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PROBLEM 3-8B (Continued)
Date
Account Titles and Explanation
Debit
Credit
Apr. 29
Salaries and Wages Expense .........................
Cash ..........................................................
(Paid salaries expense)
1,900
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
4.
Yes
None
N/A
6.
Yes
None
N/A
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
Accounts Receivable
Nov. 30 300
Nov. 30 Bal. 300
Supplies
Nov. 11 95
Nov. 14 125
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
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
Common Stock
Accounts Payable
Right/Credit
Right/Credit
Left/Debit
Left/Debit
Credit
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
