Financial Accounting Connect Access Code 4th Edition

Appendix C Time Value of Money REVIEW QUESTIONS Question C-1 (LO C-1) Interest is the cost of borrowing money. Simple interest is interest we earn on the initial investment only. Compound interest is the interest we earn on the initial investment plus previous interest. We use compound interest in calculating the time value of money. Question C-2

Appendix D - Investments Appendix D Investments REVIEW QUESTIONS Question D-1 (LO D-1) A company might invest in another company to (1) receive dividends, earn interest, and gain from the increase in the value of their investment, (2) temporarily invest excess cash created by operating in seasonable industries, or (3) build strategic alliances, increase market share, or

Appendix D - Investments Exercise D-8 (concluded) Requirement 2 Purchase: Investments Cash (Purchase common stock) Debit 360,000 Net income: Investments Equity Income (Earn equity income) ($27,000 = $135,000 × 20%) Credit 360,000 27,000 27,000 Dividends: Cash 15,000 Investments (Receive cash dividends) ($15,000 = $0.25 × 300,000 shares × 20%) 15,000 Fair value adjustment: No adjustment is made under the equity method Solutions Manual, Appendix D © The McGraw-Hill Companies, Inc., 2016 D-17 Appendix D - Investments Exercise D-9 (LO D-4) X X 1. 10%

Appendix E - International Financial Reporting Standards Appendix E International Financial Reporting Standards REVIEW QUESTIONS Question E-1 (LOE-1) Convergence refers to the process by which U.S. GAAP and IFRS will eventually merge to become a single set of accounting standards. Question E-2 (LOE-1) Financial accounting standards and practices differ from country to country for many reasons, including different legal

Chapter 1 - A Framework for Financial Accounting Problem 1-4B (LO 1-3) (Suggested order of calculation) On the statement of stockholders’ equity, $14,000 + (c) = $17,000 (c) = $3,000 $7,000 + $5,000 − (d) = $8,000 (d) = $4,000 (b) = $5,000 From (b), (a) − $13,000 − $7,000 − $5,000 = $5,000 (b) (a) = $30,000 From the statement of

Student Name: Instructor Class: McGraw-Hill Problem 01-03 LONGHORN CORPORATION Income Statement Service Revenue Expenses: Cost of goods sold Salaries Delivery Total expenses Net income $ 67,700 $ 53,400 5,500 2,600 61,500 6,200 $ Correct! LONGHORN CORPORATION Statement of Stockholders' Equity Beginning balance Issuance of common stock Add: Net income Less: Dividends Ending balance Common Stock $ 40,000 4,000 $ 44,000 Total Retained Shareholders' Earnings Equity $ 18,200 $ 58,200 4,000 6,200 6,200 $ 24,400 $ 68,400 Correct! Correct! Correct! LONGHORN CORPORATION Balance Sheet Assets Cash Supplies Equipment Building $ 1,200 3,400 Accounts payable 29,000 Salaries payable 40,000 Total liabilities Liabilities $ 4,400 800 5,200 Correct! Stockholders' Equity Total assets $ Common stock Retained earnings Total stockholders' equity 73,600 Total liabilities and stockholders' equity Correct! $ 44,000 24,400 68,400 73,600 Correct! Given Data P01-03: LONGHORN CORPORATION Year end

Chapter 1 - A Framework for Financial Accounting Chapter 1 A Framework for Financial Accounting REVIEW QUESTIONS Question 1-1 (LO 1-1) Accounting is the language of business. Whereas a basic math class might involve adding, subtracting, and solving for unknown variables, accounting involves learning to measure business transactions and communicating those measurements in a format that is

Chapter 01 - A Framework for Financial Accounting Chapter 1 A Framework for Financial Accounting EXERCISES Exercise 1-1 1. a. 2. b. 3. a. 4. c. 5. b. 6. a. 7. c. Exercise 1-2 Transaction 1. Falcon provides services to customers. 2. Falcon pays salaries for the current month. 3. Falcon purchases equipment. 4. Falcon pays dividends to stockholders. 5. Falcon borrows money by issuing a note. Account Revenue Expense Asset Equity Liability Activity Operating Operating Investing Financing Financing Account Expense Revenue Equity Liability Asset Activity Operating Operating Financing Financing Investing Exercise 1-3 Transaction 1.

Chapter 1 - A Framework for Financial Accounting Exercise 1-17 (LO 1-3) ($ in billions) 1. 2. 3. 4. 5. Total change = in cash Operating cash flows Total change = in cash $0 = Operating cash flows $3.6 Total change = in cash ($X − $0.7) = $X = $0.4 Operating cash flows $1.4 Total change = in cash $0.04 = Operating cash flows $0.07 Total change = in cash $0.02 = Operating cash flows $0.60 Total change = in cash $0.02 = Operating cash flows $0.41 Solutions Manual, Chapter 1 + + + + + + + + + + + Investing cash flows Investing cash flows $0.6 Investing cash flows ($0.3) Investing cash flows $0.63 Investing cash flows ($1.00) Investing cash flows ($1.42) + + + + + + + + + + + Financing cash flows Financing cash flows ($4.2) Financing cash flows ($1.4) Financing cash flows ($0.66) Financing cash flows $0.42 Financing cash

Chapter 01 - A Framework for Financial Accounting Chapter 1 A Framework for Financial Accounting INSTRUCTOR’S MANUAL Learning Objectives LO1-1 Describe the two primary functions of financial accounting. LO1-2 Understand the business activities that financial accounting measures. LO1-3 Determine how financial accounting information is communicated through financial statements. LO1-4 Describe the role that financial accounting plays in the decision-making

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 10-02 DONNIE HILFIGER Requirement 1: Date March 1, 2018 May 15, 2018 July 10, 2018 October 15, 2018 December 1, 2018 December 31, 2018 Account Cash Common Stock Additional Paid-in Capital (Issue common stock) Debit 46,200 Treasury Stock Cash (Purchase treasury stock) Cash Treasury Stock Additional Paid-in Capital (Reissue treasury stock above cost) 8,000 Cash Preferred Stock Additional Paid-in Capital (Issue preferred stock) 9,000 Dividends Dividends Payable (Declare cash dividends) 2,700 Dividends Payable Cash (Pay cash dividends) 2,700 Total Assets + + + NE - Total Liabilities NE NE NE NE + - 11 46,189

Chapter 10 Stockholders’ Equity REVIEW QUESTIONS Question 10-1 (LO 10-1) Most corporations first raise money by selling stock to the founders of the business and their friends and family. As the equity financing needs of the corporation grow, companies prepare a business plan and seek outside investment from “angel” investors and venture capital firms. Angel investors are

Chapter 10 - Stockholders’ Equity Chapter 10 Stockholders’ Equity INSTRUCTOR’S MANUAL Learning Objectives LO10-1 Identify the advantages and disadvantages of the corporate form of ownership. LO10-2 Record the issuance of common stock. LO10-3 Contrast preferred stock with common stock and bonds payable. LO10-4 Account for treasury stock. LO10-5 Describe retained earnings and record cash dividends. LO10-6 Explain the effect of

Exercise 10-15 (LO 10-8) Requirement 1 ($ in millions) Friendly Fashions Net Income $312 Average ÷ Stockholders’ Equity = ÷ ($2,310 + 1,850) / 2 = Return on Equity 15.0% Requirement 2 ($ in millions) Friendly Fashions Dividends Per Share $0.31 ÷ ÷ Stock Price $6.20 = = Dividend Yield 5.0% Requirement 3 ($ in millions) Friendly Fashions Net Income $312 ÷ ÷ Shares Outstanding 675 = Earnings per Share = $0.46 Requirement 4 ($ in millions) Friendly Fashions Stock Price $6.20 Solutions Manual, Vol.1, Chapter 10 ÷ ÷ Earnings Per Share $0.46 = = Price-Earnings Ratio 13.5 © McGraw-Hill Education 2016 10-21 Exercise 10-16 (LO 10-8) Requirement 1 ($ in millions) 2017 2018 Net

PROBLEMS: SET B Problem 10-1B (LO 10-1 to 10-8) Terms __e___ 1. PE ratio. __i___ 2. Stockholders’ equity section of the balance sheet. __a___ 3. Accumulated deficit. __b___ 4. Growth stocks. __c___ 5. 100% stock dividend. __f___ 6. Statement of stockholders’ equity. __j___ 7. Treasury stock. __g___ 8. Value stocks. __h___ 9. Return on equity. __d___ 10. Retained earnings, Definitions a. A debit balance

Chapter 11 - Statement of Cash Flows *Problem 11-6B (LO 11-5) Software Associates Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities Cash received from customers Cash paid to suppliers Cash paid for operating expenses Cash paid for income taxes Net cash flows from operating activities $720,000 (400,000) (137,000) (41,000) $142,000 Net sales + Decrease in accounts receivable = Cash received

Chapter 11 - Statement of Cash Flows PROBLEMS: SET A Problem 11-1A (LO 11-1) Type of Activity O I O O F O I O NC F I F F O I Cash Inflow or Outflow CO CI CO CI CI CO CI CO NE CI CO CO CO CO CI Solutions Manual, Vol.1, Chapter 11 Transaction 1. Payment of employee salaries 2. Sale of land for cash 3. Purchase of rent in advance 4. Collection of an account receivable 5. Issuance of common stock 6. Purchase of inventory 7. Collection of notes receivable 8. Payment

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 11-02 Requirement 1: ATM SOFTWARE DEVELOPERS Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense Increase in accounts receivable Decrease in inventory Decrease in prepaid rent Decrease in accounts payable Net cash flows from operating activities Cash Flows

Chapter 11 - Statement of Cash Flows Chapter 11 Statement of Cash Flows INSTRUCTOR’S MANUAL Learning Objectives LO11-1 Classify cash transactions as operating, investing, or financing activities. LO11-2 Prepare the operating activities section of the statement of cash flows using the indirect method. LO11-3 Prepare the investing activities section and the financing activities section of the statement of cash

Chapter 11 - Statement of Cash Flows Chapter 11 Statement of Cash Flows REVIEW QUESTIONS Question 11-1 (LO 11-1) The three categories of cash flows are operating activities, investing activities, and financing activities. Operating activities include cash receipts and cash payments for transactions relating to revenue and expense activities, essentially the very same activities reported on the

Student Name: Instructor McGraw-Hill/Irwin Problem 12-03 Requirement 1: SPORTS UNLIMITED Balance Sheets December 31, 2018 2018 Amount Assets Current Assets: Cash Accounts receivable Inventory Prepaid rent Long-Term Assets: Investment in bonds Land Equipment Accumulated depreciation Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts payable Interest payable Income tax payable Long-Term Liabilities Notes payable Stockholders' Equity Common stock Retained earnings Total Liabilities and Equity $ $ $ $ 2017 % Amount 103,500 46,800 44,550 7,200 23.0% 10.4% 9.9% 1.6% «- Correct! $ 54,900 117,450 106,200 (30,600) 450,000 12.2% 26.1% 23.6% -6.8% 100.0% «- Correct! «- Correct! «- Correct! $ 30,150 7,200 12,150 6.7% 1.6% 2.7% «- Correct! $ 138,150 144,000 118,350 450,000 % 70,400 32,000 71,200 3,600 17.6% 8.0% 17.8% 0.9% «- Correct! 141,600 102,000 (20,800) 400,000 0.0% 35.4% 25.5% -5.2% 100.0% «- Correct! 11.7% 0.9% 2.5% «- Correct! «- Correct! 46,800 3,600 10,000 30.7% «- Correct! 127,600 31.9% «- Correct! 32.0% 26.3% 100.0% «- Correct! 144,000 68,000 400,000 36.0% 17.0% 100.0% «- Correct! «- Correct! «- Correct! «- Correct! «- Correct! «-

Chapter 12 - Financial Statement Analysis Exercise 12-12 (LO12.5) LeBron’s Bookstores Income Statement For the Year Ended December 31, 2018 Net sales Cost of goods sold Gross profit Operating expenses Income before tax Income tax expense Income from continuing operations Discontinued operation: Loss from disposal of book division, net of tax Net income Solutions Manual, Chapter 12 $ 11,000,000 6,500,000 4,500,000 3,000,000 1,500,000 375,000 1,125,000 (675,000) $ 450,000 © The McGraw-Hill Companies, Inc., 2016 12-21 Chapter 12

Chapter 12 - Financial Statement Analysis Chapter 12 Financial Statement Analysis INSTRUCTOR’S MANUAL Learning Objectives LO12-1 Perform vertical analysis. LO12-2 Perform horizontal analysis. LO12-3 Use ratios to analyze a company’s risk. LO12-4 Use ratios to analyze a company’s profitability. LO12-5 Distinguish persistent earnings from one-time items. LO12-6 Distinguish between conservative and aggressive accounting practices. 12-1 © 2016 by McGraw-Hill Education. This is

Chapter 12 - Financial Statement Analysis Problem 12-5B (LO12.4) Profitability Ratios Calculations 1. Gross profit ratio $3,450,000 $8,900,000 = 38.8% 2. Return on assets $1,230,000 ($3,124,000 + $3,199,000) / 2 = 38.9% 3. Profit margin $1,230,000 $8,900,000 = 13.8% 4. Asset turnover $8,900,000 ($3,124,000 + $3,199,000) / 2 = 2.8 times 5. Return on equity $1,230,000 ($2,397,000 + $2,444,000) / 2 = 50.8% 6. Price-earnings ratio © The McGraw-Hill Companies, Inc., 2016 12-38 $22.42 $1.36 = 16.5 times Financial Accounting,

Chapter 12 - Financial Statement Analysis Chapter 12 Financial Statement Analysis REVIEW QUESTIONS Question 12-1 (LO 12.1, 12.2) The three types of comparisons commonly used in financial statement analysis are comparisons between companies, comparisons over time, and comparisons to industry. Question 12-2 (LO 12.1, 12.2) For vertical analysis, we express each item as a percentage of the same

Chapter 02 - The Accounting Cycle: During the Period Chapter 2 The Accounting Cycle: During the Period EXERCISES Exercise 2-1 1. c. 2. a. 3. b. 4. e. 5. d. Exercise 2-2 Assets = Liabilities + Stockholders’ Equity 1. Increase = No effect + Increase 2. Decrease = No effect + Decrease 3. Increase = Increase + No effect 4. Decrease = No effect + Decrease 5. Decrease = No effect + Decrease 6. Increase = Increase + No effect © The McGraw-Hill Companies, Inc., 2016 Solutions for Exercises Set B, Chapter 2 © 2016 by McGraw-Hill Education. This is proprietary material solely for

Chapter 02 - The Accounting Cycle: During the Period Chapter 2 The Accounting Cycle: During the Period INSTRUCTOR’S MANUAL Learning Objectives LO2-1 Identify the basic steps in measuring external transactions. LO2-2 Analyze the impact of external transactions on the accounting equation. LO2-3 Assess whether the impact of external transactions results in a debit or credit to an account

Chapter 2 - The Accounting Cycle: During the Period Chapter 2 The Accounting Cycle: During the Period REVIEW QUESTIONS Question 2-1 (LO 2-1) External transactions are transactions between the company and a separate economic entity. Internal transactions do not include an exchange with a separate economic entity. Purchasing supplies from a local vendor is classified as an

Chapter 2 - The Accounting Cycle: During the Period Exercise 2-13 (LO 2-4) Corrections 1. 2. 3. 4. 5. External Transaction Pay cash dividends of $800 to stockholders. Accounts Dividends Cash Debit 800 Provide services on account for customers, $3,400 Accounts Receivable Service Revenue 3,400 Pay a $500 utilities bill for the current period. Utilities Expense Cash Receive cash of $400 from previously billed customers. Cash 400 Accounts Receivable Pay for supplies previously purchased on account, $1,200. Accounts Payable Cash Credit 800 3,400 500 500 400 1,200 1,200 Note: Accounts in blue

Chapter 2 - The Accounting Cycle: During the Period Problem 2-8A (LO 2-4, 2-5, 2-6) Requirement 1 Entries are numbered for posting. (1) Sep. 1 Debit Cash 4,700 Service Revenue (Provide services for cash) (2) Sep. 2 Land 6,400 Notes Payable (Purchase land with note payable) (3) Sep. 4 Advertising Expense 500 Accounts Payable (Receive invoice for current advertising) (4) Sep. 8 Accounts Receivable 6,000 Service Revenue (Provide services on account) (5) Sep. 10 Supplies 1,100 Accounts Payable (Purchase

Chapter 2 - The Accounting Cycle: During the Period Problem 2-8B (LO 2-4, 2-5, 2-6) Requirement 1 Entries are numbered for posting. (1) Nov. 1 Debit Cash 13,000 Common Stock (Issue common stock) (2) Nov. 2 Equipment 3,500 Notes Payable (Purchase equipment with note payable) (3) Nov. 4 Supplies 1,000 Accounts Payable (Purchase supplies on account) (4) Nov. 10 Accounts Receivable 9,000 Service Revenue (Provide services on account) (5) Nov. 15 Accounts Payable 1,100 Cash (Pay cash on account) (6)

Student Name: Instructor Class: McGraw-Hill Problem 02-06 BRUINS COMPANY Trial Balance November 30 Accounts Cash Accounts Receivable Supplies Prepaid Rent Equipment Accounts Payable Salaries Payable Interest Payable Deferred Revenue Notes Payable Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Rent Expense Interest expense Supplies Expense Utilities Expense Totals $ Debit 40,000 50,000 1,100 3,000 60,800 Credit $ 17,000 5,000 3,000 9,000 30,000 50,000 35,000 1,100 65,000 $ 30,000 12,000 3,000 7,000 6,000 214,000 Correct! $ 214,000 Correct! Given Data P02-06: BRUINS COMPANY Trial Balance November 30 Account Title Cash Accounts Receivable Supplies Prepaid Rent Equipment Accounts Payable Salaries Payable Interest Payable Deferred Revenue Notes Payable Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Rent Expense Interest expense Supplies Expense Utilities Expense $ Balances 40,000 50,000 1,100 3,000 ? 17,000 5,000 3,000 9,000 30,000 50,000 35,000 1,100 65,000 30,000 12,000 3,000 7,000 6,000 Student Name: Instructor Class: McGraw-Hill Problem 02-07 Requirement 1: UTE SEWING

Chapter 3 - The Accounting Cycle: End of the Period Exercise 3-20 (continued) Requirement 4 (continued) Red Flash Photography Balance Sheet December 31, 2018 Assets Current assets: Cash $ 30,000 Accounts receivable 30,000 Supplies 5,000 Prepaid rent 9,000 Total current assets 74,000 Long-term assets: Land 60,000 Total assets Solutions Manual, Chapter 3 $134,000 Liabilities Current liabilities: Accounts payable $ 22,000 Salaries payable 4,000 Total current liabilities 26,000 Stockholders’ Equity Common stock 70,000 Retained earnings 38,000 Total stockholders’ equity 108,000 Total liabilities and stockholders’ equity $134,000 © McGraw-Hill Education, 2016 3-41 Chapter 3 - The

Chapter 03 - The Accounting Cycle: End of the Period Chapter 3 The Accounting Cycle: End of the Period EXERCISES Exercise 3-1 1. May 2. 2. Revenue would be recognized as each magazine is delivered. 3. November 21. 4. July 7. Exercise 3-2 1. May 2. 2. November 21. 3. November 4. 4. One month’s worth of rent expense is recorded each month. Exercise

Chapter 03 - The Accounting Cycle: End of the Period Solution: 1. Closing entries December 31 Debit Service Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained Earnings . . . . . . . .

Chapter 3 - The Accounting Cycle: End of the Period Problem 3-7A (concluded) Requirement 6 (closing entries posted in red) Retained Earnings Service Revenue 19,000 42,700 42,200 18,500 Salaries Expense 24,500 2,100 42,200 42,200 0 Interest Expense 0 800 26,600 0 0 5,400 800 0 Supplies Expense 0 1,300 Rent Expense 0 Utilities Expense 1,300 0 2,400 200 5,400 Depr. Expense 0 6,000 2,600 0 6,000 0 Requirement 7 Crimson Tide Music Academy Post-Closing Trial Balance December 31, 2018 Accounts Cash Accounts Receivable Supplies Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Salaries Payable Interest Payable Utilities Payable Notes Payable Common Stock Retained Earnings Total Solutions Manual, Chapter 3 Debit $ 10,300 9,500 700 1,800 90,000 $112,300 Credit $ 18,000 7,700 2,100 800 200 20,000 45,000 18,500 $112,300 © McGraw-Hill

Chapter 3 - The Accounting Cycle: End of the Period Problem 3-9A (concluded) Requirement 11 Zips Storage Unadjusted Trial Balance December 31, 2018 Accounts Debit Cash $103,800 Accounts Receivable 16,100 Prepaid Insurance 5,000 Supplies 2,900 Land 148,000 Accounts Payable Deferred Revenue Common Stock Retained Earnings Total $275,800 Solutions Manual, Chapter 3 Credit $ 4,500 6,900 170,000 94,400 $275,800 © McGraw-Hill Education, 2016 3-81 Chapter 3 - The Accounting Cycle: End of the Period PROBLEMS: SET B Problem 3-1B (LO 3-1, 3-2) Transaction 1. Receive cash from customers

Student Name: Instructor Class: McGraw-Hill Problem 03-04 CRIMSON TIDE MUSIC ACADEMY Adjusting Entries Entry (a) (b) (c) (d) (e) (f) Account Depreciation Expense Accumulated Depreciation (Adjust accumulated depreciation) Debit 6,000 Salaries Expense Salaries Payable (Adjust salaries payable) 2,100 Interest Expense Interest Payable (Adjust interest payable) 800 Supplies Expense Supplies (Adjust supplies) 1,300 Rent Expense Prepaid Rent (Adjust prepaid rent) 5,400 Utilities Expense Utilities Payable (Adjust utilities payable) Credit 6,000

Chapter 3 - The Accounting Cycle: End of the Period Problem 3-8B (continued) Requirement 8 Pipers Plumbing Income Statement For the year ended December 31, 2018 Service revenue Expenses: Salaries Utilities Supplies Depreciation $92,000 Total expenses Net income 49,400 $ 42,600 33,000 6,000 2,400 8,000 Pipers Plumbing Balance Sheet December 31, 2018 Assets Current assets: Cash Accounts receivable Supplies Total current assets $49,500 21,500 1,100 72,100 Long-term assets: Equipment Accumulated depr. 36,000 (16,000) Total assets * $92,100 Liabilities Current liabilities: Accounts payable Deferred revenue Total current liabilities $ 6,000 3,000 9,000 Stockholders’ Equity Common stock 34,000 Retained earnings 49,100 * Total stockholders’ equity 83,100 Total liabilities

Chapter 3 - The Accounting Cycle: End of the Period Exercise 3-4 (LO 3-2) 1. September 2. 2. January 6. 3. January 1. 4. February 23. Exercise 3-5 (LO 3-1) Net income (unadjusted) $100,000 a. Record insurance expense of $2,000 per month (6,000) b. Reclassify service revenue as deferred revenue (liability) (4,000) c. Reclassify supplies expense as supplies (asset) 2,750 d. Record interest expense of

Chapter 03 - The Accounting Cycle: End of the Period Requirement 3 Blue Hens Corporation Balance Sheet December 31, 2018 Assets Cash $ 15,700 Accts. receivable 132,500 Prepaid rent 6,100 Supplies 34,400 Total current assets 188,700 Equipment Accum. depr. 280,000 (156,900) Total assets $311,800 * Liabilities Accounts payable $ 9,300 Salaries payable 12,500 Interest payable 4,800 Total current liabilities 26,600 Notes payable 27,500 Stockholders’ Equity Common stock 126,200 Retained earnings 131,500 * Total stockholders’ equity 257,700 Total liabilities and stockholders’ equity $311,800 Retained earnings = beginning retained earnings + net income −

Chapter 3 - The Accounting Cycle: End of the Period Additional Perspective 3-1 (continued) Requirement 1 (concluded) Sep. 1, 2018 Prepaid Rent Cash (Pay cash for one-year rental policy) Sep. 21, 2018 Cash Service Revenue (Clinic) (Receive cash for rock climbing clinic) Oct. 17, 2018 Cash Service Revenue (Clinic) (Receive cash for orienteering clinic) Dec. 8, 2018 Miscellaneous Expense Cash (Pay cash for race permit) Dec. 12, 2018 Supplies (Racing) Accounts

Chapter 03 - The Accounting Cycle: End of the Period Chapter 3 The Accounting Cycle: End of the Period INSTRUCTOR’S MANUAL Learning Objectives LO3-1 Understand when revenues and expenses are recorded. LO3-2 Distinguish between accrual-basis and cash-basis accounting. LO3-3 Demonstrate the purposes and recording of adjusting entries. LO3-4 Post adjusting entries and prepare an adjusted trial balance. LO3-5 Prepare

Chapter 3 - The Accounting Cycle: End of the Period Chapter 3 The Accounting Cycle: End of the Period REVIEW QUESTIONS Question 3-1 (LO 3-1) The revenue recognition principle states that we record revenue in the period in which we provide products or services. If a company sells products or provides services to a customer in

EAGLE GOLF ACADEMY Worksheet December 31 Unadjusted Trial Balance Accounts Cash Accounts Receivable Supplies Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Salaries Payable Utilities Payable Deferred Revenue Interest Payable Notes Payable Common Stock Retained Earnings Dividends Service Revenue Rent Expense Supplies Expense Depreciation Expense Salaries Expense Utilities Expense Interest Expense Totals Net Income Totals Compare to: Debit $ 6,900 2,000 2,300 6,000 24,000 Credit Adjusting Entries Debit Adjusted Trial Balance Credit (h) 700 (b) 1,000 (a) 500 Debit $ 6,900 2,700 1,300 5,500 24,000 (c) 400 (d) 200 100 10,000 25,000 0 200 2,800 $44,200 Illustration 2-13 (page 80) (d) 200 (h) 700 (a) 500 (b) 1,000 (c) 400 (e) 300 (f) 900 (g) 100 $4,100 $4,100 Illustration 3-8 (page 123-124) Debit $ 6,900 2,700 1,300 5,500 24,000 400 2,300 300 900 400 100 10,000 25,000 0 200 7,200 500 1,000 400 3,100 900 100 $46,600 Credit $ 200 6,300 $44,200 Credit 400 2,300 300 900 400 100 10,000 25,000 0 (e) 300 (f) 900 (g) Debit Balance Sheet $ $ 2,300 600 Credit Income Statement $46,600 Illustration 3-10 (page

choose any other desired Sort options from the dialog box. DOCUMENT FORMATTING Depending on your hardware, what appears on the screen is what will print out on your printer. Formatting can improve the appearance of your printed documents. The most common formatting Figure 7 tools are located on the Formatting Toolbar, which is show as the second toolbar in Figure 7. To bring this toolbar up, choose

Student Name: Instructor Class: McGraw-Hill Problem 04-02 Requirement 1: OSCAR'S RED CARPET STORE Bank Reconciliation February 28, 2018 Bank's Cash Balance Per Bank Statement $ Deposits outstanding Checks outstanding 13,145 1,600 (2,100) Bank balance per reconciliation 12,645 $ Company's Cash Balance Per general ledger $ 8,100 NSF check (200) Company error (300) EFT for rent (1,100) Interest on account 20 Note collected 6,000 Interest on note 250 Service fees (125) Company balance per reconciliation $ 12,645 Correct! Correct! Requirement 2: OSCAR'S RED CARPET STORE Cash Adjustments Entry (a) (b) Account Debit Credit Cash 6,270 Notes Receivable 6,000 Interest Revenue 270 (Record note and interest collected by bank and

Chapter 4 - Cash and Internal Controls Chapter 4 Cash and Internal Controls REVIEW QUESTIONS Question 4-1 (LO 4-1) Occupational fraud is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources. Occupational fraud occurs through theft or misuse of the company’s resources and through financial statement manipulation. Question

Chapter 4 - Cash and Internal Controls Exercise 4-16 (LO 4-7) a. Cash used for purchase of office supplies − $2,400 b. Cash provide from consulting to customers + $50,600 c. Cash used for purchase of mining equipment (Investing) d. Cash provided from long-term borrowing (Financing) e. Cash used for payment of employee salaries − $25,000 f. Cash used for

Chapter 04 - Cash and Internal Controls Chapter 4 Cash and Internal Controls INSTRUCTOR’S MANUAL Learning Objectives LO4-1 Discuss the impact of accounting scandals and the passage of the Sarbanes-Oxley Act. LO4-2 Identify the components, responsibilities, and limitations of internal control. LO4-3 Define cash and cash equivalents. LO4-4 Understand controls over cash receipts and cash disbursements. LO4-5 Reconcile a bank

Student Name: Instructor Class: McGraw Hill Step-by-Step Problem Note: Follow the Step-by-Step instructions in the Guide to Individual Problems to work this problem. WILLAMETTE CONSULTING Income Statement For the Month Ended June 30, 20xx Revenues: Ticket revenue Concession revenue Total revenue Expenses: Equipment rent expense Film rent expense Advertising expense Salaries expense Utilities expense Total expense Net Income: $ 160,000 29,600 $ 189,600 $ 176,100 13,500 50,000 53,400 18,600 40,000 14,100 Correct! WILLAMETTE CONSULTING Statement of Retained Earnings For the Month Ended June 30, 20xx Retained earnings, June

EXCEL TEMPLATES OPERATIONS GUIDE EXCEL TEMPLATES were developed by McGraw-Hill/Irwin to accompany FINANCIAL ACCOUNTING, Fourth Edition, by David Spiceland, Wayne Thomas, and Don Herrmann. It is designed to provide you, the student, with experience in using microcomputers in accounting by working selected problems at the end of chapters, using spreadsheet templates developed for Excel. The purpose

Chapter 4 - Cash and Internal Controls Problem 4-3B (LO 4-5) Requirement 1 Glover Incorporated Bank Reconciliation July 31, 2018 Bank’s Cash Balance Per bank statement $3,750 Deposits outstanding +2,820 Checks outstanding −2,400 (#534 and #535) Bank balance per reconciliation $4,170 Company’s Cash Balance Per general ledger $5,670 Company error − 400 Interest earned + 60 NSF check − 500 Service fees − 60 Office supplies − 600 Company balance per reconciliation $4,170 Requirement 2 Debit Cash Credit 60 Interest Revenue (Record interest earned on checking account) Equipment 400 Accounts Receivable 500 Service Fee Expense 60 Supplies 600 Cash (Record

Chapter 04 - Cash and Internal Controls Chapter 4 Cash and Internal Controls EXERCISES Exercise 4-1 1. True 2. True 3. False 4. True 5. False 6. True Exercise 4-2 1. True 2. False 3. False 4. True 5. True 6. True © The McGraw-Hill Companies, Inc., 2016 Solutions for Exercises Set B, Chapter 4 © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not

Chapter 5 - Receivables and Sales Chapter 5 Receivables and Sales REVIEW QUESTIONS Question 5-1 (LO 5-1) When recording a credit sale, we debit accounts receivable. Accounts receivable are reported as assets in the balance sheet. Question 5-2 (LO 5-1) Trade receivables are amounts receivable from customers due to credit sales. Nontrade receivables are receivables from those other than

Chapter 05 - Receivables and Sales Chapter 5 Receivables and Sales EXERCISES Exercise 5-1 May 7 Debit Accounts Receivable Service Revenue (Provide services on account) 4,760 Credit 4,760 May 13 Cash 4,760 Accounts Receivable (Collect cash on account) 4,760 Exercise 5-2 May 1 Debit Cash Credit 300 Service Revenue 300 (Provide services of $375 with a 20% trade discount) © The McGraw-Hill Companies, Inc., 2016 Solutions for Exercises Set B, Chapter 5 © 2016 by McGraw-Hill Education. This is proprietary

Chapter 05 - Receivables and Sales Chapter 5 Receivables and Sales INSTRUCTOR’S MANUAL Learning Objectives LO5-1 Recognize accounts receivable. LO5-2 Calculate net revenues using discounts, returns, and allowances. LO5-3 Record an allowance for future uncollectible accounts. LO5-4 Use the aging method to estimate future uncollectible accounts. LO5-5 Apply the procedure to write off accounts receivable as uncollectible. LO5-6 Contrast the

Chapter 5 - Receivables and Sales Exercise 5-14 (LO 5-7) a. April 1 Debit Notes Receivable Service Revenue (Provide services and accept note) 7,000 Credit 7,000 b. June 1 Notes Receivable Cash (Lend cash to vendor and accept note) 11,000 11,000 c. November 1 Notes Receivable 6,000 Accounts Receivable (Cancel accounts receivable and accept note) 6,000 Exercise 5-15 (LO 5-7) March 1 Debit Credit Notes Receivable 11,000 Service Revenue 11,000 (Provide legal services and accept note) September 1 Cash 11,495 Notes Receivable Interest Revenue (Receive cash

Problem 5-8B (concluded) April 15, 2020 Cash 13,200 Interest Receivable (2019) Interest Revenue (Receive annual interest) (Interest revenue = $110,000 x 12% x 3.5/12) 9,350 3,850 December 31, 2020 Interest Receivable (2019) 9,350 Interest Revenue (Adjust interest receivable) (Interest revenue = $110,000 x 12% x 8.5/12) 9,350 Requirement 3 April 15, 2021 Cash Debit Credit 123,200 Notes Receivable Interest Receivable (2020) Interest Revenue (Receive cash on note and annual interest) (Interest revenue = $110,000 x 12% x

Chapter 5 - Receivables and Sales Problem 5-8A (LO 5-7) Requirement 1 December 1, 2018 Debit Credit Notes Receivable 90,000 Service Revenue 90,000 (Provide services in exchange for a note) Requirement 2 December 31, 2018 Debit Interest Receivable (2018) 750 Interest Revenue (Adjust interest receivable) (Interest revenue = $90,000 x 10% x 1/12) December 1, 2019 Cash 9,000 Interest Receivable (2018) Interest Revenue (Receive annual interest) (Interest revenue = $90,000 x 10% x 11/12) Credit 750 750 8,250 December 31,

Student Name: Instructor Class: McGraw-Hill Problem 05-03 Requirement 1: THE UNDERWOOD CORPORATION 2018 and 2019 Transactions Date June 12, 2018 September 17, 2018 December 31, 2018 March 4, 2019 May 20, 2019 July 2, 2019 October 19, 2019 December 31, 2019 Account Accounts Receivable Service Revenue (Provide services on account) Cash Accounts Receivable (Receive cash on account) Bad Debt Expense Allowance for Uncollectible Accounts (Estimate future bad debts) Debit 41,000 Cash Accounts Receivable (Receive cash on account) 10,000 Bad Debt Expense Allowance

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 06-01 Requirement 1: SANDRA'S PURSE BOUTIQUE Specific Identification Method Date Oct. 1 Oct. 30 Transaction Beginning Inventory Purchase Number of Units 1 7 8 Unit Cost $ 900 930 Correct! Date Oct. 1 Oct. 1 Oct. 10 Oct. 10 Oct. 20 Transaction Beginning Inventory Beginning Inventory Purchase Purchase Purchase Number of Units 4 1 2 3 4 14 Ending Inventory $ 900 6,510 $ 7,410 Correct! Unit Cost $ 900 900 910 910 920 Correct! Cost of Goods Sold $ 3,600 900 1,820 2,730 3,680 $ 12,730 Correct! Requirement 2: FIFO Method Date Oct. 20 Oct. 30 Transaction Purchase Purchase Number of Units 1 7 8 Unit Cost $ 920 930 Correct! Date Oct. 1 Oct. 10 Oct. 20 Transaction Beginning Inventory Purchase Purchase Number of Units 6 5 3 14 Correct! Ending Inventory $ 920 6,510 $ 7,430 Correct! Unit Cost $ 900 910 920 Cost of Goods Sold $ 5,400 4,550 2,760 $ 12,710 Correct! Student Name: Instructor Class: McGraw-Hill/Irwin Problem 06-01 Requirement 3: LIFO Method Date Oct. 1 Oct. 10 Transaction Beginning Inventory Purchase Number of Units 6 2 8 Unit Cost $ 900 910 Correct! Date Oct. 10 Oct. 20 Oct. 30 Number of Units 3 4 7 14 Transaction Purchase Purchase Purchase Ending Inventory $ 5,400 1,820 $ 7,220 Correct! Unit Cost $ 910 920 930 Correct! Cost

Chapter 06 - Inventory and Cost of Goods Sold 1. Cost of Ending + goods sold inventory Cost of goods available for sale = Beginning inventory x and Number purchases of units Unit cost = Total Cost Jan. 1 200 $20 $4,000 Jun. 15 250 50 $25 $25 $6,250 $1,250 { $11,500 500 Sold $4,000 first 450 units $6,250 Not Sold $1,250 $10,250 + $1,250 = 2. Cost of Ending + goods sold inventory Cost of goods available for sale = Beginning inventory and Number purchases of units Jan. 1 { Jun. 15 x Unit cost = Total Cost 50 150 $20 $20 $1,000 $3,000 300 $25 $7,500 500 $11,500 Not Sold Sold $3,000 last 450 $7,500 units $1,000 $10,500 + $1,000 = 3. Weighted-average unit cost Cost of goods sold Ending inventory $11,500 500 = = 450 sold X =

Chapter 6 - Inventory and Cost of Goods Sold AP6-1 (continued) Requirement 1 (b) Great Adventures, Inc. Partial Income Statement For the year ended December 31, 2019 Sales revenue $60,000 Cost of goods sold (32,900) Gross profit $27,100 Requirement 2 (a) Inventory items MU watches Cost per unit NRV per unit Lower of Cost and NRV per unit $180 $100 $100 Dec. 31, 2019 Debit Cost of Goods Sold 5,600 Inventory (Adjust inventory down to net realizable value) a Quantity Lower of Cost and NRV 70 $7,000 Credit 5,600a The amount of the

Chapter 6 - Inventory and Cost of Goods Sold Chapter 6 Inventory and Cost of Goods Sold REVIEW QUESTIONS Question 6-1 (LO 6-1) Inventory includes items a company intends for sale to customers. Inventory also includes items that are not yet finished products. The cost of inventory that has not been sold by the end of

Chapter 06 - Inventory and Cost of Goods Sold Chapter 6 Inventory and Cost of Goods Sold EXERCISES Exercise 6-1 Beginning inventory Add: Purchases Cost of goods available for sale Less: Ending inventory Cost of goods sold $ 63,800 925,500 989,300 (41,500) $947,800 © The McGraw-Hill Companies, Inc., 2016 Solutions for Exercises Set B, Chapter 6 © 2016 by McGraw-Hill Education. This is proprietary material solely for

Chapter 06 - Inventory and Cost of Goods Sold Chapter 6 Inventory and Cost of Goods Sold INSTRUCTOR’S MANUAL Learning Objectives LO6-1 Trace the flow of inventory costs from manufacturing companies to merchandising companies. LO6-2 Understand how cost of goods sold is reported in a multiple-step income statement. LO6-3 Determine the cost of goods sold and ending inventory

Chapter 06 - Inventory and Cost of Goods Sold Exercise 6-9 Requirement 1 May 2 Inventory Accounts Payable (Purchase inventory on account) May 3 Debit 2,500 2,500 Inventory Cash (Pay freight-in cost) May 5 120 Accounts Payable Inventory (Return inventory on account) May 10 480 Accounts Payable Inventory Cash (Pay on account with 5% discount) ($101 = $2,020 × 5%) Credit 120 480 2,020 101 1,919 May 30 a Accounts Receivable Sales Revenue (Sell inventory on account) 3,650 Cost of Goods Sold Inventory (Record cost of inventory sold) 2,039 3,650 2,039a $2,500 (purchase) +

Chapter 6 - Inventory and Cost of Goods Sold Problem 6-6B (LO 6-2, 6-3, 6-4, 6-5, 6-6) Requirement 1 November 2 Inventory Accounts Payable (Purchase inventory on account) November 3 Inventory Cash (Pay freight-in) November 9 Debit 9,000 9,000 231 231 Accounts Payable Inventory (Return inventory on account) November 11 1,300 Accounts Payable Inventory Cash (Pay on account less 3% discount) ($231 = $7,700 × 3%) November 16 7,700 Accounts Receivable Sales Revenue (Sell inventory on account) 1,300 231 7,469 14,000 14,000 Cost of Goods Sold 9,640 Inventory (Cost of

Chapter 6 - Inventory and Cost of Goods Sold Exercise 6-20 (LO 6-9) Requirement 1 When goods are shipped FOB shipping point, title transfers from the seller to the buyer at the time of shipment. This means that Mulligan Corporation (buyer) receives title to the inventory when it is shipped on December 30, 2018. By

Chapter 6 - Inventory and Cost of Goods Sold Problem 6-6A (continued) Requirement 1 (continued) October 20 Debit Inventory Accounts Payable (Purchase inventory on account) October 22 7,000 Cash 8,000 7,000 Sales Revenue (Sell inventory for cash) 8,000 Cost of Goods Sold 6,840 Inventory (Record cost of inventory sold) ($6,840 = ($54 × 10 units) + ($70 × 90 units)) Solutions Manual, Chapter 6 Credit 6,840 © The McGraw-Hill Companies, Inc., 2014 6-61 Chapter 6 -

Chapter 6 - Inventory and Cost of Goods Sold Exercise 6-4 (continued) Requirement 2 LIFO (a) Date Jan. 1 Transaction Beginning Inventory Number of units 50 50 Unit cost $42 Ending Inventory $2,100 $2,100 Transaction Purchase Purchase Purchase Number of units 130 200 110 440a Unit cost $44 47 48 Cost of Goods Sold $ 5,720 9,400 5,280 $20,400 (b) Date Apr. 7 Jul. 16 Oct. 6 a Last 440 units purchased are assumed sold (c) Sales revenue = 440 units × $60 = $26,400 (d) Gross profit = Sales revenue − Cost of goods sold = $26,400 −

Chapter 07 - Long-Term Assets Chapter 7 Long-Term Assets INSTRUCTOR’S MANUAL Learning Objectives LO7-1 Identify the major types of property, plant, and equipment. LO7-2 Identify the major types of intangible assets. LO7-3 Describe the accounting treatment of expenditures after acquisition. LO7-4 Calculate depreciation of property, plant, and equipment. LO7-5 Calculate amortization of intangible assets. LO7-6 Account for the disposal of

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-05 Requirement 1: University Car Wash Straight Line Calculation Depreciable Depreciation X Cost Rate 246,000 1/6 246,000 1/6 246,000 1/6 246,000 1/6 246,000 1/6 246,000 1/6 Year 1 2 3 4 5 6 = Total End of Year Amounts Depreciation Accumulated Book Expense Depreciation Value 41,000 41,000 229,000 41,000 82,000 188,000 41,000 123,000 147,000 41,000 164,000 106,000 41,000 205,000 65,000 41,000 246,000 24,000 246,000 Correct! Correct! Requirement 2: University Car Wash Double-declining-balance Year 1 2 3 4 5 6 Calculation Beginning Depreciation Book Value X Rate 270,000 0.33333 180,000 0.33333 120,000 0.33333 80,000 0.33333 53,333 0.33333 35,556 0.33333 = Total End of Year Amounts Depreciation Accumulated Book Expense Depreciation Value 90,000 90,000 180,000 60,000 150,000 120,000 40,000 190,000 80,000 26,667 216,667 53,333 17,778 234,444 35,556 11,556 246,000 24,000 246,000 Correct! Correct! Requirement 3: University Car Wash Activity-based Year 1 2 3 4 5 6 Total Calculation Hours Depreciation X Used Rate 3,100 $ 20.50 1,100 $ 20.50 1,200 $ 20.50 2,800 $ 20.50 2,600 $ 20.50 1,200 $ 20.50 12,000 Correct! = End of Year Amounts Depreciation Accumulated Book Expense Depreciation Value 63,550 63,550 206,450 22,550 86,100 183,900 24,600 110,700 159,300 57,400 168,100 101,900 53,300 221,400 48,600 24,600 246,000 24,000 246,000 Correct! Correct! Given Data P07-05: UNIVERSITY CAR WASH Cost of new car wash machines Estimated residual value Machine life in years Machine life in hours Actual use per year Year 1 2 3 4 5 6 Hours Used 3,100 1,100 1,200 2,800 2,600 1,200 $ $ 270,000 24,000 6 12,000 Student Name: Instructor Class:

Chapter 7 Long-Term Assets REVIEW QUESTIONS Question 7-1 (LO 7-1) WorldCom recorded assets on the balance sheet that should have been recorded as expenses on the income statement. When WorldCom uses the telecommunication lines of another company, it pays a fee. This fee is part of normal operating costs, and should be recorded as an expense

Chapter 7 Long-Term Assets EXERCISES Exercise 7-1 Purchase price of land (and building to be removed) Title insurance Back property taxes Cost of removing the building Less: Salvaged materials Level the land Total cost of the land $400,000 3,000 4,000 25,000 (2,000) 6,000 $436,000 For property taxes, $2,000 relates only to the current period and we expense it in the current period. All of the other costs, including the

Problem 7-3B (LO 7-2) 1. Purchase price Less: Fair value of assets acquired Less: Fair value of liabilities assumed Fair value of identifiable net assets Goodwill $5,600,000 $5,650,000 (750,000) 4,900,000 $ 700,000 2. Accounts Receivable (at fair value) Buildings (at fair value) Equipment (at fair value) Goodwill (remaining purchase price) Accounts Payable (at fair value) Cash (at purchase price) (Acquire Pioneer Equipment Rental) Solutions Manual, Chapter 7 Debit 650,000 4,800,000 200,000 700,000 Credit 750,000 5,600,000 © The McGraw-Hill Companies, Inc.,

Exercise 7-20 (LO 7-8) Requirement 1 Step 1: Test for Impairment The long-term asset is impaired since future cash flows ($7.1 million) are less than book value ($8.6 million). Step 2: If Impaired, Record Loss The impairment loss is $2.7 million calculated as the amount by which book value ($8.6 million) exceeds fair value ($5.9 million). Requirement 2 Step

Exercise 8-10 Requirement 1 Cash 10,000,000 Deferred Revenue (Advance collection for gift cards) 10,000,000 Requirement 2 Deferred Revenue 8,000,000 Sales Revenue 8,000,000 (Revenue earned when gift cards are redeemed) Requirement 3 The ending balance in Deferred Revenue is $2,000,000. Deferred Revenue 8,000,000 10,000,000 2,000,000 Ending balance Solutions Manual © The McGraw-Hill Companies, Inc., 2016 21 © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized

Chapter 07 - Long-Term Assets Requirement 2 Assets Cash Accounts receivable Inventory Buildings Less: Accumulated depreciation Total assets Accounts payable Litigation liability Common stock Retained earnings Total liabilities and stockholders’ equity © The McGraw-Hill Companies, Inc., 2016 74 Federer Sports Apparel Balance Sheet December 31 Year 2019 2018 $ 2,600,000 $ 1,100,000 1,200,000 1,700,000 2,200,000 1,900,000 12,000,000 10,000,000 Increase (Decrease) Amount % $1,500,000 136.4 (500,000) (29.4) 300,000 15.8 2,000,000 20.0 (2,300,000) $15,700,000 (1,100,000) $13,600,000 (1,000,000) 2,100,000 90.9 15.4 $ 2,500,000 600,000 9,500,000 3,100,000 $ 1,800,000 200,000 9,500,000 2,100,000 700,000 400,000 0 1,000,000 38.9 200.0 0 47.6 $15,700,000 $13,600,000 2,100,000 15.4 Financial Accounting, 4e © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale

Exercise 9-14 Requirement 1 (1) Date 1/ 1 /18 12/31/18 12/31/19 (2) (3) Cash Paid Face Amount x Stated Rate Interest Expense Carrying Value x Market Rate $ 14,000 14,000 $ 14,926 15,000 Requirement 2 January 1, 2018 Cash Bonds Payable (To record the bond issue) December 31, 2018 Interest Expense Bonds Payable (difference) Cash ($200,000 x 7%) (First annual interest payment) December 31, 2019 Interest Expense Bonds Payable (difference) Cash ($200,000 x 7%) (Second annual interest payment) Solutions Manual (4) Increase in Carrying Value (3) – (2) $ 926 1,000 (5) Carrying Value Prior Carrying Value +

Chapter 8 Current Liabilities QUESTIONS Question 8-1 Liabilities have three essential characteristics. Liabilities are: (1) probable future sacrifices of economic benefits; (2) arising from present obligations to other entities; (3) resulting from past transactions or events. The definition of liabilities touches on the present, the future, and the past. A liability is a present responsibility to sacrifice

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 08-02 PRECISION CASTPARTS Date Requirement 1: October 1, 2018 October 1, 2018 Requirement 2: December 31, 2018 December 31, 2018 Requirement 3: September 30, 2019 September 30, 2019 Account Debit Cash Notes Payable (Issuance of notes payable) 41,000,000 Notes Receivable Cash (Acceptance of notes receivable) 41,000,000 Interest Expense Interest Payable (Interest expense incurred, but not paid) Credit 41,000,000

Chapter 08 - Current Liabilities Chapter 8 Current Liabilities INSTRUCTOR’S MANUAL Learning Objectives LO8-1 Distinguish between current and long-term liabilities. LO8-2 Account for notes payable and interest expense. LO8-3 Account for employee and employer payroll liabilities. LO8-4 Explain the accounting for other current liabilities. LO8-5 Apply the appropriate accounting treatment for contingencies. Analysis LO8-6 Assess liquidity using current liability ratios. 8-1 © 2016

PROBLEMS: SET B Problem 8-1B _i__ _d__ _h__ _c__ _j__ _b__ _f__ _g__ _a__ _e__ List A 1. Interest expense is recorded in the period interest is incurred rather than in the period interest is paid. 2. Payment is reasonably possible and is reasonably estimable. 3. Cash, current investments, and accounts receivable all divided by current liabilities. 4. Payment is probable and is reasonably estimable. 5. Gift cards. 6. Long-term debt maturing within

Exercise 8-13 Requirement 1 Yes, it’s probable that costs for warranties will be incurred and based on previous experience the amount is reasonably estimable. Requirement 2 December 31 Warranty Expense ($600,000 x 6%) Warranty Liability (Record contingent liability for warranties) 36,000 Requirement 3 January 31 Warranty Liability Cash (Record actual warranty expenditures) 13,000 36,000 13,000 Requirement 4 Warranty Liability 36,000 Expense Payment 13,000 23,000 Balance Solutions Manual, Chapter 8 © The McGraw-Hill Companies, Inc.,

Chapter 9 - Long-Term Liabilities Requirement 5 The debt to equity ratio will not be in violation (exceed 2.0) under an operating lease, but will be in violation (exceed 2.0) under a capital lease. Therefore, Thrillville has a strong incentive to structure the lease agreement as an operating lease. Operating lease: Total Liabilities $52 million ÷ ÷ Stockholders’ Equity $29 million ÷ ÷ Stockholders’ Equity $29 million Debt to

Chapter 9 - Long-Term Liabilities Chapter 9 Long-Term Liabilities REVIEW QUESTIONS Question 9-1 (LO 9-1) Capital structure is the mixture of liabilities and stockholders’ equity a business uses. Companies in the auto industry, like Ford, typically lean more toward liabilities for their financing, while companies in the computer industry, like Microsoft, use stockholders’ equity to a greater

Chapter 9 - Long-Term Liabilities Requirement 3 Discount. The issue price is $24,233,258. Calculator Input Bond Characteristics 1. Face amount 2. Interest payment 3. Market interest rate 4. Periods to maturity Key FV PMT I N Amount $26,000,000 $910,000 = $26,000,000 x 7% x ½ year 4% = 8% / 2 semi-annual periods 20 = 10 years x 2 periods each year Calculator Output Issue price PV $24,233,258 Exercise 9-7 (LO 9-6) January 1, 2018 Cash Bonds

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 09-04 TWISTER ENTERPRISES Date Requirement 1: January 1, 2018 June 30, 2018 December 31, 2018 Requirement 2: January 1, 2018 June 30, 2018 December 31, 2018 Requirement 3: January 1, 2018 June 30, 2018 December 31, 2018 Account Cash Bonds Payable (Issued bonds at face amount) Debit Credit 600,000 Interest Expense Cash (Pay semiannual interest) 24,000 Interest Expense Cash (Pay semiannual interest) 24,000 Cash Discount on Bonds Payable Bonds Payable (Bonds issued at a discount) 544,795 55,205 Interest Expense Discount on Bonds Payable Cash (Pay

Chapter 09 - Long-Term Liabilities Chapter 9 Long-Term Liabilities INSTRUCTOR’S MANUAL Learning Objectives LO9-1 Explain financing alternatives. LO9-2 Account for installment notes payable. LO9-3 Understand the balance sheet effects of operating and capital leases. LO9-4 Identify the characteristics of bonds. LO9-5 Determine the price of a bond issue. LO9-6 Account for the issuance of bonds. LO9-7 Record the retirement of bonds. Analysis LO9-8

Chapter 9 - Long-Term Liabilities Problem 9-4B (LO 9-6) Requirement 1 January 1, 2018 Cash Bonds Payable (Issue bonds at face amount) June 30, 2018 Interest Expense Cash ($3,000,000 x 9% x ½) (Pay semiannual interest) December 31, 2018 Interest Expense Cash ($3,000,000 x 9% x ½) (Pay semiannual interest) Requirement 2 January 1, 2018 Cash Discount on Bonds Payable Bonds Payable (Issue bonds at a discount) June 30, 2018 Interest Expense