PROBLEM 3-9A (Continued)
(d) HILLS LEGAL SERVICES INC.
Trial Balance
August 31, 2017
Debit
Credit
Cash ……………………………………………………………
Accounts Receivable ……………………………………
Supplies ………………………………………………………
Equipment …………………………………………………..
$ 6,225
1,300
500
6,200
PROBLEM 3-10A
(a) & (c)
Cash
Apr. 30 11,400
Bal. 11,400
May 1 1,000
4 1,100
14 1,200
Supplies
Equipment
Bal. 6,000
Accounts Payable
Bal. 1,200
Apr. 30 10,000
Bal. 10,000
Bal. 2,400
May 1 1,000
Bal. 1,000
Supplies Expense
Apr. 30 2,100
May 22 700
Unearned Service Revenue
Bal. 1,200
Apr. 30 1,000
May 7 1,500
Common Stock
Apr. 30 5,000
Bal. 5,000
Service Revenue
May 8 1,200
15 800
15 700
22 1,000
29 1,700
Salaries and Wages Expense
May 14 1,200
31 1,200
May 22 700
Bal. 700
PROBLEM 3-10A (Continued)
Utilities Expense
Interest Expense
Income Tax Expense
PROBLEM 3-10A (Continued)
(b)
Date
Account Titles
Debit
Credit
May 1
Rent Expense ……………………………………………..
Cash …………………………………………………….
1,000
1,000
4
Accounts Payable ……………………………………….
Cash …………………………………………………….
1,100
1,100
7
Cash …………………………………………………………..
Unearned Service Revenue …………………..
1,500
1,500
8
Cash …………………………………………………………..
Service Revenue …………………………………..
1,200
1,200
14
Salaries and Wages Expense ……………………….
Cash …………………………………………………….
1,200
15
Cash …………………………………………………………..
Service Revenue …………………………………..
800
800
15
Unearned Service Revenue ………………………….
Service Revenue …………………………………..
700
700
21
Accounts Payable ……………………………………….
Cash …………………………………………………….
1,000
1,000
22
Cash …………………………………………………………..
Service Revenue …………………………………..
Supplies Expense ……………………………………….
Accounts Payable …………………………………
700
700
PROBLEM 3-10A (Continued)
May 25
Advertising Expense …………………………………..
Accounts Payable ………………………………..
500
500
29
Cash …………………………………………………………..
Service Revenue ………………………………….
1,700
1,700
29
Unearned Service Revenue …………………………
Service Revenue ………………………………….
600
600
31
Interest Expense …………………………………………
Cash ……………………………………………………
50
50
31
Salaries and Wages Expense ………………………
Cash ……………………………………………………
31
Income Tax Expense …………………………………..
Cash ……………………………………………………
150
150
PROBLEM 3-10A (Continued)
(d) PAMPER ME SALON INC.
Trial Balance
May 31, 2017
Debit
Credit
Cash …………………………………………………………….
Supplies ………………………………………………………
Service revenue ……………………………………………
Salaries and wages expense …………………………
Rent expense ……………………………………………….
Supplies expense …………………………………………
Advertising expense …………………………………….
$ 5,100
500
2,400
1,000
700
500
6,000
(Assets and Expenses have debit balances)
PROBLEM 3-11A
Error
(a) In Balance
(b) Difference
(c) Larger Column
1.
No
$600
Debit
2.
Yes
None
N/A
3.
Yes
None
N/A
4.
No
$680
5.
Yes
None
N/A
6.
Yes
None
N/A
7.
No
$900
Debit
8.
Yes
None
N/A
CT 3-1 FINANCIAL REPORTING PROBLEM
(a)
Account
Increase
Side
Decrease
Side
Normal
Balance
Equipment
Net Sales
Debit
Credit
Common Stock
Accounts Payable
Right/Credit
Right/Credit
Left/Debit
Left/Debit
Credit
Credit
(b) 1. Cash is increased.
(c) 1. Cash is decreased or Interest Payable is increased.
CT 3-2 COMPARATIVE ANALYSIS PROBLEM
(a)
Columbia Sportswear
VF Corporation
2.
4.
Net Property, Plant, and
Equipment
Retained Earnings
debit
credit
2.
3.
5.
Income Taxes
Accrued Liabilities
Interest Expense
debit
credit
debit
(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 Equipment: Notes Payable is increased (credited) or
Cash is decreased (credited).
4. Increase in Interest Revenue: Cash or Interest Receivable is in–
CT 3-3 COMPARATIVE ANALYSIS PROBLEM
(a)
Amazon
Wal-Mart
1.
3.
Interest Expense:
Accounts Payable:
debit
credit
1.
3.
Product Revenues:
Cost of Sales:
credit
debit
(b) The following other accounts are ordinarily involved:
2. Increase in Interest Expense: Cash is decreased (credited).
4. Increase in Service Revenue: Cash or Accounts Receivable is in-
CT 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
CT 3-5 REAL-WORLD FOCUS
(a) CPAs work in public accounting, business and industry, government,
(b) A CPA needs:
strong leadership,
(c) Salary ranges are: $5 1,500 – $74,250 during the first three years for a CPA
at a large firm;
CT 3-6 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
(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
(c) Since some of the cost of the stadium that the Packers play in is
(d) The Packers’ revenues increased during recent years. However,
because the cost of players’ salaries increased at a faster rate than
CT 3-7 DECISION MAKING ACROSS THE ORGANIZATION
(a) May 1 Cash ………………………………………………………. 15,000
Common Stock ………………………………… 15,000
5 Correct.
7 Cash ………………………………………………………. 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
(d) Cash as reported …………………………………………….. $12,475
Add: 5/9, Purchase on account ………………………. $1,500
CT 3-8 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
The $6,000 amount is then posted to the debit side of the general ledger
account Accounts Receivable and to the credit side of the general ledger
account Service Revenue.
In the second transaction, $2,000 was paid in salaries to employees. Therefore,
the expense Salaries and Wages Expense is increased $2,000 and the asset
The $2,000 amount is then posted to the debit side of the general ledger
account Salaries and Wages Expense and to the credit side of the general
ledger account Cash.
CT 3-9 ETHICS CASE
(a) The stakeholders in this situation are:
• Vanessa Jones, 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) Vanessa’s alternatives are:
2. Tell her supervisor of the imbalance and suffer the consequences.
3. Do as she did and locate the error later, making the adjustment in
CT 3-10 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
(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
(c) The employees were fired. In addition, the matter was being investigated
(d) To restate financial statements means to actually issue new financial
statements to replace those that were previously issued. We are told
that, for example, 2002 revenue was overstated by $158 million, and
CT 3-11 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-
(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
would suggest that it will happen. Therefore, you probably don’t have
IFRS 3-1 CONCEPTS AND APPLICATION
Account
Financial Statement
Position in Financial Statement
Other operating
income and
expense
Consolidated Income
Statement
After gross profit and before
operating profit
Cash and cash
equivalents
Consolidated
Balance Sheet
Current assets