Accounting Chapter 3 Homework Service Revenue or Sales Revenue is increased

PROBLEM 3-8B (Continued)

Date

Account Titles and Explanation

Debit

Credit

Apr. 29

Salaries and Wages Expense …………………….

Cash ………………………………………………….

(Paid salaries expense)

1,900

(d) ROXY THEATER INC.

Trial Balance

April 30, 2014

Debit

Credit

Cash ……………………………………………………………

Accounts Receivable ……………………………………

Prepaid Rent ………………………………………………..

$ 6,660

170

1,200

PROBLEM 3-9B

(a) Correct: 2, 7

Incorrect: 1, 3, 4, 5, 6, 8

(b)

Error

(1) In Balance

(2) Difference

(3) Larger Column

1.

No

$270

Credit

3.

No

Credit

4.

Yes

None

N/A

5.

Yes

None

N/A

6.

Yes

None

N/A

8.

No

Credit

CCC3 CONTINUING COOKIE CHRONICLE

(a)

General Journal

Date Account Titles Debit Credit

Nov. 8 No journal entry required.

8 No journal entry required.

17 Equipment ……………………………………………. 900

Cash ……………………………………………… 900

18 No journal entry required.

25 Cash ……………………………………………………. 60

Unearned Service Revenue …………….. 60

CONTINUING COOKIE CHRONICLE (Continued)

Date Account Titles Debit Credit

Nov. 30 Website ……………………………………………….. 600

Accounts Payable ………………………….. 600

(b)

Cash

Nov. 8 500

Nov. 11 95

Nov. 16 2,000

Nov. 14 125

Nov. 25 60

Nov. 17 900

Nov. 29 100

Nov. 30 1,200

Nov.30 Bal. 340

Nov. 30 Bal. 1,200

Nov. 30 600

Nov. 30 Bal. 600

Accounts Receivable

Nov. 30 300

Nov. 30 Bal. 300

Nov. 30 50

Nov. 30 Bal. 650

Supplies

Nov. 11 95

Nov. 14 125

Nov. 30 Bal. 220

Nov. 30 1,200

Nov. 30 Bal. 1,200

Nov. 30 Bal. 60

Nov. 16 2,000

Nov. 30 Bal. 2,000

Equipment

Nov. 15 300

Nov. 17 900

Accounts Payable

Nov. 30 600

Unearned Service Revenue

Nov. 25 60

CONTINUING COOKIE CHRONICLE (Continued)

Common Stock

Nov. 8 500

Nov. 15 300

Nov. 30 Bal. 800

Nov.29 100

Nov.30 300

Utilities Expense

Nov. 30 50

(c) COOKIE CREATIONS INC.

Trial Balance

November 30, 2014

Debit Credit

Cash ………………………………………………………………. $ 340

Accounts Receivable ………………………………………. 300

Supplies …………………………………………………………. 220

Prepaid Insurance …………………………………………… 1,200

BYP 3-1 FINANCIAL REPORTING PROBLEM

(a)

Account

Increase

Side

Decrease

Side

Normal

Balance

Equipment

Net Product Sales

Right/Credit

Debit

Credit

Common Stock

Accounts Payable

Right/Credit

Left/Debit

Credit

(b) 1. Cash is increased.

2. Cash is decreased.

BYP 3-2 COMPARATIVE ANALYSIS PROBLEM

(a)

Tootsie Roll

Hershey Company

2.

4.

Net Property, Plant, and

Equipment

Retained Earnings

debit

credit

2.

4.

Provision for Income

Taxes

Common Stock

debit

credit

(b) The following other accounts are ordinarily involved:

1. Increase in Accounts Receivable: Service Revenue or Sales Reve–

nue is increased (credited).

3. Increase in Machinery: Notes Payable is increased (credited) or Cash

is decreased (credited).

BYP 3-3 RESEARCH CASE

(a) The reason the Green Bay Packers’ issue an annual report is because

they are a publicly owned, nonprofit company. They issue the report to

the more than 100,000 shareholders who hold shares. None of the

(b) At the time that the article was written the owners of the NFL teams

and the players’ labor union were negotiating a new contract. Knowing

how profitable the NFL teams are would be useful information for the

players to know so that they would have a better sense of how much

(c) Since some of the cost of the stadium that the Packers play in is

covered by taxpayers, the county and state government has an interest

in the team’s finances.

BYP 3-4 INTERPRETING FINANCIAL STATEMENTS

CHIEFTAIN INTERNATIONAL, INC.

(a) One of the primary advantages to Chieftain of having no long-term debt

is that there is room for growth through the use of debt and the

company’s financial risk is greatly reduced. Another advantage is that

(b) An advantage to Chieftain from having a large cash balance is that

cash is available to finance such things as the drilling of new wells and

the investment in new technology. New opportunities may be seized

(c) Accounts payable, as purchases on credit, represent interest-free loans.

Business enterprises don’t pay cash unless the supplier requires

BYP 3-5 REAL-WORLD FOCUS

(a) CPAs work in public accounting, business and industry, government,

and education.

(b) A CPA needs:

strong leadership,

BYP 3-6 DECISION MAKING ACROSS THE ORGANIZATION

(a) May 1 Cash ………………………………………………………. 15,000

Common Stock ………………………………… 15,000

5 Correct.

7 Cash ………………………………………………………. 500

Unearned Service Revenue ………………. 500

(b) The error in the entries of May 14 and May 20 would prevent the trial

balance from balancing.

(c) Net income as reported …………………………………… $ 4,500

Add: 5/9, Supplies expense …………………………... $1,500

BYP 3-7 COMMUNICATION ACTIVITY

To: Accounting Instructor

From: Accounting Student

Re: Steps in Recording Process

In the first transaction, bills totaling $6,000 were sent to customers for

services provided. Therefore, the asset Accounts Receivable is increased

$6,000 and the revenue Service Revenue is increased $6,000. Debits increase

assets and credits increase revenues, so the journal entry is:

Accounts Receivable ……………………………………………………. 6,000

Service Revenue ……………………………………………………. 6,000

(Billed customers for services provided)

BYP 3-8 ETHICS CASE

(a) The stakeholders in this situation are:

• Jennifer VanPelt, assistant chief accountant.

(b) By adding $1,000 to the Equipment account, that account total is inten-

tionally misstated. By not locating the error causing the imbalance,

some other account may also be misstated by $1,000. If the amount of

(c) Jennifer’s alternatives are:

2. Tell her supervisor of the imbalance and suffer the consequences.

BYP 3-9 ETHICS CASE

(a) Employees in the rail unit accelerated revenue in each of the fourth

quarters from 2000 to 2003. That is, revenue that should have been

reported in the first quarter of a year was instead reported in the fourth

quarter of the previous year.

(b) One possible motivation for engaging in this activity is that bonuses

are frequently based on annual results. If it appeared that the rail unit

was not going to meet the performance level required for bonuses, the

BYP 3-10 ALL ABOUT YOU

We address the issue of contingent liabilities in greater detail in Chapter

10. Our primary interest in this exercise is to engage students in a

discussion regarding the general nature of the financial statement

elements (assets, liabilities, equity, revenues and expenses).

(a) By taking out the bank loan your friend has incurred a liability. You do

not have a liability unless your friend defaults, or unless it becomes

(b) Accounting standards have specific requirements regarding account–

ing for situations where there is uncertainty regarding whether a liability

has been incurred. Those standards require an evaluation of the pro–

bability of an amount being owed. Without going into detail regarding

(c) Losing your job would not create a financial liability, although it would

most certainly reduce your revenues. You are obviously concerned that

you might lose your job, but you don’t have specific information that

IFRS 3-1 CONCEPTS AND APPLICATION

In deciding whether the U.S. should adopt IFRS, the SEC should consider

the following:

• Whether IFRS is sufficiently developed and consistent in application

• Whether the IASB is sufficiently independent

• Whether IFRS is established for the benefit to investors

• The issues involved in educating investors about IFRS

IFRS 3-2 INTERNATIONAL FINANCIAL REPORTING PROBLEM

Account

Financial Statement

Position in Financial Statement

Share capital

Consolidated

Balance Sheet

Equity

Goodwill

Consolidated

Balance Sheet

Non-current assets

Derivative

financial asset

Consolidated

Balance Sheet

Current assets