................. Cash ............................................................. Total assets ........................................................
CHF21,700 5,200
CHF16,500 6,500
4,100 4,300 1,200 3,900
13,500 CHF36,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-13
DO IT! 4-4 NA CL CL CA NCL IA
4-14
Interest revenue Utilities payable Accounts payable Supplies Bonds payable Trademarks
E PPE PPE NA LTI CL
Share capital—ordinary Accumulated depreciation– equipment Equipment Salaries and wages expense Investment in real estate Unearned rent revenue
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
SOLUTIONS TO EXERCISES EXERCISE 4-1 LIM COMPANY Worksheet For the Month Ended June 30, 2014 (in thousands) Account Titles
Trial Balance Dr.
Cash
Adjustments
Cr.
Dr.
Cr.
4,020
Adj. Trial Balance Dr.
Cr.
Income Statement Dr.
Statement of Financial Position
Cr.
Dr.
4,020
4,020
2,440
2,440
500
500
Cr.
Accounts Receivable Supplies
2,440 1,900
Accounts Payable
(a) 1,400 1,120
1,120
1,120
100
100
Unearned Service Revenue
240 (b)
140
Share Capital— Ordinary
5,000
Service Revenue
5,000
3,100
(b)
140
5,000
3,240
3,240
Salaries and Wages Expense
860
(c)
250
1,110
1,110
240
240
1,400
1,400
Miscellaneous Expense Totals Supplies Expense
240 9,460
9,460 (a) 1,400
Salaries and Wages Payable Totals Net Income Totals
(c) 1,790
250 1,790
250 9,710
9,710
250 2,750
3,240
6,960
490 3,240
6,470 490
3,240
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
6,960
6,960
4-15
EXERCISE 4-2 ALBANESE COMPANY (Partial) Worksheet For the Month Ended April 30, 2014 Adjusted Trial Balance Account Titles Cash Accounts Receivable Prepaid Rent Equipment Accum. Depreciation— Equipment Notes Payable Accounts Payable Share Capital— Ordinary Retained Earnings Dividends Service Revenue Salaries and Wages Expense Rent Expense Depreciation Expense Interest Expense Interest Payable Totals Net Income Totals
4-16
Dr. 7,442 7,840 2,280 23,000
Cr.
Income Statement Dr.
Cr.
Dr. 7,442 7,840 2,280 23,000
Cr.
4,800 5,700 5,672 22,000
4,800 5,700 5,672 22,000
4,000
4,000
3,000
3,000 12,590
9,840 760 600 57 54,819
Statement of Financial Position
12,590 9,840 760 600 57
57 54,819
11,257 1,333 12,590
12,590
43,562
12,590
43,562
57 42,229 1,333 43,562
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-3 ALBANESE COMPANY Income Statement For the Month Ended April 30, 2014 Revenues Service revenue ........................................................ Expenses Salaries and wages expense ................................... Rent expense ............................................................ Depreciation expense ............................................... Interest expense ....................................................... Total expenses .................................................. Net income ........................................................................
€12,590 € 9,840 760 600 57 11,257 € 1,333
ALBANESE COMPANY Retained Earnings Statement For the Month Ended April 30, 2014 Retained Earnings, April 1 ........................................................ Add: Net income ......................................................................
€4,000 1,333 5,333 3,000 €2,333
Less: Dividends ........................................................................ Retained Earnings, April 30 ......................................................
ALBANESE COMPANY Statement of Financial Position April 30, 2014 Assets Property, plant, and equipment Equipment ................................................................. Less: Accumulated depreciation—equipment ...... Current assets Prepaid rent ............................................................... Accounts receivable ................................................. Cash ........................................................................... Total assets .......................................................................
€23,000 4,800 2,280 7,840 7,442
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€18,200
17,562 €35,762
4-17
EXERCISE 4-3 (Continued) ALBANESE COMPANY Statement of Financial Position (Continued) April 30, 2014 Equity and Liabilities Equity Share capital—ordinary ........................................... Retained earnings .................................................... Current liabilities Notes payable ........................................................... Accounts payable ..................................................... Interest payable ........................................................ Total equity and liabilities ..............................................
€22,000 2,333 5,700 5,672 57
€24,333
11,429 €35,762
EXERCISE 4-4 (a) Apr. 30
30
30
30
Service Revenue ....................................... Income Summary ..............................
12,590
Income Summary ...................................... Salaries and Wages Expense ........... Rent Expense ..................................... Depreciation Expense ....................... Interest Expense ................................
11,257
Income Summary ...................................... Retained Earnings .............................
1,333
Retained Earnings ..................................... Dividends ...........................................
3,000
12,590
9,840 760 600 57
1,333
3,000
(b) Income Summary 11,257 12,590 1,333 12,590 12,590
4-18
Retained Earnings 3,000 Bal. 4,000 1,333 Bal. 2,333
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-4 (Continued) (c)
ALBANESE COMPANY Post-Closing Trial Balance April 30, 2014 Cash ..................................................................... Accounts Receivable .......................................... Prepaid Rent........................................................ Equipment ........................................................... Accumulated Depreciation—Equipment .......... Notes Payable ..................................................... Accounts Payable ............................................... Interest Payable .................................................. Share Capital—Ordinary .................................... Retained Earnings ..............................................
Debit €7,442 7,840 2,280 23,000
€40,562
Credit
€ 4,800 5,700 5,672 57 22,000 2,333 €40,562
EXERCISE 4-5 (a) Accounts Receivable .......................................... Service Revenue .........................................
600
Insurance Expense ............................................. Prepaid Insurance .......................................
400
Depreciation Expense ........................................ Accumulated Depreciation—Equipment ...
900
Salaries and Wages Expense ............................ Salaries and Wages Payable ......................
500
600
400
900
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500
4-19
EXERCISE 4-5 (Continued) (b)
Accounts Receivable Prepaid Insurance Accum. Depreciation—Equip. Salaries and Wages Payable Service Revenue Salaries and Wages Expense Insurance Expense Depreciation Expense
Statement of Income Statement Financial Position Dr. Cr. Dr. Cr. X X X X X X X X
EXERCISE 4-6 (a) Accounts Receivable—27,000 (34,000 – 7,000). Supplies—2,300 (7,000 – 4,700). Accumulated Depreciation—Equipment—22,000 (12,000 + 10,000). Salaries and Wages Payable—0 No liability recorded until adjustments are made. Insurance Expense—8,000 (26,000 – 18,000). Salaries and Wages Expense—44,000 (49,000 – 5,000). (b) Accounts Receivable ................................................. Service Revenue .................................................
7,000
Insurance Expense ..................................................... Prepaid Insurance ...............................................
8,000
Supplies Expense ....................................................... Supplies ...............................................................
4,700
Depreciation Expense ................................................ Accumulated Depreciation—Equipment ..........
10,000
Salaries and Wages Expense .................................... Salaries and Wages Payable..............................
5,000
4-20
7,000
8,000
4,700
10,000
5,000
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-7 (a) Service Revenue ..................................................... Income Summary ..............................................
4,300
Income Summary .................................................... Salaries and Wages Expense .......................... Miscellaneous Expense ................................... Supplies Expense .............................................
3,424
Income Summary .................................................... Retained Earnings ............................................
876
Retained Earnings .................................................. Dividends ..........................................................
600
(b)
4,300
1,344 180 1,900
876
600
LANZA COMPANY Post-Closing Trial Balance For the Month Ended June 30, 2014 Account Titles Cash ......................................................................... Accounts Receivable .............................................. Supplies ................................................................... Accounts Payable ................................................... Salaries and Wages Payable ................................. Unearned Service Revenue ................................... Share Capital—Ordinary ........................................ Retained Earnings ..................................................
Debit R$3,712 3,904 480
Credit
R$1,556 344 160 4,000 2,036 R$8,096 R$8,096
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4-21
EXERCISE 4-8 (a) General Journal Date Account Titles July 31 Service Revenue .................................. Rent Revenue ....................................... Income Summary ........................
Ref. 400 429 350
Debit 64,000 6,500
31 Income Summary ................................. Salaries and Wages Expense .... Utilities Expense ......................... Depreciation Expense ................
350 726 732 711
74,300
31 Retained Earnings ............................... Income Summary ........................
320 350
3,800
31 Retained Earnings ............................... Dividends ....................................
320 332
12,000
J15 Credit
70,500
55,700 14,900 3,700
3,800
12,000
(b) Retained Earnings Date Explanation Ref. Debit July 31 Balance 31 Close net loss J15 3,800 31 Close dividends J15 12,000
Income Summary Date Explanation Ref. Debit July 31 Close revenue J15 31 Close expenses J15 74,300 31 Close net loss J15
4-22
Credit
Credit 70,500 3,800
No. 320 Balance 20,260 16,460 4,460
No. 350 Balance 70,500 (3,800) 0
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-8 (Continued) (c)
ROTH COMPANY Post-Closing Trial Balance July 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Equipment ........................................................... Accumulated Depreciation—Equipment .......... Accounts Payable ............................................... Unearned Rent Revenue .................................... Share Capital—Ordinary .................................... Retained Earnings ..............................................
Debit $9,840 8,140 15,900
$33,880
Credit
$ 5,400 2,220 3,800 18,000 4,460 $33,880
EXERCISE 4-9 (a)
ROTH COMPANY Income Statement For the Year Ended July 31, 2014 Revenues Service revenue........................................... Rent revenue ............................................... Total revenues ..................................... Expenses Salaries and wages expense...................... Utilities expense .......................................... Depreciation expense ................................. Total expenses .................................... Net loss ................................................................
$64,000 6,500 $70,500 55,700 14,900 3,700
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74,300 ($ 3,800)
4-23
EXERCISE 4-9 (Continued) ROTH COMPANY Retained Earnings Statement For the Year Ended July 31, 2014 Retained Earnings, August 1, 2013 ................... Less: Net loss .................................................... Dividends ................................................. Retained Earnings, July 31, 2014 ......................
(b)
$20,260 $ 3,800 12,000
15,800 $ 4,460
ROTH COMPANY Statement of Financial Position July 31, 2014 Assets Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation— equipment ............................................ Current assets Accounts receivable ...................................... Cash ................................................................ Total assets ............................................................
$15,900 5,400 8,140 9,840
$10,500
17,980 $28,480
Equity and Liabilities Equity Share capital—ordinary................................. Retained earnings .......................................... Current liabilities Accounts payable .......................................... Unearned rent revenue .................................. Total equity and liabilities .....................................
4-24
$18,000 4,460 2,220 3,800
$22,460
6,020 $28,480
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-10 1.
False. “Analyze business transactions” is the first step in the accounting cycle.
2.
False. Reversing entries are an optional step in the accounting cycle.
3.
True.
4.
True.
5.
True.
6.
False. Steps 1–3 may occur daily in the accounting cycle. Steps 4–7 are performed on a periodic basis. Steps 8 and 9 are usually prepared only at the end of a company’s annual accounting period.
7.
False. The step of “journalize the transactions” occurs before the step of “post to the ledger accounts.”
8.
False. Closing entries are prepared after financial statements are prepared.
EXERCISE 4-11 (a) June 30
30
30
30
Service Revenue .................................... Income Summary ...........................
18,100
Income Summary ................................... Salaries and Wages Expense ........ Supplies Expense........................... Rent Expense..................................
12,700
Income Summary ................................... Retained Earnings ..........................
5,400
Retained Earnings.................................. Dividends ........................................
2,200
18,100
8,800 900 3,000
5,400
2,200
(b) Income Summary June 30 12,700 June 30 June 30 5,400 18,100
18,100 18,100
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4-25
EXERCISE 4-12 (a) 1.
2.
3.
(b) 1.
2.
3.
4-26
Cash ................................................................... Equipment .................................................
700
Salaries and Wages Expense .......................... Cash ..........................................................
700
Service Revenue ............................................... Cash ..........................................................
300
Cash ................................................................... Accounts Receivable ...............................
800
Accounts Payable ............................................ Equipment ................................................
670
Equipment ........................................................ Accounts Payable ...................................
760
Salaries and Wages Expense .......................... Equipment ................................................
700
Service Revenue ............................................... Cash ................................................................... Accounts Receivable ...............................
300 500
Equipment ......................................................... Accounts Payable ....................................
90
700
700
300
800
670
760
700
800
90
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-13 1.
2.
3.
Accounts Payable (R$840 – R$480) ........................ Cash ...................................................................
360
Supplies ..................................................................... Equipment.......................................................... Accounts Payable .............................................
380
Dividends................................................................... Salaries and Wages Expense...........................
500
360
38 342
500
EXERCISE 4-14 (a)
REGO BOWLING ALLEY Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Land ............................................. Buildings ...................................... Less: Acc. depr.—buildings ...... Equipment.................................... Less: Acc. depr.—equipment.... Current assets Prepaid insurance ....................... Accounts receivable ................... Cash ............................................. Total assets .........................................
$67,000 $128,000 42,600 62,400 18,720
85,400 43,680 4,680 7,540 18,040
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$196,080
30,260 $226,340
4-27
EXERCISE 4-14 (Continued) REGO BOWLING ALLEY Statement of Financial Position (Continued) December 31, 2014 Equity and Liabilities Equity Share capital—ordinary............................... Retained earnings ($28,000 + $8,440*) ....... Non-current liabilities Note payable................................................. Current liabilities Current portion of note payable ................. Accounts payable ........................................ Interest payable............................................ Total equity and liabilities ...................................
$80,000 36,440
$116,440 80,000
15,000 12,300 2,600
29,900 $226,340
*Net income = $19,180 – $780 – $7,360 – $2,600 = $8,440 (b) Current assets exceed current liabilities by only $360 ($30,260 – $29,900). However, approximately 60% of current assets are in the form of cash. The company’s liquidity appears to be reasonably good, but some caution is needed.
EXERCISE 4-15 CL CA CA E IA CL CA LTI
4-28
Accounts payable Accounts receivable Cash Share capital—ordinary Patents Salaries and wages payable Inventory Investments
PPE PPE PPE NCL CA PPE CA
Accumulated depreciation Buildings Land Long-term debt Supplies Equipment Prepaid expenses
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-16 SEXTON COMPANY Statement of Financial Position December 31, 2014 (in thousands) Assets Property, plant, and equipment Equipment.................................................... Less: Accumulated depreciation— equipment ........................................ Long-term investments ...................................... Current assets Prepaid insurance ....................................... Inventory ...................................................... Accounts receivable ................................... Short-term investments .............................. Cash ............................................................. Total assets .........................................................
£11,500 (4,125)
680 1,256 1,696 3,619 2,668
£ 7,375 1,200
9,919 £18,494
Equity and Liabilities Equity Share capital—ordinary .............................. Retained earnings ....................................... Non-current liabilities Long-term debt ............................................ Notes payable (due after 2015) .................. Current liabilities Notes payable due in 2015 ......................... Accounts payable ....................................... Total equity and liabilities ..................................
£10,000 4,750
£14,750
1,000 800
1,800
500 1,444
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
1,944 £18,494
4-29
EXERCISE 4-17 (a) EMJAY COMPANY Income Statement For the Year Ended July 31, 2014 Revenues Service revenue ....................................... Rent revenue ............................................ Total revenues .................................. Expenses Salaries and wages expense .................. Utilities expense....................................... Depreciation expense .............................. Total expense ................................... Net loss.............................................................
$62,000 8,500 $70,500 50,700 22,600 2,500 75,800 $ (5,300)
EMJAY COMPANY Retained Earnings Statement For the Year Ended July 31, 2014 Retained Earnings, August 1, 2013 ................ Less: Net loss ................................................. Dividends .............................................. Retained Earnings, July 31, 2014 ...................
4-30
$22,700 $5,300 3,000
8,300 $14,400
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
EXERCISE 4-17 (Continued) (b) EMJAY COMPANY. Statement of Financial Position July 31, 2014 Assets Property, plant, and equipment Equipment........................................................ Less: Accumulated depreciation— equipment ............................................. Current assets Accounts receivable ....................................... Cash ................................................................. Total assets .............................................................
$30,000 6,000 9,180 14,200
$24,000
23,380 $47,380
Equity and Liabilities Equity Share capital—ordinary .................................. Retained earnings ........................................... Non-current liabilities Note payable .................................................... Current liabilities Accounts payable ........................................... Salaries and wages payable........................... Total equity and liabilities ......................................
$25,000 14,400
$39,400 1,800
4,100 2,080
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
6,180 $47,380
4-31
*EXERCISE 4-18 (a) Dec. 31
Jan. 4
(b) Dec. 31
Jan. 1
Jan. 4
Salaries and Wages Expense (R$9,000 X 4/5)...................................... Salaries and Wages Payable ..........
7,200 7,200
Salaries and Wages Payable.................. Salaries and Wages Expense (R$9,000 X 1/5)...................................... Cash .................................................
7,200
Salaries and Wages Expense ................ Salaries and Wages Payable ..........
7,200
Salaries and Wages Payable.................. Salaries and Wages Expense .........
7,200
Salaries and Wages Expense ............... Cash .................................................
9,000
1,800 9,000
7,200
7,200
9,000
*EXERCISE 4-19 (a) Dec. 31
31
(b) Jan. 1
1
4-32
Service Revenue ..................................... Income Summary ............................
93,800
Income Summary .................................... Interest Expense .............................
8,300
Service Revenue ..................................... Accounts Receivable ......................
5,000
Interest Payable ...................................... Interest Expense .............................
1,300
93,800
8,300
5,000
1,300
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*EXERCISE 4-19 (Continued) (c) & (e) Accounts Receivable Dec. 31 Balance *19,500 31 Adjusting 5,000 24,500 Jan. 1 Reversing
5,000
*($24,500 – $5,000)
Dec. 31 Closing
Jan. 1
Reversing
Service Revenue 93,800 Dec. 31 Balance 31 Adjusting 93,800 5,000 Jan. 10
88,800* 5,000 93,800 5,000
*($93,800 – $5,000)
Jan. 1
Reversing
Dec. 31 Balance 31 Adjusting Jan. 15
Interest Payable Dec. 31 Adjusting 1,300 Interest Expense *7,000 Dec. 31 Closing 1,300 8,300 3,000 Jan. 1 Reversing
1,300
8,300 8,300 1,300
*($8,300 – $1,300) (d) Jan. 10
15
(1) Cash ............................................................... Service Revenue ....................................
5,000
(2) Interest Expense ........................................... Cash........................................................
3,000
5,000
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3,000
4-33
4-34
Account Titles
2,240 1,300 1,200 230 56,550
600
11,410 5,920 1,250 2,400 30,000
56,550
14,200
10,000 12,350 20,000
770 720
300 600 3,470
(a) (b)
(c) (d)
(e) 1,080 770 600
(c)
(b)
3,470
300
720
(e) 1,080
(a) (d)
Cr.
Dr.
Dr.
Cr.
Adjustments
Trial Balance
600 58,650
300
770 720
2,240 1,300 1,200 230
600
11,410 7,000 480 1,800 30,000
Dr.
58,650
300
720
15,280
10,000 12,350 20,000
Cr.
Adjusted Trial Balance
HERCULES POIROT, P.I., INC. Worksheet For the Quarter Ended March 31, 2014
600 7,360 7,920 15,280
300
770 720
2,240 1,300 1,200 230
Dr.
51,290 51,290
15,280
600
11,410 7,000 480 1,800 30,000
Dr.
43,370 7,920 51,290
300
720
10,000 12,350 20,000
Cr.
Statement of Financial Position
15,280
15,280
Cr.
Income Statement
Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Accrued Interest on note; (d) Insurance Expired; (e) Service Revenue
Cash Accounts Receivable Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Share Capital—Ordinary Dividends Service Revenue Salaries and Wages Expense Travel Expense Rent Expense Miscellaneous Expense Totals Supplies Expense Depreciation Expense Accumulated Depreciation—Equipment Interest Expense Interest Payable Insurance Expense Totals Net Income Totals
(a)
SOLUTIONS TO PROBLEMS PROBLEM 4-1A
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PROBLEM 4-1A (Continued) (b)
HERCULES POIROT, P.I., INC Income Statement For the Quarter Ended March 31, 2014 Revenues Service revenue............................................... Expenses Salaries and wages expense.......................... Travel expense ................................................ Rent expense ................................................... Depreciation expense ..................................... Insurance expense .......................................... Supplies expense ............................................ Interest expense .............................................. Miscellaneous expense .................................. Total expenses ........................................ Net income ..............................................................
€15,280 €2,240 1,300 1,200 720 600 770 300 230 7,360 € 7,920
HERCULES POIROT, P.I., INC. Retained Earnings Statement For the Quarter Ended March 31, 2014 Retained Earnings, January 1 .......................................... Add: Net income.............................................................. Less: Dividends ................................................................ Retained Earnings, March 31 ............................................
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
€
0 7,920 7,920 600 €7,320
4-35
PROBLEM 4-1A (Continued) HERCULES POIROT, P.I., INC. Statement of Financial Position March 31, 2014 Assets Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation— equipment ............................................... Current assets Prepaid insurance ......................................... Supplies.......................................................... Accounts receivable...................................... Cash ................................................................ Total assets ........................................................... Equity and Liabilities Equity Share capital—ordinary ................................ Retained earnings ......................................... Current liabilities Notes payable ................................................ Accounts payable .......................................... Interest payable ............................................. Total equity and liabilities .................................... (c) Mar. 31 31
31 31
4-36
€30,000 720 1,800 480 7,000 11,410
€20,000 7,320 10,000 12,350 300
Supplies Expense ................................. Supplies .........................................
770
Depreciation Expense .......................... Accumulated Depreciation— Equipment...................................
720
Interest Expense ................................... Interest Payable.............................
300
Insurance Expense ............................... Prepaid Insurance .........................
600
€29,280
20,690 €49,970
€27,320
22,650 €49,970 770
720 300 600
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PROBLEM 4-1A (Continued) Mar. 31
(d) Mar. 31
31
31
31
Accounts Receivable ................................ Service Revenue ................................
1,080
Service Revenue....................................... Income Summary ..............................
15,280
Income Summary ..................................... Travel Expense ................................. Salaries and Wages Expense .......... Rent Expense .................................... Insurance Expense ........................... Depreciation Expense ...................... Supplies Expense ............................. Interest Expense ............................... Miscellaneous Expense ...................
7,360
Income Summary ..................................... Retained Earnings ............................
7,920
Retained Earnings .................................... Dividends ..........................................
600
1,080
15,280
1,300 2,240 1,200 600 720 770 300 230
7,920
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600
4-37
PROBLEM 4-2A
(a)
WATSON COMPANY Partial Worksheet For the Year Ended December 31, 2014
Account
Adjusted Trial Balance Dr. Cr.
No. Titles 101 112 126 130 157 158 200 201 212 230 311 320 332 400 610 631 711 722 726 905
4-38
Cash Accounts Receivable Supplies Prepaid Insurance Equipment Acc. Depr.—Equip. Notes Payable Accounts Payable Salaries and Wages Payable Interest Payable Share Capital—Ordinary Retained Earnings Dividends Service Revenue Advertising Expense Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Interest Expense Totals Net Income Totals
Income Statement Dr. Cr.
17,800 14,400 2,300 4,400 46,000
Statement of Financial Position Dr. Cr. 17,800 14,400 2,300 4,400 46,000
18,000 20,000 8,000
18,000 20,000 8,000
2,600 1,000 15,000 9,800
2,600 1,000 15,000 9,800
12,000
12,000 86,200
10,000 3,700 6,000 4,000 39,000 1,000 160,600 160,600
86,200 10,000 3,700 6,000 4,000 39,000 1,000 63,700 22,500 86,200
86,200
96,900
86,200
96,900
74,400 22,500 96,900
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PROBLEM 4-2A (Continued) (b)
WATSON COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Service revenue.............................................. Expenses Salaries and wages expense......................... Advertising expense ...................................... Depreciation expense .................................... Insurance expense ......................................... Supplies expense ........................................... Interest expense ............................................. Total expenses ....................................... Net income .............................................................
$86,200 $39,000 10,000 6,000 4,000 3,700 1,000 63,700 $22,500
WATSON COMPANY Retained Earnings Statement For the Year Ended December 31, 2014 Retained Earnings, January 1 ................................................ Add: Net income .................................................................... Less: Dividends ...................................................................... Retained Earnings, December 31 ...........................................
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$ 9,800 22,500 32,300 12,000 $20,300
4-39
PROBLEM 4-2A (Continued) WATSON COMPANY Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation— equipment ............................................... Current assets Prepaid insurance ......................................... Supplies.......................................................... Accounts receivable...................................... Cash ................................................................ Total assets ...........................................................
$46,000 18,000 4,400 2,300 14,400 17,800
$28,000
38,900 $66,900
Equity and Liabilities Equity Share capital—ordinary ................................ Retained earnings ......................................... Non-current liabilities Notes payable (due after 2015) ..................... Current liabilities Notes payable (due in 2015) ......................... Accounts payable .......................................... Salaries and wages payable ......................... Interest payable ............................................. Total equity and liabilities ....................................
4-40
$15,000 20,300
$35,300 15,000
5,000 8,000 2,600 1,000
16,600 $66,900
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PROBLEM 4-2A (Continued) (c) General Journal Date Account Titles Dec. 31 Service Revenue ................................. Income Summary.......................
Ref. 400 350
Debit 86,200
31 Income Summary ................................ Advertising Expense ................. Supplies Expense ...................... Depreciation Expense ............... Insurance Expense .................... Salaries and Wages Expense ... Interest Expense ........................
350 610 631 711 722 726 905
63,700
31 Income Summary ................................ Retained Earnings .....................
350 320
22,500
31 Retained Earnings............................... Dividends....................................
320 332
12,000
J14 Credit 86,200
10,000 3,700 6,000 4,000 39,000 1,000
22,500
12,000
(d) Date
Explanation Balance Dec. 31 Closing entry 31 Closing entry
Date Explanation Dec. 31 Balance 31 Closing entry
Retained Earnings Ref. Debit J14 J14
Dividends Ref. J14
Credit 9,800 22,500
12,000
Debit 12,000
Credit 12,000
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No. 320 Balance 9,800 32,300 20,300
No. 332 Balance 12,000 0
4-41
PROBLEM 4-2A (Continued)
Credit 86,200
No. 350 Balance 86,200 22,500 0
Credit 86,200
86,200
No. 400 Balance 86,200 0
Date Explanation Dec. 31 Balance 31 Closing entry
Advertising Expense Ref. Debit 10,000 J14
Credit
No. 610 Balance 10,000 0
Date Explanation Dec. 31 Balance 31 Closing entry
Supplies Expense Ref. Debit 3,700 J14
Date Explanation Dec. 31 Balance 31 Closing entry
Depreciation Expense Ref. Debit 6,000 J14
Date Dec. 31 31 31
Explanation Closing entry Closing entry Closing entry
Date Explanation Dec. 31 Balance 31 Closing entry
Date Dec. 31 31
4-42
Explanation Balance Closing entry
Income Summary Ref. Debit J14 J14 63,700 J14 22,500
Service Revenue Ref. Debit J14
Insurance Expense Ref. Debit 4,000 J14
10,000
Credit 3,700
Credit 6,000
Credit 4,000
No. 631 Balance 3,700 0
No. 711 Balance 6,000 0
No. 722 Balance 4,000 0
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PROBLEM 4-2A (Continued) Salaries and Wages Expense Date Explanation Ref. Debit Dec. 31 Balance 39,000 31 Closing entry J14
Date Explanation Dec. 31 Balance 31 Closing entry
(e)
Interest Expense Ref. Debit 1,000 J14
Credit 39,000
Credit 1,000
No. 726 Balance 39,000 0
No. 905 Balance 1,000 0
WATSON COMPANY Post-Closing Trial Balance December 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Insurance ............................................... Equipment ........................................................... Accumulated Depreciation— Equipment ....................................................... Notes Payable ..................................................... Accounts Payable ............................................... Salaries and Wages Payable ............................. Interest Payable .................................................. Share Capital—Ordinary .................................... Retained Earnings ..............................................
Debit $17,800 14,400 2,300 4,400 46,000
$84,900
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Credit
$18,000 20,000 8,000 2,600 1,000 15,000 20,300 $84,900
4-43
PROBLEM 4-3A (a)
HUBBS COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Service revenue ........................................... Expenses Salaries and wages expense ...................... Maintenance and repairs expense ............. Utilities expense .......................................... Depreciation expense ................................. Insurance expense ...................................... Total expenses ..................................... Net loss ................................................................
$47,000 $35,200 4,100 4,000 3,300 2,200 48,800 $ (1,800)
HUBBS COMPANY Retained Earnings Statement For the Year Ended December 31, 2014 Retained Earnings, January 1 ............................ Less: Net loss ..................................................... Dividends .................................................. Retained Earnings, December 31 ......................
$9,700 $1,800 4,000
5,800 $3,900
HUBBS COMPANY Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment .................................................... Less: Accumulated depreciation— equipment ......................................... Current assets Prepaid insurance ....................................... Accounts receivable.................................... Cash .............................................................. Total assets .........................................................
4-44
$33,000 9,900 1,800 7,500 6,200
$23,100
15,500 $38,600
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PROBLEM 4-3A (Continued) HUBBS COMPANY Statement of Financial Position (Continued) December 31, 2014 Equity and Liabilities Equity Share capital—ordinary .............................. Retained earnings ....................................... Current liabilities Accounts payable ....................................... Salaries and wages payable....................... Total equity and liabilities ..................................
$20,000 3,900 11,700 3,000
$23,900 14,700 $38,600
(b) General Journal Date Account Titles Dec. 31 Service Revenue ................................. Income Summary ....................... 31
31
31
Ref. 400 350
Debit 47,000
Income Summary ................................ Maintenance and Repairs Expense ................................... Depreciation Expense................ Insurance Expense .................... Salaries and Wages Expense.... Utilities Expense ........................
350
48,800
Retained Earnings............................... Income Summary .......................
320 350
1,800
Retained Earnings............................... Dividends ....................................
320 332
4,000
Credit 47,000
4,100 3,300 2,200 35,200 4,000
622 711 722 726 732
1,800
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4,000
4-45
PROBLEM 4-3A (Continued) (c) 12/31 12/31
12/31 Bal.
12/31
12/31
(d)
Retained Earnings No. 320 1,800 1/1 Bal. 9,700 4,000 12/31 Bal. 3,900
Dividends 4,000 12/31
Income Summary 48,800 12/31 12/31 48,800
No. 332 4,000
No. 350 47,000 1,800 48,800
Service Revenue No. 400 47,000 12/31 Bal. 47,000
Maintenance and Repairs Expense 12/31 Bal. 4,100 12/31
Depreciation Expense No. 711 12/31 Bal. 3,300 12/31 3,300
Insurance Expense 12/31 Bal. 2,200 12/31
No. 722 2,200
Salaries and Wages Expense 12/31 Bal. 35,200 12/31
No. 726 35,200
Utilities Expense 12/31 Bal. 4,000 12/31
No. 732 4,000
HUBBS COMPANY Post-Closing Trial Balance December 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Prepaid Insurance ............................................... Equipment ............................................................ Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Share Capital—Ordinary ..................................... Retained Earnings ............................................... Totals ............................................................
4-46
No. 622 4,100
Debit $ 6,200 7,500 1,800 33,000
$48,500
Credit
$ 9,900 11,700 3,000 20,000 3,900 $48,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Account Titles
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
277,900
36,200 14,600 3,900 50,000 60,000 36,100
30,500 9,400 16,900 21,000 6,000 478,700 478,700
98,000
14,000
34,400 18,600 29,900 80,000 120,000
49,300
(e)
(f)
3,000 49,300
2,000
2,000 3,000 489,700 489,700
6,000
280,800
Cr.
228,200 280,800 52,600 280,800 280,800
6,000
(b) 19,000 (a) 16,400 6,000
19,000 16,400
19,000 16,400
3,000 2,000
(c)
30,500 9,400 16,900 24,000 8,000
280,800
Dr.
30,500 9,400 16,900 24,000 8,000
14,000
42,200 14,600 1,000 50,000 60,000 36,100
Cr.
Income Statement
98,000
(d) 2,900
6,000
34,400 2,200 10,900 80,000 120,000
Dr.
Adjusted Trial Balance
98,000
(e) (f)
(d) 2,900
(c)
(a) 16,400 (b) 19,000
Cr.
Dr.
Dr.
Cr.
Adjustments
Trial Balance
TERESINA AMUSEMENT PARK Worksheet For the Year Ended September 30, 2014
261,500
261,500
14,000
34,400 2,200 10,900 80,000 120,000
Dr.
3,000 208,900 52,600 261,500
2,000
42,200 14,600 1,000 50,000 60,000 36,100
Cr.
Statement of Financial Position
Key: (a) Supplies Used; (b) Expired Insurance; (c) Depreciation Expensed; (d) Ticket Revenue Earned; (e) Accrued Property Taxes; (f) Accrued Interest Payable.
Cash Supplies Prepaid Insurance Land Equipment Accumulated Depreciation— Equipment Accounts Payable Unearned Ticket Revenue Mortgage Payable Share Capital—Ordinary Retained Earnings Dividends Ticket Revenue Salaries and Wages Expense Maintenance and Repairs Expense Advertising Expense Utilities Expense Property Tax Expense Interest Expense Totals Insurance Expense Supplies Expense Interest Payable Depreciation Expense Property Taxes Payable Totals Net Income Totals
(a)
PROBLEM 4-4A
4-47
PROBLEM 4-4A (Continued) (b)
TERESINA AMUSEMENT PARK, INC. Statement of Financial Position September 30, 2014 Assets Property, plant, and equipment Land .............................................. R$80,000 Equipment .................................... R$120,000 Less: Accum. depreciation— equipment .......................... 42,200 77,800 R$157,800 Current assets Prepaid insurance ....................... 10,900 Supplies........................................ 2,200 Cash .............................................. 34,400 47,500 Total assets ......................................... R$205,300 Equity and Liabilities Equity Share capital—ordinary .............. Retained earnings ....................... Non-current liabilities Mortgage payable (due after 2015) ....................... Current liabilities Mortgage payable (due in 2015) . Accounts payable ........................ Interest payable ........................... Property taxes payable ............... Unearned ticket revenue ..................................... Total equity and liabilities ..................
R$60,000 74,700* R$134,700
35,000 15,000 14,600 2,000 3,000 1,000
35,600 R$205,300
*R$36,100 + R$52,600 – R$14,000
4-48
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-4A (Continued) (c) Sept. 30
30
30
30
30
30
(d) Sept. 30
30
30
30
Supplies Expense ................................ Supplies ........................................
16,400
Insurance Expense .............................. Prepaid Insurance ........................
19,000
Depreciation Expense ......................... Accumulated Depreciation— Equipment..................................
6,000
Unearned Ticket Revenue ................... Ticket Revenue .............................
2,900
Property Tax Expense ......................... Property Taxes Payable...............
3,000
Interest Expense .................................. Interest Payable............................
2,000
Ticket Revenue .................................... Income Summary .........................
280,800
Income Summary ................................. Salaries and Wages Expense...... Maintenance and Repairs Expense ..................................... Insurance Expense ...................... Property Tax Expense ................. Supplies Expense ........................ Utilities Expense .......................... Interest Expense .......................... Advertising Expense.................... Depreciation Expense..................
228,200
Income Summary ................................. Retained Earnings........................
52,600
Retained Earnings ............................... Dividends ......................................
14,000
16,400
19,000
6,000
2,900
3,000
2,000
280,800
98,000 30,500 19,000 24,000 16,400 16,900 8,000 9,400 6,000
52,600
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
14,000 4-49
PROBLEM 4-4A (Continued) (e)
TERESINA AMUSEMENT PARK Post-Closing Trial Balance September 30, 2014 Debit Cash ..................................................................... R$ 34,400 Supplies ............................................................... 2,200 Prepaid Insurance ............................................... 10,900 Land ...................................................................... 80,000 Equipment ............................................................ 120,000 Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Interest Payable ................................................... Property Taxes Payable ...................................... Unearned Ticket Revenue .................................. Mortgage Payable ............................................... Share Capital—Ordinary ..................................... Retained Earnings ............................................... R$247,500
4-50
Credit
R$ 42,200 14,600 2,000 3,000 1,000 50,000 60,000 74,700 R$247,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5A
(a) Date Mar. 1
1
3
5
14
18
20
21
28
31
31
General Journal Account Titles Cash .................................................... Share Capital—Ordinary ..........
Ref. 101 311
Debit 14,000
Equipment........................................... Cash ........................................... Accounts Payable .....................
157 101 201
8,000
Supplies .............................................. Accounts Payable .....................
126 201
1,200
Prepaid Insurance .............................. Cash ...........................................
130 101
1,800
Accounts Receivable ......................... Service Revenue .......................
112 400
4,800
Accounts Payable .............................. Cash ...........................................
201 101
2,000
Salaries and Wages Expense............ Cash ...........................................
726 101
1,800
Cash .................................................... Accounts Receivable ................
101 112
1,600
Accounts Receivable ......................... Service Revenue .......................
112 400
2,500
Gasoline Expense .............................. Cash ...........................................
633 101
320
Dividends ........................................... Cash ...........................................
332 101
800
J1 Credit 14,000
3,000 5,000
1,200
1,800
4,800
2,000
1,800
1,600
2,500
320
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
800
4-51
4-52
Account Titles
320 1,800 25,500
800
5,880 5,700 1,200 1,800 8,000
25,500
7,300
4,200 14,000
150 950
(c) (d) 2,870
300
720
750
(b)
(e)
(a)
(e)
(b)
(a)
(d) (c)
720 2,870
300
750
950 150
Cr.
Dr.
Dr.
Cr.
Adjustments
Trial Balance
27,270
150 950
300
320 2,520
800
5,880 6,450 250 1,650 8,000
Dr.
720 27,270
300
8,050
4,200 14,000
Cr.
Adjusted Trial Balance
FRESH STEP CARPET CLEANERS Worksheet For the Month Ended March 31, 2014
4,240 3,810 8,050
150 950
300
320 2,520
Dr.
23,030 23,030
8,050
800
5,880 6,450 250 1,650 8,000
Dr.
720 19,220 3,810 23,030
300
4,200 14,000
Cr.
Statement of Financial Position
8,050
8,050
Cr.
Income Statement
Key: (a) Service Revenue Earned; (b) Depreciation Expensed; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.
Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Share Capital—Ordinary Dividends Service Revenue Gasoline Expense Salaries and Wages Expense Totals Depreciation Expense Accum. Depr.—Equipment Insurance Expense Supplies Expense Salaries and Wages Payable Totals Net Income Totals
(b)&(c)
PROBLEM 4-5A (Continued)
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5A (Continued) (a), (e) & (f)
Date Mar. 1 1 5 18 20 21 31 31
Date Mar. 14 21 28 31
Date Mar. 3 31
Date Mar. 5 31
Date Mar. 1
Explanation
Explanation
Adjusting
Explanation Adjusting
Explanation Adjusting
Explanation
Cash Ref. J1 J1 J1 J1 J1 J1 J1 J1
Debit 14,000
3,000 1,800 2,000 1,800 1,600 320 800
Accounts Receivable Ref. Debit J1 4,800 J1 J1 2,500 J2 750
Supplies Ref. J1 J2
Debit 1,200
Credit 1,600
Credit 950
Prepaid Insurance Ref. Debit J1 1,800 J2
Equipment Ref. J1
Credit
Debit 8,000
Credit 150
Credit
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
No. 101 Balance 14,000 11,000 9,200 7,200 5,400 7,000 6,680 5,880
No. 112 Balance 4,800 3,200 5,700 6,450
No. 126 Balance 1,200 250
No. 130 Balance 1,800 1,650
No. 157 Balance 8,000
4-53
PROBLEM 4-5A (Continued)
Date Mar. 31
Date Mar. 1 3 18
Date Mar. 31
Date Mar. 1
Date Mar. 1 31 31
Date Mar. 31 31
Date Mar. 31 31 31 4-54
Accumulated Depreciation—Equipment Explanation Ref. Debit Credit Adjusting J2 300
Explanation
Accounts Payable Ref. Debit J1 J1 J1 2,000
Salaries and Wages Payable Explanation Ref. Debit Adjusting J2
Explanation
Explanation Closing Closing
Explanation Closing
Explanation Closing Closing Closing
Share Capital—Ordinary Ref. Debit J1 Retained Earnings Ref. Debit J3 J3 Dividends Ref. J1 J3
Credit 5,000 1,200
Credit 720
Credit 14,000
No. 311 Balance 14,000
Credit
800
Income Summary Ref. Debit J3 J3 4,240 J3 3,810
No. 201 Balance 5,000 6,200 4,200
No. 212 Balance 720
3,810
Debit 800
No. 158 Balance 300
Credit 800
Credit 8,050
No. 320 Balance 0 3,810 3,010 No. 332 Balance 800 0 No. 350 Balance 8,050 3,810 0
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5A (Continued)
Date Mar. 14 28 31 31
Explanation
Adjusting Closing
Service Revenue Ref. Debit J1 J1 J2 J3 8,050
Closing
Gasoline Expense Ref. Debit J1 320 J3
Explanation Adjusting Closing
Supplies Expense Ref. Debit J2 950 J3
Explanation Adjusting Closing
Depreciation Expense Ref. Debit J2 300 J3
Date Mar. 31 31
Explanation Adjusting Closing
Insurance Expense Ref. Debit J2 150 J3
Date Mar. 20 31 31
Salaries and Wages Expense Explanation Ref. Debit J1 1,800 Adjusting J2 720 Closing J3
Date Mar. 31 31
Date Mar. 31 31
Date Mar. 31 31
Explanation
Credit 4,800 2,500 750
No. 400 Balance 4,800 7,300 8,050 0
Credit
No. 633 Balance 320 0
320
Credit 950
Credit 300
Credit 150
Credit
2,520
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
No. 631 Balance 950 0 No. 711 Balance 300 0 No. 722 Balance 150 0 No. 726 Balance 1,800 2,520 0
4-55
PROBLEM 4-5A (Continued) (d)
FRESH STEP CARPET CLEANERS Income Statement For the Month Ended March 31, 2014 Revenues Service revenue ............................................. Expenses Salaries and wages expense ........................ Supplies expense .......................................... Depreciation expense ................................... Gasoline expense .......................................... Insurance expense ........................................ Total expenses ....................................... Net income .............................................................
$8,050 $2,520 950 300 320 150 4,240 $3,810
FRESH STEP CARPET CLEANERS Retained Earnings Statement For the Month Ended March 31, 2014 Retained Earnings, March 1 ................................. Add: Net income ..................................................
$
0 3,810 3,810 800 $3,010
Less: Dividends .................................................... Retained Earnings, March 31 ...............................
FRESH STEP CARPET CLEANERS Statement of Financial Position March 31, 2014 Assets Property, plant, and equipment Equipment ........................................................ Less: Accumulated depreciation— equipment .................................................
4-56
$ 8,000 300
$ 7,700
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5A (Continued) FRESH STEP CARPET CLEANERS Statement of Financial Position (Continued) March 31, 2014 Assets (Continued) Current assets Prepaid insurance ........................................... Supplies ........................................................... Accounts receivable ....................................... Cash ................................................................. Total assets .............................................................
1,650 250 6,450 5,880
14,230 $21,930
Equity and Liabilities Equity Share capital—ordinary .................................. Retained earnings ........................................... Current liabilities Accounts payable ........................................... Salaries and wages payable........................... Total equity and liabilities ......................................
$14,000 3,010 4,200 720
$17,010 4,920 $21,930
(e) Date Mar. 31
31
31
31
31
General Journal Account Titles Accounts Receivable......................... Service Revenue .......................
Ref. 112 400
Debit 750
Depreciation Expense ....................... Accumulated Depreciation— Equipment .............................
711
300
Insurance Expense ............................ Prepaid Insurance.....................
722 130
150
Supplies Expense .............................. Supplies.....................................
631 126
950
Salaries and Wages Expense ........... Salaries and Wages Payable ...
726 212
720
J2 Credit 750
158
300
150
950
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
720
4-57
PROBLEM 4-5A (Continued) (f) Date Mar. 31
31
31
31
(g)
General Journal Account Titles Service Revenue ................................. Income Summary .......................
Ref. 400 350
Debit 8,050
Income Summary ................................ Salaries and Wages Expense ... Depreciation Expense ............... Insurance Expense .................... Supplies Expense ...................... Gasoline Expense ......................
350 726 711 722 631 633
4,240
Income Summary ................................ Retained Earnings .....................
350 320
3,810
Retained Earnings .............................. Dividends....................................
320 332
800
8,050
2,520 300 150 950 320
3,810
800
FRESH STEP CARPET CLEANERS Post-Closing Trial Balance March 31, 2014
Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Insurance ............................................... Equipment ............................................................ Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Share Capital—Ordinary ..................................... Retained Earnings ............................................... 000,000
4-58
J3 Credit
Debit $ 5,880 6,450 250 1,650 8,000
Credit
$
$22,230
300 4,200 720 14,000 3,010 $22,230
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Cash ................................... Accts. Receivable........
Misc. Expense ................... Cash .............................
Salaries and Wages Expense .......................... Cash .............................
Supplies............................. Accounts Payable .......
Equipment ......................... Cash .............................
2.
3.
4.
5.
(1) INCORRECT ENTRY
1.
(a)
152
310
1,850
75
950
152
310
1,850
75
950
Maintenance and Repairs Expense .......................... Cash .............................
Equipment ......................... Accounts Payable .......
Salaries and Wages Expense .......................... Salaries and Wages Payable ........................... Cash .............................
Advertising Expense ........ Cash .............................
Cash ................................... Accts. Receivable ........
(2) CORRECT ENTRY
125
310
700
1,150
75
590
125
310
1,850
75
590
75
152
Maintenance and Repairs Expense ........................... Cash ................................. Equipment .....................
125 27
310
700
75
360
Equipment .......................... 310 Supplies ........................
Salaries and Wages Payable ............................ 700 Salaries and Wages Expense......................
Advertising Expense ......... Misc. Expense...............
Accounts Receivable......... 360 Cash...............................
(3) CORRECTING ENTRY
PROBLEM 4-6A
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4-59
PROBLEM 4-6A (Continued) (b)
INFO CABLE Trial Balance April 30, 2014 Cash (£4,100 – £360 + £27) ................................... Accounts Receivable (£3,200 + £360) .................. Supplies (£800 – £310) .......................................... Equipment (£10,600 + £310 – £152) ..................... Accumulated Depreciation—Equipment ............. Accounts Payable ................................................. Salaries and Wages Payable (£700 – £700)......... Unearned Service Revenue .................................. Share Capital—Ordinary ....................................... Retained Earnings ................................................. Service Revenue ................................................... Salaries and Wages Expense (£3,300 – £700) .... Advertising Expense (£480 + £75) ....................... Miscellaneous Expense (£290 – £75)................... Depreciation Expense ........................................... Maintenance and Repairs Expense .....................
4-60
Debit £ 3,767 3,560 490 10,758
Credit
£ 1,250 2,100 0 890 10,000 2,880 5,450 2,600 555 215 500 125 £22,570
£22,570
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Account Titles
1,300 280 20,600
1,100
2,720 2,700 1,500 11,000
Dr.
20,600
6,300
1,250 2,500 550 10,000
Cr.
Trial Balance
(a) (b)
(d)
(c)
950 250
480
260
1,940
Dr.
(d)
480 1,940
260
250
(b)
(c)
950
(a)
Cr.
Adjustments
21,330
950 250
1,780 280
1,100
2,720 2,700 550 11,000
Dr.
480 21,330
6,560
1,500 2,500 290 10,000
Cr.
Adjusted Trial Balance
FIRMAMENT ROOFING Worksheet For the Month Ended March 31, 2014
3,260 3,300 6,560
950 250
1,780 280
Dr.
18,070 18,070
6,560
1,100
2,720 2,700 550 11,000
Dr.
480 14,770 3,300 18,070
1,500 2,500 290 10,000
Cr.
Statement of Financial Position
6,560
6,560
Cr.
Income Statement
Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Service Revenue Earned; (d) Salaries Accrued.
Cash Accounts Receivable Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Unearned Service Revenue Share Capital—Ordinary Dividends Service Revenue Salaries and Wages Expense Miscellaneous Expense Totals Supplies Expense Depreciation Expense Salaries and Wages Payable Totals Net Income Totals
(a)
PROBLEM 4-1B
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4-61
PROBLEM 4-1B (Continued) (b)
FIRMAMENT ROOFING Income Statement For the Month Ended March 31, 2014 Revenues Service revenue .................................................. Expenses Salaries and wages expense ............................. Supplies expense ............................................... Miscellaneous expense ...................................... Depreciation expense ........................................ Total expenses ............................................ Net income ..................................................................
$6,560 $1,780 950 280 250 3,260 $3,300
FIRMAMENT ROOFING Retained Earnings Statement For the Month Ended March 31, 2014 Retained Earnings, March 1 ....................................................... Add: Net income ........................................................................ Less: Dividends .......................................................................... Retained Earnings, March 31 .....................................................
$
0 3,300 3,300 1,100 $2,200
FIRMAMENT ROOFING Statement of Financial Position March 31, 2014 Assets Property, plant, and equipment Equipment ........................................................... Less: Accum. depreciation—equipment ......... Current assets Supplies............................................................... Accounts receivable........................................... Cash ..................................................................... Total assets ................................................................
4-62
$11,000 1,500 550 2,700 2,720
$ 9,500
5,970 $15,470
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-1B (Continued) FIRMAMENT ROOFING Statement of Financial Position (Continued) March 31, 2014 Equity and Liabilities Equity Share capital—ordinary ...................................... $10,000 Retained earnings ............................................... 2,200 Current liabilities Accounts payable ............................................... 2,500 Salaries and wages payable............................... 480 Unearned service revenue ................................. 290 Total equity and liabilities ........................................... (c) Mar. 31 31
31 31
(d) Mar. 31 31
31 31
Supplies Expense........................................ Supplies ................................................
950
Depreciation Expense ................................. Accumulated Depreciation— Equipment .........................................
250
Unearned Service Revenue ........................ Service Revenue ..................................
260
Salaries and Wages Expense ..................... Salaries and Wages Payable ..............
480
Service Revenue.......................................... Income Summary .................................
6,560
Income Summary ........................................ Salaries and Wages Expense ............. Supplies Expense ................................ Depreciation Expense ......................... Miscellaneous Expense ......................
3,260
Income Summary ........................................ Retained Earnings ...............................
3,300
Retained Earnings ....................................... Dividends .............................................
1,100
$12,200
3,270 $15,470
950
250 260 480
6,560 1,780 950 250 280 3,300
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
1,100
4-63
PROBLEM 4-2B
(a)
EAGLE COMPANY Partial Worksheet For the Year Ended December 31, 2014 Adjusted Trial Balance
Account No. 101 112 126 130 157 158 200 201 212 230 311 320 332 400 610 631 711 722 726 905
4-64
Titles Cash Accounts Receivable Supplies Prepaid Insurance Equipment Acc. Depr.—Equip. Notes Payable Accounts Payable Salaries and Wages Payable Interest Payable Share Capital—Ordinary Retained Earnings Dividends Service Revenue Advertising Expense Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Interest Expense Totals Net Income Totals
Dr. 5,300 10,800 1,500 2,000 27,000
Cr.
Income Statement Dr.
Cr.
Statement of Financial Position Dr. 5,300 10,800 1,500 2,000 27,000
Cr.
5,600 15,000 4,600
5,600 15,000 4,600
2,400 600 10,000 4,200
2,400 600 10,000 4,200
5,000
5,000 59,000
59,000
8,400 4,000 5,600 3,200
8,400 4,000 5,600 3,200
28,000 600 101,400
28,000 600 49,800 9,200 59,000
101,400
59,000
51,600
59,000
51,600
42,400 9,200 51,600
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-2B (Continued) (b)
EAGLE COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Service revenue.............................................. Expenses Salaries and wages expense......................... Advertising expense ...................................... Depreciation expense .................................... Supplies expense ........................................... Insurance expense ......................................... Interest expense ............................................. Total expenses ....................................... Net income .............................................................
£59,000 £28,000 8,400 5,600 4,000 3,200 600 49,800 £ 9,200
EAGLE COMPANY Retained Earnings Statement For the Year Ended December 31, 2014 Retained Earnings, January 1 ................................................ Add: Net income .................................................................... Less: Dividends ...................................................................... Retained Earnings, December 31 ...........................................
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£4,200 9,200 13,400 5,000 £8,400
4-65
PROBLEM 4-2B (Continued) EAGLE COMPANY Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation— equipment ........................................... Current assets Prepaid insurance ......................................... Supplies.......................................................... Accounts receivable...................................... Cash ................................................................ Total assets ...........................................................
£27,000 5,600 2,000 1,500 10,800 5,300
£21,400
19,600 £41,000
Equity and Liabilities Equity Share capital—ordinary ................................ Retained earnings ......................................... Non-current liabilities Notes payable (due after 2015) ..................... Current liabilities Notes payable (due in 2015) ......................... Accounts payable .......................................... Salaries and wages payable ......................... Interest payable ............................................. Total equity and liabilities ....................................
4-66
£10,000 8,400
£18,400 12,000
3,000 4,600 2,400 600
10,600 £41,000
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-2B (Continued) (c) General Journal Date Account Titles Dec. 31 Service Revenue ................................. Income Summary.......................
Ref. 400 350
Debit 59,000
31 Income Summary ................................ Advertising Expense ................. Supplies Expense ...................... Depreciation Expense ............... Insurance Expense .................... Salaries and Wages Expense ... Interest Expense ........................
350 610 631 711 722 726 905
49,800
31 Income Summary ................................ Retained Earnings .....................
350 320
9,200
31 Retained Earnings............................... Dividends....................................
320 332
5,000
J14 Credit 59,000
8,400 4,000 5,600 3,200 28,000 600
9,200
5,000
(d)
Date Jan. 1 Dec. 31 31
Date
Explanation Balance Closing entry Closing entry
Explanation
Dec. 31 Balance 31 Closing entry
Retained Earnings Ref. Debit J14 J14
Dividends Ref.
5,000
No. 320 Balance 4,200 13,400 8,400
Debit
Credit
No. 332 Balance
5,000
5,000 0
Credit 4,200 9,200
5,000 J14
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
4-67
PROBLEM 4-2B (Continued)
Date Dec. 31 31 31
Explanation Closing entry Closing entry Closing entry
Income Summary Ref. Debit J14 J14 49,800 J14 9,200
Service Revenue Ref. Debit
Credit 59,000
No. 350 Balance 59,000 9,200 0
Credit 59,000
Date Dec. 31 31
Explanation Balance Closing entry
59,000
No. 400 Balance 59,000 0
Date Dec. 31 31
Advertising Expense Explanation Ref. Debit Balance 8,400 Closing entry J14
No. 610 Balance 8,400 0
Date Dec. 31 31
Explanation Balance Closing entry
Supplies Expense Ref. Debit 4,000 J14
Date Dec. 31 31
Depreciation Expense Explanation Ref. Debit Balance 5,600 Closing entry J14
Date Dec. 31 31
Explanation Balance Closing entry
Insurance Expense Ref. Debit 3,200 J14
4-68
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
J14
Credit 8,400
Credit 4,000
Credit 5,600
Credit 3,200
No. 631 Balance 4,000 0
No. 711 Balance 5,600 0
No. 722 Balance 3,200 0
PROBLEM 4-2B (Continued)
Date Dec. 31 31
Salaries and Wages Expense Explanation Ref. Debit Balance 28,000 Closing entry J14
Date Dec. 31 31
Interest Expense Ref. Debit 600 J14
(e)
Explanation Balance Closing entry
Credit 28,000
Credit 600
No. 726 Balance 28,000 0
No. 905 Balance 600 0
EAGLE COMPANY Post-Closing Trial Balance December 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Insurance ............................................... Equipment ........................................................... Accumulated Depreciation— Equipment ....................................................... Notes Payable ..................................................... Accounts Payable ............................................... Salaries and Wages Payable ............................. Interest Payable .................................................. Share Capital—Ordinary .................................... Retained Earnings .............................................. Totals ...........................................................
Debit £ 5,300 10,800 1,500 2,000 27,000
£46,600
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Credit
£ 5,600 15,000 4,600 2,400 600 10,000 8,400 £46,600
4-69
PROBLEM 4-3B (a)
LATHROP COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Service revenue ............................................. Expenses Salaries and wages expense ........................ Depreciation expense ................................... Insurance expense ........................................ Maintenance and repairs expense ............... Utilities expense ............................................ Total expenses ....................................... Net income .............................................................
$56,000 $27,000 3,000 1,800 1,600 1,400 34,800 $21,200
LATHROP COMPANY Retained Earnings Statement For the Year Ended December 31, 2014 Retained Earnings, January 1 ........................................... Add: Net income ............................................................... Less: Dividends ................................................................. Retained Earnings, December 31 .....................................
$16,400 21,200 37,600 8,000 $29,600
LATHROP COMPANY Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment ...................................................... Less: Accumulated depreciation— equipment ........................................... Current assets Prepaid insurance ......................................... Accounts receivable...................................... Cash ................................................................ Total assets ...........................................................
4-70
$28,000 4,500 2,800 10,800 8,900
$23,500
22,500 $46,000
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-3B (Continued) LATHROP COMPANY Statement of Financial Position (Continued) December 31, 2014 Equity and Liabilities Equity Share capital—ordinary .................................. $12,000 Retained earnings ........................................... 29,600 Current liabilities Accounts payable ........................................... 2,000 Salaries and wages payable........................... 2,400 Total equity and liabilities ......................................
$41,600
4,400 $46,000
(b) Date Dec. 31
31
31
31
General Journal Account Titles Service Revenue ................................. Income Summary .......................
Ref. 400 350
Debit 56,000
350
34,800
Credit 56,000
Income Summary ................................ Maintenance and Repairs Expense ................................... Depreciation Expense................ Insurance Expense .................... Salaries and Wages Expense.... Utilities Expense ........................
622 711 722 726 732
Income Summary ................................ Retained Earnings......................
350 320
21,200
Retained Earnings............................... Dividends ....................................
320 332
8,000
1,600 3,000 1,800 27,000 1,400
21,200
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
8,000
4-71
PROBLEM 4-3B (Continued) (c) 12/31
Retained Earnings No. 320 8,000 1/1 Bal. 16,400 12/31 21,200 12/31 Bal. 29,600
12/31 Bal.
12/31 12/31
12/31
(d)
Dividends 8,000 12/31
No. 332 8,000
Income Summary 34,800 12/31 21,200 56,000
No. 350 56,000 56,000
Maintenance and Repairs Expense No. 622 12/31 Bal. 1,600 12/31 1,600
Depreciation Expense No. 711 12/31 Bal. 3,000 12/31 3,000
Insurance Expense 12/31 Bal. 1,800 12/31
No. 722 1,800
Salaries and Wages Expense 12/31 Bal. 27,000 12/31
No. 726 27,000
Utilities Expense 12/31 Bal. 1,400 12/31
No. 732 1,400
Service Revenue No. 400 56,000 12/31 Bal. 56,000
LATHROP COMPANY Post-Closing Trial Balance December 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Prepaid Insurance ............................................... Equipment ............................................................ Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Share Capital—Ordinary ..................................... Retained Earnings ............................................... Totals ............................................................
4-72
Debit $ 8,900 10,800 2,800 28,000
$50,500
Credit
$ 4,500 2,000 2,400 12,000 29,600 $50,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
Account Titles Dr.
Cr.
Trial Balance Dr.
Cr.
Adjustments Dr.
Cr.
Adjusted Trial Balance
CARROLL MANAGEMENT SERVICES INC. Worksheet For the Year Ended December 31, 2014
Dr.
Cr.
Income Statement
Dr.
Cr.
Statement of Financial Position
13,800 Cash 13,800 13,800 26,300 Accounts Receivable 26,300 26,300 1,800 Prepaid Insurance (a) 1,800 1,800 3,600 67,000 Land 67,000 67,000 127,000 Buildings 127,000 127,000 59,000 Equipment 59,000 59,000 Accounts Payable 12,500 12,500 12,500 Unearned Rent Revenue 8,000 (c) 4,500 3,500 3,500 Mortgage Payable 120,000 120,000 120,000 Share Capital—Ordinary 80,000 80,000 80,000 Retained Earnings 54,000 54,000 54,000 16,000 16,000 Dividends 16,000 Service Revenue 90,700 90,700 90,700 Rent Revenue 26,000 (c) 4,500 30,500 30,500 Salaries and Wages 42,000 Expense 42,000 42,000 17,500 Advertising Expense 17,500 17,500 19,000 Utilities Expense 19,000 19,000 391,200 391,200 Totals 1,800 (a) 1,800 Insurance Expense 1,800 6,600 (b) 6,600 Depr. Expense 6,600 3,000 Accum. Depr.—Buildings (b) 3,000 3,000 3,600 Accum. Depr.—Equipment (b) 3,600 3,600 9,600 (d) 9,600 Interest Expense 9,600 9,600 Interest Payable (d) 9,600 9,600 22,500 22,500 407,400 407,400 96,500 121,200 310,900 286,200 Totals 24,700 24,700 Net Income 121,200 121,200 310,900 310,900 Totals Key: (a) Expired Insurance; (b) Depreciation Expense—Buildings and Equipment; (c) Rent Revenue Earned; (d) Accrued Interest Payable.
(a)
PROBLEM 4-4B
4-74 Copyright © 2011 WileyInc. & Sons, Inc. Financial, Weygandt, Accounting Principles, 10/e, (For Solutions Manual (For Instructor Use 4-73 Copyright © 2013 John WileyJohn & Sons, Weygandt IFRS, 2/e, Solution’s Manual Instructor Use Only)
PROBLEM 4-4B (Continued) (b)
CARROLL MANAGEMENT SERVICES INC. Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Land ............................................... Buildings ....................................... Less: Accumulated depreciation—buildings ... Equipment ..................................... Less: Accumulated depreciation—equipment .. Current assets Prepaid insurance ........................ Accounts receivable..................... Cash ............................................... Total assets ..........................................
£ 67,000 £127,000 3,000 59,000
124,000
3,600
55,400 1,800 26,300 13,800
£246,400
41,900 £288,300
Equity and Liabilities Equity Share capital—ordinary ................................ Retained earnings ......................................... Non-current liabilities Mortgage payable (due after 2015) .............. Current liabilities Mortgage payable (due in 2015) ................... Accounts payable .......................................... Interest payable ............................................. Unearned rent revenue ................................. Total equity and liabilities ....................................
£80,000 62,700* £142,700 95,000 25,000 12,500 9,600 3,500
50,600 £288,300
*£54,000 + £24,700 – £16,000
4-74
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-4B (Continued) (c) Dec. 31
31
31
31
(d) Dec. 31
31
31
31
Insurance Expense ............................... Prepaid Insurance .........................
1,800
Depreciation Expense........................... Accumulated Depreciation— Buildings .................................... Accumulated Depreciation— Equipment ..................................
6,600
Unearned Rent Revenue....................... Rent Revenue ................................
4,500
Interest Expense ................................... Interest Payable .............................
9,600
Service Revenue ................................... Rent Revenue ........................................ Income Summary ..........................
90,700 30,500
Income Summary .................................. Salaries and Wages Expense ....... Advertising Expense ..................... Interest Expense ............................ Utilities Expense ............................ Depreciation Expense ................... Insurance Expense ........................
96,500
Income Summary .................................. Retained Earnings .........................
24,700
Retained Earnings................................. Dividends .......................................
16,000
1,800
3,000 3,600
4,500
9,600
121,200
42,000 17,500 9,600 19,000 6,600 1,800
24,700
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
16,000
4-75
PROBLEM 4-4B (Continued) (e)
CARROLL MANAGEMENT SERVICES INC. Post-Closing Trial Balance December 31, 2014 Cash ................................................................. Accounts Receivable ...................................... Prepaid Insurance ........................................... Land .................................................................. Buildings .......................................................... Accumulated Depreciation—Buildings ......... Equipment ........................................................ Accumulated Depreciation—Equipment ....... Accounts Payable ........................................... Interest Payable ............................................... Unearned Rent Revenue ................................. Mortgage Payable ........................................... Share Capital—Ordinary ................................. Retained Earnings ...........................................
Debit £ 13,800 26,300 1,800 67,000 127,000 £
3,000
59,000
£294,900
4-76
Credit
3,600 12,500 9,600 3,500 120,000 80,000 62,700 £294,900
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5B
(a) Date July 1
1
3
5
12
18
20
21
25
31
31
General Journal Account Titles Cash ..................................................... Share capital—ordinary ............
Ref. 101 311
Equipment ........................................... Cash ............................................ Accounts Payable ......................
157 101 201
12,000
Supplies ............................................... Accounts Payable ......................
126 201
2,100
Prepaid Insurance............................... Cash ............................................
130 101
1,800
Accounts Receivable.......................... Service Revenue ........................
112 400
5,900
Accounts Payable ............................... Cash ............................................
201 101
2,900
Salaries and Wages Expense ............ Cash ............................................
726 101
4,500
Cash ..................................................... Accounts Receivable.................
101 112
4,400
Accounts Receivable.......................... Service Revenue ........................
112 400
8,000
Gasoline Expense ............................... Cash ............................................
633 101
350
Dividends ............................................. Cash ............................................
332 101
1,200
Debit 20,000
J1 Credit 20,000
4,000 8,000
2,100
1,800
5,900
2,900
4,500
4,400
8,000
350
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
1,200
4-77
4-78 350 4,500 41,100
1,200
9,650 9,500 2,100 1,800 12,000
Dr.
41,100
13,900
7,200 20,000
Cr.
Trial Balance
500
7,650
(c) 150 (d) 1,500
(b)
(e) 2,200
(a) 3,300
Dr.
500
(e) 2,200 7,650
(b)
(a) 3,300
(d) 1,500 (c) 150
Cr.
Adjustments
47,100
150 1,500
500
350 6,700
1,200
9,650 12,800 600 1,650 12,000
Dr.
2,200 47,100
500
17,200
7,200 20,000
Cr.
Adjusted Trial Balance
BRENNAN'S CLEANING SERVICE Worksheet For the Month Ended July 31, 2014
9,200 8,000 17,200
150 1,500
500
350 6,700
Dr.
37,900 37,900
17,200
1,200
9,650 12,800 600 1,650 12,000
Dr.
2,200 29,900 8,000 37,900
500
7,200 20,000
Cr.
Statement of Financial sheet
17,200
17,200
Cr.
Income Statement
Key: (a) Service Revenue Earned; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.
Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Share Capital—Ordinary Dividends Service Revenue Gasoline Expense Salaries and Wages Expense Totals Depreciation Expense Accum. Depr.—Equipment Insurance Expense Supplies Expense Salaries and Wages Payable Totals Net Income Totals
Account Titles
(b) & (c)
PROBLEM 4-5B (Continued)
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5B (Continued) (a), (e) & (f)
Date Explanation July 1 1 5 18 20 21 31 31
Date Explanation July 12 21 25 31 Adjusting
Date July 3 31
Explanation Adjusting
Date Explanation July 5 31 Adjusting
Date July 1
Explanation
Cash Ref. J1 J1 J1 J1 J1 J1 J1 J1
Debit 20,000
4,000 1,800 2,900 4,500 4,400 350 1,200
Accounts Receivable Ref. Debit J1 5,900 J1 J1 8,000 J2 3,300
Supplies Ref. J1 J2
Debit 2,100
Credit 4,400
Credit 1,500
Prepaid Insurance Ref. Debit J1 1,800 J2
Equipment Ref. J1
Credit
Debit 12,000
Credit 150
Credit
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
No. 101 Balance 20,000 16,000 14,200 11,300 6,800 11,200 10,850 9,650
No. 112 Balance 5,900 1,500 9,500 12,800
No. 126 Balance 2,100 600
No. 130 Balance 1,800 1,650
No. 157 Balance 12,000
4-79
PROBLEM 4-5B (Continued)
Date July 31
Date July 1 3 18
Date July 31
Date July 1
Date July 1 31 31
Date July 31 31
Date July 31 31 31 4-80
Accumulated Depreciation—Equipment Explanation Ref. Debit Credit Adjusting J2 500
Explanation
Accounts Payable Ref. Debit J1 J1 J1 2,900
Salaries and Wages Payable Explanation Ref. Debit Adjusting J2
Explanation
Explanation Closing Closing
Explanation Closing
Explanation Closing Closing Closing
Share Capital—Ordinary Ref. Debit J1 Retained Earnings Ref. Debit J3 J3 Dividends Ref. J1 J3
Credit 8,000 2,100
Credit 2,200
Credit 20,000
No. 311 Balance 20,000
Credit
No. 320 Balance
1,200
Income Summary Ref. Debit J3 J3 9,200 J3 8,000
No. 201 Balance 8,000 10,100 7,200
No. 212 Balance 2,200
8,000
Debit 1,200
No. 158 Balance 500
Credit 1,200
Credit 17,200
8,000 6,800 No. 332 Balance 1,200 0 No. 350 Balance 17,200 8,000 0
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5B (Continued)
Date July 12 25 31 31
Date July 31 31
Date July 31 31
Explanation
Adjusting Closing
Service Revenue Ref. Debit J1 J1 J2 J3 17,200
Closing
Gasoline Expense Ref. Debit J1 350 J3
Explanation Adjusting Closing
Supplies Expense Ref. Debit J2 1,500 J3
Explanation
Explanation Adjusting Closing
Depreciation Expense Ref. Debit J2 500 J3
Date July 31 31
Explanation Adjusting Closing
Insurance Expense Ref. Debit J2 150 J3
Date July 20 31 31
Salaries and Wages Expense Explanation Ref. Debit J1 4,500 Adjusting J2 2,200 Closing J3
Date July 31 31
Credit 5,900 8,000 3,300
No. 400 Balance 5,900 13,900 17,200 0
Credit
No. 633 Balance 350 0
350
Credit 1,500
Credit 500
Credit 150
Credit
6,700
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
No. 631 Balance 1,500 0 No. 711 Balance 500 0 No. 722 Balance 150 0 No. 726 Balance 4,500 6,700 0
4-81
PROBLEM 4-5B (Continued) (d)
BRENNAN'S CLEANING SERVICE Income Statement For the Month Ended July 31, 2014 Revenues Service revenue ............................................... Expenses Salaries and wages expense .......................... Supplies expense ............................................ Depreciation expense ..................................... Gasoline expense ............................................ Insurance expense .......................................... Total expenses ......................................... Net income ...............................................................
$17,200 $6,700 1,500 500 350 150 9,200 $ 8,000
BRENNAN'S CLEANING SERVICE Retained Earnings Statement For the Month Ended July 31, 2014 Retained Earnings, July 1....................................... Add: Net income .................................................... Less: Dividends ...................................................... Retained Earnings, July 31.....................................
$
0 8,000 8,000 1,200 $ 6,800
BRENNAN'S CLEANING SERVICE Statement of Financial Position July 31, 2014 Assets Property, plant, and equipment Equipment ........................................................ $ 12,000 Less: Accumulated depreciation— equipment ................................................ 500
4-82
$ 11,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
PROBLEM 4-5B (Continued) BRENNAN'S CLEANING SERVICE Statement of Financial Position (Continued) July 31, 2014 Assets (Continued) Current assets Prepaid insurance ........................................... Supplies ........................................................... Accounts receivable ....................................... Cash ................................................................. Total assets .............................................................
1,650 600 12,800 9,650
24,700 $36,200
Equity and Liabilities Equity Share capital—ordinary .................................. Retained earnings ........................................... Current liabilities Accounts payable ........................................... Salaries and wages payable........................... Total equity and liabilities ......................................
$20,000 6,800 7,200 2,200
$26,800 9,400 $36,200
(e) Date July 31
31
31
31
31
General Journal Account Titles Accounts Receivable......................... Service Revenue .......................
Ref. 112 400
Debit 3,300
Depreciation Expense ....................... Accumulated Depreciation— Equipment .............................
711
500
Insurance Expense ............................ Prepaid Insurance.....................
722 130
150
Supplies Expense .............................. Supplies.....................................
631 126
1,500
Salaries and Wages Expense ........... Salaries and Wages Payable ...
726 212
2,200
J2 Credit 3,300
158
500
150
1,500
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
2,200
4-83
PROBLEM 4-5B (Continued) (f)
General Journal
Date July 31
31
31
31
(g)
Account Titles Service Revenue ................................. Income Summary.......................
Ref. 400 350
Debit 17,200
Income Summary ................................ Salaries and Wages Expense ... Depreciation Expense ............... Insurance Expense.................... Supplies Expense ...................... Gasoline Expense......................
350 726 711 722 631 633
9,200
Income Summary ................................ Retained Earnings .....................
350 320
8,000
Retained Earnings .............................. Dividends ...................................
320 332
1,200
17,200
6,700 500 150 1,500 350
8,000
1,200
BRENNAN'S CLEANING SERVICE Post-Closing Trial Balance July 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Insurance ............................................... Equipment ............................................................ Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Salaries and Wages Payable .............................. Share Capital—Ordinary ..................................... Retained Earnings ...............................................
Debit $ 9,650 12,800 600 1,650 12,000
Credit
$
$36,700
4-84
J3 Credit
500 7,200 2,200 20,000 6,800 $36,700
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
COMPREHENSIVE PROBLEM: CHAPTERS 2 TO 4
(a) Date July 1
1
3
5
12
18
20
21
25
31
31
General Journal Account Titles and Explanation Cash ..................................................... Share Capital—Ordinary ..........
Ref. 101 311
Debit 15,000
Equipment ........................................... Cash ........................................... Accounts Payable.....................
157 101 201
10,000
Supplies ............................................... Accounts Payable.....................
126 201
1,700
Prepaid Insurance............................... Cash ...........................................
130 101
1,800
Accounts Receivable.......................... Service Revenue .......................
112 400
4,200
Accounts Payable ............................... Cash ...........................................
201 101
1,400
Salaries and Wages Expense ............ Cash ...........................................
726 101
1,900
Cash ..................................................... Accounts Receivable................
101 112
2,400
Accounts Receivable.......................... Service Revenue .......................
112 400
2,100
Gasoline Expense ............................... Cash ...........................................
633 101
400
Dividends ............................................. Cash ...........................................
332 101
500
J1 Credit 15,000
3,000 7,000
1,700
1,800
4,200
1,400
1,900
2,400
2,100
400
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
500
4-85
4-86 400 1,900 28,600
500
8,400 3,900 1,700 1,800 10,000
Dr.
28,600
6,300
7,300 15,000
Cr.
Trial Balance
200
630
3,700
(c) 150 (d) 1,420
(b)
(e)
(a) 1,300
Dr.
(e)
(b)
630 3,700
200
(a) 1,300
(d) 1,420 (c) 150
Cr.
Adjustments
30,730
150 1,420
200
400 2,530
500
8,400 5,200 280 1,650 10,000
Dr.
630 30,730
200
7,600
7,300 15,000
Cr.
Adjusted Trial Balance
MARY'S MAIDS CLEANING SERVICE Worksheet For the Month Ended July 31, 2014
4,700 2,900 7,600
150 1,420
200
400 2,530
Dr.
26,030 26,030
7,600
500
8,400 5,200 280 1,650 10,000
Dr.
630 23,130 2,900 26,030
200
7,300 15,000
Cr.
Statement of Financial Position
7,600
7,600
Cr.
Income Statement
Key: (a) Service Revenue; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.
Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Share Capital—Ordinary Dividends Service Revenue Gasoline Expense Salaries and Wages Expense Total Depreciation Expense Accum. Depr.—Equipment Insurance Expense Supplies Expense Salaries and Wages Payable Totals Net Income Totals
Account Titles
(b) & (c)
COMPREHENSIVE PROBLEM (Continued)
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COMPREHENSIVE PROBLEM (Continued) (a), (e) & (f)
Date July 1 1 5 18 20 21 31 31
Date July 12 21 25 31
Date July 3 31
Date July 5 31
Date July 1
Explanation
Explanation
Adjusting
Explanation Adjusting
Explanation Adjusting
Explanation
Cash Ref. J1 J1 J1 J1 J1 J1 J1 J1
Debit 15,000
3,000 1,800 1,400 1,900 2,400 400 500
Accounts Receivable Ref. Debit J1 4,200 J1 J1 2,100 J2 1,300
Supplies Ref. J1 J2
Credit
Debit 1,700
Prepaid Insurance Ref. Debit J1 1,800 J2
Equipment Ref. Debit J1 10,000
Credit 2,400
Credit 1,420
Credit 150
Credit
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
No. 101 Balance 15,000 12,000 10,200 8,800 6,900 9,300 8,900 8,400 No. 112 Balance 4,200 1,800 3,900 5,200
No. 126 Balance 1,700 280
No. 130 Balance 1,800 1,650
No. 157 Balance 10,000
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COMPREHENSIVE PROBLEM (Continued)
Date July 31
Date July 1 3 18
Date July 31
Date July 1
Date July 31 31
Date July 31 31
Date July 31 31 31 4-88
Accumulated Depreciation—Equipment Explanation Ref. Debit Credit Adjusting J2 200
Explanation
Accounts Payable Ref. Debit J1 J1 J1 1,400
Salaries and Wages Payable Explanation Ref. Debit Adjusting J2
Explanation
Explanation Closing Closing
Explanation Closing
Explanation Closing Closing Closing
Share Capital—Ordinary Ref. Debit J1 Retained Earnings Ref. Debit J3 J3 500 Dividends Ref. J1 J3
Debit 500
Income Summary Ref. Debit J3 J3 4,700 J3 2,900
Credit 7,000 1,700
No. 158 Balance 200
No. 201 Balance 7,000 8,700 7,300
Credit 630
No. 212 Balance 630
Credit 15,000
No. 311 Balance 15,000
Credit 2,900
No. 320 Balance 2,900 2,400
Credit
No. 332 Balance 500 0
500
Credit 7,600
No. 350 Balance 7,600 2,900 0
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COMPREHENSIVE PROBLEM (Continued)
Date July 12 25 31 31
Date July 31 31
Date July 31 31
Explanation
Adjusting Closing
Service Revenue Ref. Debit J1 J1 J2 J3 7,600
Closing
Gasoline Expense Ref. Debit J1 400 J3
Explanation Adjusting Closing
Supplies Expense Ref. Debit J2 1,420 J3
Explanation
Explanation Adjusting Closing
Depreciation Expense Ref. Debit J2 200 J3
Date July 31 31
Explanation Adjusting Closing
Insurance Expense Ref. Debit J2 150 J3
Date July 20 31 31
Salaries and Wages Expense Explanation Ref. Debit J1 1,900 Adjusting J2 630 Closing J3
Date July 31 31
Credit 4,200 2,100 1,300
No. 400 Balance 4,200 6,300 7,600 0
Credit
No. 633 Balance 400 0
400
Credit 1,420
Credit 200
Credit 150
Credit
2,530
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No. 631 Balance 1,420 0 No. 711 Balance 200 0 No. 722 Balance 150 0 No. 726 Balance 1,900 2,530 0
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COMPREHENSIVE PROBLEM (Continued) (d)
MARY'S MAIDS CLEANING SERVICE Income Statement For the Month Ended July 31, 2014 Revenues Service revenue ............................................... Expenses Salaries and wages expense .......................... Supplies expense ............................................ Gasoline expense ............................................ Depreciation expense ..................................... Insurance expense .......................................... Total expenses ......................................... Net income ...............................................................
$7,600 $2,530 1,420 400 200 150 4,700 $2,900
MARY'S MAIDS CLEANING SERVICE Retained Earnings Statement For the Month Ended July 31, 2014 Retained Earnings, July 1..................................................... Add: Net income .................................................................. Less: Dividends .................................................................... Retained Earnings, July 31...................................................
4-90
$
0 2,900 2,900 500 $2,400
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
COMPREHENSIVE PROBLEM (Continued) MARY'S MAIDS CLEANING SERVICE Statement of Financial Position July 31, 2011 Assets Property, plant, and equipment Equipment........................................................ Less: Accumulated depreciation— equipment.................................................. Current assets Prepaid insurance ........................................... Supplies ........................................................... Accounts receivable ....................................... Cash ................................................................. Total assets .............................................................
$10,000 200 1,650 280 5,200 8,400
$ 9,800
15,530 $25,330
Equity and Liabilities Equity Share capital—ordinary .................................. Retained earnings ........................................... Current liabilities Accounts payable ........................................... Salaries and wages payable........................... Total equity and liabilities ......................................
$15,000 2,400 7,300 630
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$17,400
7,930 $25,330
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COMPREHENSIVE PROBLEM (Continued) (e) Date July 31
31
31
31
31
General Journal Account Titles Accounts Receivable ......................... Service Revenue........................
Ref. 112 400
Debit 1,300
Depreciation Expense ........................ Accumulated Depreciation— Equipment ..............................
711
200
Insurance Expense............................. Prepaid Insurance .....................
722 130
150
Supplies Expense............................... Supplies .....................................
631 126
1,420
Salaries and Wages Expense............ Salaries and Wages Payable ....
726 212
630
J2 Credit 1,300
158
200
150
1,420
630
(f) Date July 31
31
31
31
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General Journal Account Titles Service Revenue................................. Income Summary ......................
Ref. 400 350
Debit 7,600
Income Summary ............................... Salaries and Wages Expense... Depreciation Expense............... Insurance Expense.................... Supplies Expense...................... Gasoline Expense .....................
350 726 711 722 631 633
4,700
Income Summary ............................... Retained Earnings .....................
350 320
2,900
Retained Earnings .............................. Dividends ...................................
320 332
500
J3 Credit 7,600
2,530 200 150 1,420 400
2,900
500
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COMPREHENSIVE PROBLEM (Continued) (g)
MARY'S MAIDS CLEANING SERVICE Post-Closing Trial Balance July 31, 2014 Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Insurance ............................................... Equipment ........................................................... Accumulated Depreciation—Equipment .......... Accounts Payable ............................................... Salaries and Wages Payable ............................. Share Capital—Ordinary .................................... Retained Earnings ..............................................
Debit $ 8,400 5,200 280 1,650 10,000
Credit
$
$25,530
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200 7,300 630 15,000 2,400 $25,530
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CCC4
CONTINUING COOKIE CHRONICLE
(a) COOKIE CREATIONS Income Statement For the Two Months Ended December 31, 2014 Revenues Service revenue ......................................................... Expenses Supplies expense ...................................................... Salaries and wages expense .................................... Advertising expense ................................................. Utilities expense ........................................................ Insurance expense .................................................... Depreciation expense ............................................... Interest expense ........................................................ Total expenses ...................................................... Net income .....................................................................
$4,515 $1,025 1,006 165 125 110 40 15 2,486 $2,029
COOKIE CREATIONS Retained Earnings Statement For the Two Months Ended December 31, 2014 Retained earnings, November 1 ................................... Add: Net income .......................................................... Less: Dividends ............................................................ Retained earnings, December 31 .................................
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$
0 2,029 2,029 500 $1,529
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CCC4 (Continued) (a) (Continued) COOKIE CREATIONS Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment ................................................................... Less: Accumulated depreciation—equipment ........ Current assets Prepaid insurance ....................................................... Supplies ....................................................................... Accounts receivable ................................................... Cash ............................................................................. Total current assets ............................................... Total assets ............................................................
$1,200 40
$1,160
1,210 350 875 1,180 3,615 $4,775
Equity and Liabilities Equity Share Capital—Ordinary ............................... Retained earnings .......................................... Non-current liabilities Interest payable ............................................. Notes payable ................................................ Total non-current liabilities ...................... Current liabilities Accounts payable .......................................... Salaries and wages payable ......................... Unearned service revenue ............................ Total current liabilities .............................. Total liabilities ..................................... Total equity and liabilities...................
$ 800 1,529 $
$2,329
15 2,000 2,015 75 56 300 431
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2,446 $4,775
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CCC4 (Continued) (b) Date
GENERAL JOURNAL Account Titles
2014 Dec. 31 Service Revenue ..................................... Income Summary ...............................
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Debit
J4 Credit
4,515 4,515
31 Income Summary .................................... Salaries and Wages Expense ............ Utilities Expense ................................ Advertising Expense .......................... Supplies Expense .............................. Insurance Expense ............................ Depreciation Expense ........................ Interest Expense ................................
2,486
31 Income Summary .................................... Retained Earnings ..............................
2,029
31 Retained Earnings .................................. Dividends ............................................
500
1,006 125 165 1,025 110 40 15
2,029
500
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CCC4 (Continued) (c)
COOKIE CREATIONS Post-Closing Trial Balance December 31, 2014
Account Cash ......................................................................... Accounts Receivable .............................................. Supplies ................................................................... Prepaid Insurance .................................................. Equipment ............................................................... Accumulated Depreciation–Equipment ................ Accounts Payable ................................................... Salaries and Wages Payable .................................. Unearned Service Revenue .................................... Interest Payable....................................................... Notes Payable.......................................................... Share Capital—Ordinary......................................... Retained Earnings...................................................
Debit $1,180 875 350 1,210 1,200
Credit
$
$4,815
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40 75 56 300 15 2,000 800 1,529 $4,815
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BYP 4-1
FINANCIAL REPORTING PROBLEM
(a)
Total current assets were W61,402,589 million at December 31, 2010, and W54,211,297 million at December 31, 2009.
(b)
No. Current assets are normally listed in reverse order of liquidity. Samsung’s current assets are listed in order of liquidity.
(c)
The asset classifications are: (1) current assets, and non-current assets.
(d)
Cash equivalents are investments with original maturities of 3 months or less that Samsung does not intend to rollover beyond three months.
(e)
Total current liabilities were W39,944,721 million at December 31, 2010, and W34,204,424 million at December 31, 2009.
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BYP 4-2
COMPARATIVE ANALYSIS PROBLEM
(a)
Nestlé (in millions) 1. 2. 3. 4.
Total current assets Net property, plant & equipment Total current liabilities Total equity
Zetar (in thousands)
CHF38,997 21,438 30,146 62,598
£45,670 16,583 40,474 46,287
(b) Current assets are cash and other resources that are reasonably expected to be realized in cash or sold or consumed within one year or the company’s operating cycle, whichever is longer. Current liabilities are obligations that are reasonably expected to be paid from existing current assets or through the creation of other current liabilities. Nestlé’s current assets were 29.4% greater than its current liabilities, while Zetar’s current assets were 12.8% greater than its current liabilities. From this information, it appears that Nestlé is in a better liquidity position than Zetar.
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4-99
BYP 4-3
REAL–WORLD FOCUS
The solution is dependent upon the companies chosen by the student.
4-100
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BYP 4-4
(a)
DECISION–MAKING ACROSS THE ORGANIZATION
EVERCLEAN JANITORIAL SERVICE Statement of Financial Position December 31, 2014 Assets Property, plant, and equipment Equipment ($22,000 + $4,000) ....................... Less: Accum. depreciation— equipment ($4,000 + $2,000) ................. Delivery trucks ($34,000 + $5,000) .. Less: Accum. depreciation— delivery trucks ($5,000 + $5,000) ................. Current assets Prepaid insurance ($4,800 X 2/3) ...... Supplies ($5,200 – $3,100) ......................... Accounts receivable ($9,000 + $3,900) ......................... Cash ................................................ Total assets ............................................
$26,000
6,000 39,000
$20,000
10,000
29,000
$49,000
3,200 2,100 12,900 5,500
23,700 $72,700
Equity and Liabilities Equity Share capital—ordinary .................................... Retained earnings ............................................. Non-current liabilities Notes payable, due July 1, 2016 ...................... Current liabilities Notes payable due within one year ................. Accounts payable ($1,500 + $620) ................... Interest payable ($25,000 X 10% X 6/12) ......... Total equity and liabilities .........................................
$30,000 14,330* $44,330 15,000 10,000 2,120 1,250
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13,370 $72,700
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BYP 4-4 (Continued) EVERCLEAN JANITORIAL SERVICE Statement of Financial Position (Continued) December 31, 2014 *Retained earnings balance as reported ............... Add: Earned but unbilled fees ............................ Less: Janitorial supplies used ............................. Insurance expired ($4,800 X 1/3) ............... Depreciation ($2,000 + $5,000) .................. Expenses incurred but unpaid .................. Interest accrued .......................................... Total ..................................................... Retained earnings balance as adjusted ...............
$24,000 3,900 27,900 $3,100 1,600 7,000 620 1,250 13,570 $14,330
(b) Everclean Janitorial Service met the terms of the bank loan because current assets exceed current liabilities by $10,330 ($23,700 – $13,370) at December 31, 2014.
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BYP 4-5
COMMUNICATION ACTIVITY
MEMO To:
Accounting Instructor
From:
Student
Re:
Accounting Cycle
The required steps in the accounting cycle, in the order in which they should be completed, are: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Analyze business transactions. Journalize the transactions. Post to ledger accounts. Prepare a trial balance. Journalize and post adjusting entries. Prepare an adjusted trial balance. Prepare financial statements. Journalize and post closing entries. Prepare a post-closing trial balance.
The optional steps in the accounting cycle include preparing a worksheet and preparing reversing entries. If a worksheet is prepared, it is done after step 3 above, and it includes steps 4 and 6. The worksheet is a form used to make it easier to prepare adjusting entries and financial statements. If reversing entries are prepared, they are journalized and posted after step 9, at the beginning of the next accounting period. A reversing entry is the exact opposite of a previously recorded adjusting entry and simplifies the recording of subsequent transactions.
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4-103
BYP 4-6
ETHICS CASE
(a) The stakeholders in this case are: f You, as controller. f Phil McNally, president. f Users of the company’s financial statements.
(b) The ethical issue is the continued circulation of significantly misstated financial statements. As controller, you have just issued misleading financial statements. You have acted ethically by telling the company’s president. The president has reacted unethically by allowing the misleading financial statements to continue to circulate. (c) As controller, you should impress upon the president the consequences of having those misleading financial statements be detected by some user or securities regulator. Also stress upon him that you have a professional obligation to correct the statements or to resign.
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GAAP EXERCISES GAAP 4-1 The statement of financial position required under IFRS and the balance sheet prepared under GAAP usually present the same information regarding a company’s assets, liabilities, and equity at a point in time. IFRS does not dictate a specific order but most companies list non-current items before current. Differences in ordering are: IFRS
GAAP
Statement of Financial Position presentation Non-current assets Current assets Equity Non-current liabilities Current liabilities
Balance Sheet presentation Current assets Non-current assets Current liabilities Non-current liabilities Stockholders’ equity
Under GAAP, current assets are usually listed in the order of liquidity. GAAP 4-2 GAAP uses the term balance sheet rather than statement of financial position. GAAP 4-3 DIAZ COMPANY Partial Balance Sheet Current assets Cash .......................................................................................... Short-term investments .......................................................... Accounts receivable ................................................................ Supplies .................................................................................... Prepaid insurance .................................................................... Total ..................................................................................
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$ 15,400
6,700 12,500 5,200 3,600 $43,400
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GAAP 4-4 ZURICH COMPANY Partial Balance Sheet December 31, 2014 Current assets Cash ............................................................. Short-term investments .............................. Accounts receivable ................................... Inventories ................................................... Long-term investments Investments in stock................................... Property, plant and equipment Equipment .................................................... Less: Accumulated depreciation— equipment ................................................ Total assets .........................................................
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$ 13,100 120 4,300 2,700
$20,220 6,500
21,700 5,700
16,000 $42,720
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GAAP 4-5 (a)
REGO BOWLING ALLEY Balance Sheet December 31, 2014 Assets
Current assets Cash ................................................... Accounts receivable ......................... Prepaid insurance............................. Property, plant, and equipment Land ................................................... Buildings ........................................... $128,000 Less: Acc. depr.—buildings ............ 42,600 Equipment ......................................... 62,400 Less: Acc. depr.—equipment .......... 18,720 Total assets ..............................................
$18,040 7,540 4 ,680
$30,260
67,000 85,400 43,680
196,080 $226,340
Liabilities and Stockholders’ Equity Current liabilities Current portion of notes payable ............. $ 13,900 Accounts payable ...................................... 12,300 Interest payable ......................................... 2,600 $28,800 Long-term liabilities Notes payable ........................................... 81,100 Total liabilities .................................................. $109,900 Stockholders’ equity Common stock ......................................... 90,000 Retained earnings ($22,000 + $4,440*) .... 26,440 116,440 Total liabilities and stockholders’ equity ....... $226,340 *Net income = $15,180 – $780 – $7,360 – $2,600 = $4,440 GAAP 4-6 It is possible to compare liquidity and solvency for companies using different currencies. The ratios that are used to do so, such as the current ratio and debt to total assets, indicate relative amounts of assets and liabilities rather than absolute monetary values.
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GAAP FINANCIAL REPORTING PROBLEM GAAP 4-7 (a) Tootsie Roll’s total current assets at December 31, 2010 were $ 237,591 thousand and at December 31, 2009 were $ 211,878 thousand. (b) Yes, under GAAP current assets are listed in the order of their liquidity. (c) Tootsie Roll’s assets are classified as current assets, property, plant and equipment, and other assets. (d) Tootsie Roll’s total current liabilities at December 31, 2010 were $ 58,505 thousand and at December 31, 2009 were $ 56,066 thousand.
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