978-0078025587 Chapter 3 Solution Manual Part 5

subject Type Homework Help
subject Pages 9
subject Words 2031
subject Textbook Fundamental Accounting Principles 21st Edition
subject Authors Barbara Chiappetta, John Wild, Ken Shaw
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page-pf1
Serial Problem, SP 3 (Continued)
Part 6
SUCCESS SYSTEMS
Balance Sheet
December 31, 2013
Assets
Cash ................................................................................ $ 58,160
Accounts receivable ..................................................... 5,668
Computer supplies ........................................................ 580
Prepaid insurance ......................................................... 1,665
Liabilities
Accounts payable ........................................................... $ 1,100
Wages payable ............................................................... 500
Unearned computer services revenue ......................... 1,500
Total liabilities ................................................................ 3,100
Equity
page-pf2
Serial Problem, SP 3 (Continued)
[Note: Ledger includes all entries from prior three months. The Working Papers shorten
the solution by showing account balances as of November 30.]
General Ledger
Cash
Acct. No. 101
Date
Explanation
PR
Credit
Balance
Oct.
1
55,000
2
3,300
51,700
5
2,220
49,480
8
1,420
48,060
15
52,860
17
805
52,055
20
1,940
50,115
22
51,515
31
875
50,640
31
3,600
47,040
Nov.
1
320
46,720
2
51,353
5
1,125
50,228
18
52,436
22
250
52,186
28
384
51,802
30
1,750
50,052
30
2,000
48,052
Dec.
2
1,025
47,027
3
500
46,527
4
50,477
10
750
49,727
14
51,227
20
56,852
28
59,852
29
192
59,660
31
1,500
58,160
page-pf3
Serial Problem, SP 3 (Continued)
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Credit
Oct.
6
12
15
4,800
22
1,400
28
Nov.
8
18
2,208
24
Dec.
4
3,950
28
3,000
Computer Supplies
Acct. No. 126
Date
Explanation
PR
Credit
Oct.
3
Nov.
5
Dec.
15
31
3,065
Prepaid Insurance
Acct. No. 128
Date
Explanation
PR
Credit
Oct.
5
Dec.
31
555
Prepaid Rent
Acct. No. 131
Date
Explanation
PR
Credit
Oct.
2
Dec.
31
2,475
Office Equipment
Acct. No. 163
Date
Explanation
PR
Credit
Oct.
1
Accumulated Depreciation—Office Equipment
Acct. No. 164
Date
Explanation
PR
Credit
Dec.
31
400
page-pf4
Serial Problem, SP 3 (Continued)
Computer Equipment
Acct. No. 167
Date
Explanation
PR
Credit
Oct.
1
Accumulated Depreciation—Computer Equipment
Acct. No. 168
Date
Explanation
PR
Credit
Dec.
31
1,250
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Credit
Oct.
3
1,420
8
Dec.
15
1,100
Wages Payable
Acct. No. 210
Date
Explanation
PR
Credit
Dec.
31
500
Unearned Computer Services Revenue
Acct. No. 236
Date
Explanation
PR
Credit
Dec.
14
1,500
A. Lopez, Capital
Acct. No. 301
Date
Explanation
PR
Credit
Oct.
1
83,000
A. Lopez, Withdrawals
Acct. No. 302
Date
Explanation
PR
Credit
Oct.
31
Nov.
30
Dec.
31
page-pf5
Serial Problem, SP 3 (Continued)
Computer Services Revenue
Acct. No. 403
Date
Explanation
PR
Credit
Oct.
6
4,800
12
1,400
28
5,208
Nov.
2
4,633
8
5,668
24
3,950
Dec.
20
5,625
Depreciation Expense—Office Equipment
Acct. No. 612
Date
Explanation
PR
Credit
Dec.
31
Depreciation Expense—Computer Equipment
Acct. No. 613
Date
Explanation
PR
Credit
Dec.
31
Wages Expense
Acct. No. 623
Date
Explanation
PR
Credit
Oct.
31
Nov.
30
Dec.
10
31
Insurance Expense
Acct. No. 637
Date
Explanation
PR
Credit
Dec.
31
page-pf6
Serial Problem, SP 3 (Concluded)
Rent Expense
Acct. No. 640
Date
Explanation
PR
Credit
Dec.
31
Computer Supplies Expense
Acct. No. 652
Date
Explanation
PR
Credit
Dec.
31
Advertising Expense
Acct. No. 655
Date
Explanation
PR
Credit
Oct.
20
Dec.
2
Mileage Expense
Acct. No. 676
Date
Explanation
PR
Credit
Nov.
1
28
Dec.
29
Miscellaneous Expense
Acct. No. 677
Date
Explanation
PR
Credit
Nov.
22
Repairs Expense—Computer
Acct. No. 684
Date
Explanation
PR
Credit
Oct.
17
Dec.
3
page-pf7
Reporting in Action — BTN 3-1
1. The revenue recognition principle requires that revenue be recorded
customers.
2. Polaris provides information on revenue recognition in its Note 1 titled
“Organization and Significant Accounting Policies.” They report that
3. For year-end December 31, 2010, the profit margin is ($ thousands):
$147,138 / $1,991,139 = 0.074 = 7.4%
4. Solution depends on the financial statements accessed.
page-pf8
Comparative Analysis — BTN 3-2
($ in thousands)
1. Polaris
Current year, profit margin = $227,575 / $2,656,949 = 0.086 = 8.6%
Prior year, profit margin = $147,138 / $1,991,139 = 0.074 = 7.4%
Arctic Cat
2. Polaris is more successful on the basis of profit margin in both the
current and prior years relative to Arctic Cat. Both companies
Ethics Challenge — BTN 3-3
1. GAAP requires that annual deprecation be accumulated in a contra-
asset account, called Accumulated Depreciation. While property, plant,
2. One strength of Smith’s method would be the ease of preparing the
balance sheet. The property, plant, and equipment balance in the
adjusted trial balance would be directly transferable to the balance sheet
3. While both approaches would lead to the same total assets on the
balance sheet, GAAP requires Boland’s approach. As a professional,
page-pf9
Communicating in Practice — BTN 3-4
This communication activity has no set solution. A class discussion of the
Taking It to the Net — BTN 3-5
1. The Gap’s main brands (stores) are The Gap, Old Navy, and Banana
2. The Gap’s fiscal year-end is January 28, 2012. It appears that The Gap’s
3. Net sales for the year ended January 28, 2012, are $14,549 million.
5. Profit margin = $833 million / $14,549 million = 5.73%
6. The company probably chose a fiscal year-end as the end of January or
page-pfa
Teamwork in Action — BTN 3-6
Note that there is no specific solution to this activity. Still, the presentation
of each expert team should reflect the following summary points:
Before Adjusting
Balance Sheet Income Statement
Type Account Account Adjusting Entry
Prepaid expenses Asset overstated Expense understated Dr. Expense
Cr. Asset*
* For depreciation, one would Credit the Accumulated Depreciation contra account.
Some implementation notes: This activity allows all students to be actively
involved in the learning process. Encourage students to take the opportunity
page-pfb
Entrepreneurial Decision — BTN 3-7
1. a. To record the collection of cash from sale of the gift certificate in
advance of delivery of merchandise to the customer:
b. To record the delivery of merchandise to the customer when he/she
uses the gift certificate:
2. Carrying less inventory would allows ash&dans to save the costs of
carrying that added inventory; such as warehousing costs, insurance,
3. If it carries additional inventory, ash&dans can potentially sell more
merchandise and increase its profits. This might further fuel increased
sales as additional customers might be attracted to its products. On
page-pfc
Hitting the Road — BTN 3-8
There is no formal solution to this field activity. The instructor may wish to
tally students’ findings to see what companies were selected, who
Global Decision — BTN 3-9
1. Piaggio’s Note 2.2 (Accounting Policies — Recognition of revenues)
reports that:
“According to IFRS, sales of goods are recognised when the goods are
dispatched and the company has transferred the significant risks and
accrual basis.”
2. (Euro in thousands)

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