Archives: Solution Manual

Appendix A Reporting and Interpreting Investments in Other Corporations ANSWERS TO QUESTIONS 1. A short-term investment is one that meets the two tests of (1) ready marketability and (2) management intention to convert it to cash in the short run. […]

130 CHAPTER 34 NATURE OF A CORPORATION Answers to Learning Objectives 1. The different classifications and kinds of corporations are public, private, quasi public, not-for- profit, profit, stock, close, Subchapter S, foreign, domestic, and alien corporations. Lesson Outline 1. Corporations […]

127 CHAPTER 33 DISSOLUTION OF A PARTNERSHIP Answers to Learning Objectives 1. Dissolution can occur by acts of the partners, court decree, or by operation of law. Dissolution by acts of the partners includes agreement, withdrawal or alienation, and expulsion. […]

123 CHAPTER 32 CREATION AND OPERATION OF A PARTNERSHIP Answers to Learning Objectives 1. A partnership results from a contract, express or implied, written or oral. 2. A partner owes co-partners the duty to exercise loyalty and good faith, to […]

Financial Accounting, 9/e 8-57 Case B Req. 1 The company should record bad debt expense of $13,900 for the current year. Req. 2 Under current assets on the current year’s balance sheet: Accounts receivable, net of the allowance for doubtful […]

PART SEVEN BUSINESS ORGANIZATION Teaching Suggestions 1. Obtain a copy of the form used for filing a fictitious name in your state. Have the students imagine a business they would like to organize and fill out the registration form for […]

Financial Accounting, 9/e 8-41 P8–8. Req. 1 Date Assets Liabilities Stockholders’ Equity a. Jan. 1 Patent Cash +28,000 –28,000 b. Jan. 1 Assets (not detailed) Goodwill Cash +154,000 +10,000 –164,000 Machine B +5,000 (1) ($25,000 – $5,000) x 1/5 = […]

114 CHAPTER 30 LABOR LEGISLATION Answers to Learning Objectives (Page 358) 1. The objectives of the Fair Labor Standards Act are to spread employment by discouraging long workweeks and to set a minimum wage. All workers except those in intrastate […]

E8–12. Management of General Motors Corporation probably anticipated that the pre-2001 property and equipment would be more productive or efficient in the earlier part of their lives than in the later. Thus, the accelerated method would provide the best matching […]

110 CHAPTER 29 EMPLOYEES’ RIGHTS Answers to Learning Objectives 1. Under federal law, an employer may not discriminate against employees on the basis of race, color, religion, sex, national origin, age over 40, or disability. 2. Employers are restricted from […]

Financial Accounting, 9/e 8-1 Chapter 8 Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources ANSWERS TO QUESTIONS 1. Long-lived assets are noncurrent assets, which a business retains beyond one year, not for sale, but for use in […]

106 CHAPTER 28 EMPLOYER AND EMPLOYEE RELATIONS Answers to Learning Objectives 1. The relationship of employer and employee arises from the contract of employment, which is usually express, but may be implied. 2. Statutory modifications of an employer’s defenses under […]

Financial Accounting, 9/e 7-41 P7–7. Req. 1 Projected change No change from beginning of year Inventory = Cost of Goods Sold $7,283,566 = 15.1 $7,283,566 = 12.5 Turnover Average Inventory $483,555* $582,500** Req. 3 An increase in the inventory turnover […]

102 CHAPTER 27 OPERATION AND TERMINATION OF AN AGENCY Answers to Learning Objectives 1. An agent owes the principal the duties of loyalty and good faith, obedience, reasonable skill and diligence, accounting, and information. The principal owes the agent the […]

Financial Accounting, 9/e 7-21 E7–11. (continued) Req. 3 When prices are falling, the opposite effect occurs–LIFO produces higher net income and less favorable cash flow than does FIFO. E7–12. Item Quantity Total Cost Total Market LCM Valuation A 50 x […]

98 PART SIX AGENCY AND EMPLOYMENT Teaching Suggestions 1. After the students have listed the employment relationships they have had, discuss whether they were covered by union contracts or not. Group Projects 1. Divide the class into groups of about […]

Chapter 7 Reporting and Interpreting Cost of Goods Sold and Inventory ANSWERS TO QUESTIONS 1. Inventory often is one of the largest amounts listed under assets on the balance sheet which means that it represents a significant amount of the […]

94 CHAPTER 25 DEFENSES Answers to Learning Objectives (Page 293) 1. The chief advantage of being a holder in due course of a negotiable instrument is that limited defenses are not effective against such a holder. Lesson Outline 1. The […]

AP6–3. Req. 1 Aging Analysis of Accounts Receivable Customer Total Receivable (a) Not Yet Due (b) Up to 6 Mo. Past Due (c) 6 to 12 Mo. Past Due (d) More Than 12 Mo. Past Due R. Devens ……….. $ […]

89 CHAPTER 24 LIABILITIES OF PARTIES AND HOLDERS IN DUE COURSE Answers to Learning Objectives 1. A person with primary liability may be called upon to carry out the specific terms indicated on the paper. The only condition is that […]

Financial Accounting, 9/e 6-21 E6–27 (Supplement) November 20 Cash (+A) ………………………………………………………….. 441 Credit card discount (+XR, –R, –SE) ……………………… 9 Sales revenue (+R, +SE) ……………………………. 450 To record credit card sale. November 30: Sales returns and allowances (+XR, –R, –SE) […]

86 CHAPTER 23 NEGOTIATION AND DISCHARGE Answers to Learning Objectives (Page 269) 1. Negotiation by indorsement is accomplished by signing the back of the instrument. The different types of indorsements are: blank, special, qualified, and restrictive. Lesson Outline 1. Negotiation […]

82 CHAPTER 22 PROMISSORY NOTES AND DRAFTS Answers to Learning Objectives 1. The maker agrees to pay the note according to its terms, admits the existence of the payee, and warrants that the payee is competent to transfer the instrument […]

CONTINUING PROBLEMS CON5-1. a. Retained earnings (−SE) ……………………………………………. 10,000 Cash (−A) …………………………………………………………….. 10,000 b. Cash (+A) ………………………………………………………………… 2,000 Deferred revenue (+L) ……………………………………………. 2,000 c. Rent expense (+E, −SE) …………………………………………….. 500 Cash (−A) …………………………………………………………….. 500 d. Equipment (+A) ………………………………………………………… 14,000 Note […]

79 CHAPTER 21 ESSENTIALS OF NEGOTIABILITY Answers to Learning Objectives 1. The seven requirements for negotiability include: a signed writing, an order or promise to pay, an unconditional order or promise, a sum certain in money, payable on demand or […]

75 PART FIVE NEGOTIABLE INSTRUMENTS Teaching Suggestions 1. Prepare blank check and note forms with sample or for classroom use only written on them. Have each student fill out several of each and indicate whether they would be negotiable or […]

Chapter 5 Communicating and Interpreting Accounting Information ANSWERS TO QUESTIONS 1. The primary responsibility for the accuracy of the financial records and conformance with Generally Accepted Accounting Principles (GAAP) of the information in the financial statements rests with management, normally […]

69 CHAPTER 19 WARRANTIES, PRODUCT LIABILITY, AND CONSUMER PROTECTION Answers to Learning Objectives (Page 210) 1. A warranty is an assurance that an article conforms to a certain standard or will operate in a certain manner. An express warranty is […]

Financial Accounting, 9/e 4-61 COMP4-2. (continued) Req. 3 l. Remaining expenses (+E, −SE) …………………… 9,000 Supplies (−A) …………………………………….. 8,000 Small tools (−A) …………………………………. 1,000 [Supplies used ($12 – 4) and small tools used ($9 – 8)] Req. 4 FURNITURE REFINISHERS, […]

65 CHAPTER 18 TRANSFER OF TITLE AND RISK IN SALES CONTRACTS Answers to Learning Objectives 1. It is important to determine when ownership and risk of loss pass in order to know whether creditors of the buyer or seller have […]

Financial Accounting, 9/e 4-41 P4–7. Req. 1 December 31 Adjusting Entries: (a) Supplies expense (+E, −SE) ……………………………….. 600 Supplies (−A) ………………………………………….. 600 (b) Insurance expense (+E, −SE) ……………………………… 800 Prepaid insurance (−A) …………………………….. 800 Req. 2 TUNSTALL, INC. Income Statement […]

62 CHAPTER 17 FORMALITIES OF A SALE Answers to Learning Objectives 1. All contracts to sell or contracts of sale must be evidenced by a writing when the sales price is $500 or more. Such a contract need not be […]

Financial Accounting, 9/e 4-21 E4–10. Balance Sheet Income Statement Transaction Assets Liabilities Stockholders’ Equity Revenues Expenses Net Income (a) NE +2,700 –2,700 NE +2,700 –2,700 (b) –675 NE –675 NE +675 –675 E4–11 Balance Sheet Income Statement Transaction Assets Liabilities […]

59 PART FOUR SALES Teaching Suggestions 1. Obtain a retail installment contract or charge account agreement from a store, bank, or loan company for the class to read and discuss. Group Projects 1. After dividing the class into groups, assign […]

54 CHAPTER 15 SPECIAL BAILMENTS Answers to Learning Objectives 1. A carrier is engaged in the business of transporting either goods or persons, or both. The two categories of carriers are private carriers and common carriers. Lesson Outline 1. A […]

CASES AND PROJECTS FINANCIAL REPORTING AND ANALYSIS CASES CP3–1. 1. The largest expense on the income statement for the year ended January 31, 2015, is the “cost of sales” for $2,128,193,000. As goods were sold throughout the year, cost of […]

49 PART THREE PERSONAL PROPERTY Teaching Suggestions 1. Have the students make an inventory of their major personal property and classify it with regard to whether it is tangible or intangible. Group Projects 1. Assign groups of students to make […]

Financial Accounting, 9/e 3-41 P3–6. (continued) Req. 3 FedEx Income Statement (unadjusted) For the Year Ended May 31 (current year) (in millions) Req. 4 Net Profit Margin Ratio = Net Income = $1,464 = 0.037 or 3.7% Net Sales (or […]

44 CHAPTER 13 TERMINATION OF CONTRACTS Answers to Learning Objectives 1. A contract is terminated by performance, when all the terms of a contract have been fulfilled. 2. A contract will be discharged by operation of law as a result […]

Financial Accounting, 9/e 3-21 E3–11. STACEY’S PIANO REBUILDING COMPANY Income Statement (unadjusted) For the Month Ended January 31 Operating Revenues: Rebuilding fees revenue $ 19,000 Total operating revenues 19,000 Operating Expenses: Wages expense 16,500 Utilities expense 400 Total operating expenses […]

40 CHAPTER 12 THIRD PARTIES AND CONTRACTS Answers to Learning Objectives 1. In a third party beneficiary contract, the contracting parties intend to benefit a third person, not a party to the contract. A novation is the release of at […]

37 CHAPTER 11 WRITTEN CONTRACTS Answers to Learning Objectives (Page 111) 1. The Statute of Frauds requires contracts (a) for the sale of land, (b) that cannot be performed within one year, (c) to pay the debt of another, (d) […]

33 CHAPTER 10 ILLEGAL AGREEMENTS Answers to Learning Objectives 1. A contract for an unlawful purpose or a purpose achieved illegally is void. 2. Gambling contracts, Sunday contracts (in certain states), usurious contracts, contracts of an Lesson Outline 1. If […]

Financial Accounting, 9/e 2-41 AP2–2. Req. 1 Adamson Incorporated was organized as a corporation. Only a corporation issues shares of capital stock to its owners in exchange for their investment, as Adamson did in transaction (c). Req. 2 (On next […]

Financial Accounting, 9/e 2-21 E2–12. Req. 1 Transaction Brief Explanation 1 Issued common stock to shareholders for $45,000 cash. (Volz Cleaning is a corporation because it issues stock. Par value is $2.00 per share $6,000 common stock amount divided by […]

29 CHAPTER 9 DEFECTIVE AGREEMENTS Answers to Learning Objectives 1. Normally, mutual mistakes of fact invalidate contracts. Unilateral mistakes invalidate contracts when the nonmistaken party has caused the mistake or knows or should have Lesson Outline 1. Some mistakes make […]

25 CHAPTER 8 CONSIDERATION Answers to Learning Objectives 1. Consideration is whatever the promisor demands and receives as the price of a promise. 2. Part payment constitutes consideration when the amount of the debt is in dispute and a lesser […]

Financial Accounting, 9/e 2-1 Chapter 2 Investing and Financing Decisions and the Accounting System ANSWERS TO QUESTIONS 1. The primary objective of financial reporting for external users is to provide financial information about the reporting entity that is useful to […]

21 CHAPTER 7 CAPACITY TO CONTRACT Answers to Learning Objectives 1. Persons who are minors, mentally incompetent, intoxicated, or convicts may not have the capacity to contract. Lesson Outline 1. In order that an agreement may be enforceable at law, […]

Financial Accounting, 9/e 1-17 Total liabilities and stockholders’ equity $159,400 P1–2. Req. 1 JAMES COOK LAWN SERVICE Income Statement For the Three Months Ended August 31 Revenues from services Lawn service–cash $15,000 –credit 700 Total revenues $15,700 Expenses Gas, oil, […]