Archives: Solution Manual

Problem 6-5B (Concluded) Part 3 There are several possible reasons why some prenumbered checks are missing from the sequence of canceled checks returned with a bank statement. Reasons include: (1) Some of the checks in the numbered sequence may have […]

Problem 6-4A (30 minutes) Part 1 BRANCH COMPANY Bank Reconciliation July 31, 2015 Bank statement balance….. $27,233 Book balance……………..…………………………………….$27,497 Add Add Deposit of July 31……….. 11,514 38,747 Proceeds of note less collection charge…………………………..………………………….. 7,955 35,452 Adjusted bank balance……. $34,602 Adjusted […]

Exercise 6-6 (20 minutes) 1. Jan. 1 Petty Cash…………………………….…………….…….…… 200 Cash…………………………………..…………….….…… 200 To establish a petty cash fund. 2. Jan. 8 Postage Expense…………………………………….….….. 74 Merchandise Inventory*…………………….…..…….…. 29 3. Jan. 8 Postage Expense…………………………………….….….. 74 Merchandise Inventory…………..….…….….….….….. 29 Delivery Expense……………..……………………..….….. 16 Miscellaneous […]

Chapter 6 Cash and Internal Controls QUESTIONS 2. Internal control procedures become especially critical when the manager of a business can no longer control the business through personal supervision and direct participation. 3. Responsibility for related transactions should be divided […]

Chapter Outline Notes VI. Controls of Purchases Discounts—Appendix 6B A. Recording inventory purchases using net method provides more control than gross method. B. Gross method in a perpetual inventory system—records the purchase (debit inventory, credit accounts payable) at the gross […]

CHAPTER 6 CASH AND INTERNAL CONTROL Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Define internal control and its purpose and principles. 1, 2, 3, 4, 6 6-1, 6-11 6-1, 6-2 […]

Comment: Its inventory turnover is higher (more favorable) than the industry average turnover of 40. Similarly, its days’ sales in inventory is lower (more favorable) than the industry norm of 9 days. ©2016 by McGraw-Hill Education. This is proprietary material […]

Problem 5-8BA (Concluded) Part 2 If Shepard Company had been experiencing decreasing costs in the acquisition of inventory, we would observe the opposite results in our Part 3 Advantages LIFO: Assuming a trend of increasing costs, the advantage of using […]

Problem 5-3B (Continued) 3b. LIFO perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance May 1 150 @ $300 = $ 45,000 May 6 350 @ $350 = $122,500 150 @ $300 350 @ $350 = $167,500 May 9 […]

Problem 5-9AB (25 minutes) Part 1 ALASKA COMPANY Estimated Inventory December 31 At Cost At Retail Goods available for sale Beginning inventory………………………….…….…… $ 469,010 $ 928,950 Cost of goods purchased…………….….……..……. 3,376,050 6,381,050 Goods available for sale ………………………………. $3,845,060 $7,310,000 Part […]

Problem 5-3A (Continued) 3b. LIFO perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance 1/1 600 @ $45.00 = $27,000 2/10 400 @ $42.00= $16,800 600 @ $45.00 400 @ $42.00 = $43,800 3/13 200 @ $27.00= $ 5,400 […]

Exercise 5-13 (20 minutes) 2015 Inventory turnover 2015 Days’ Sales in Inventory $643,825/[($87,750 + $97,400)/2] = 7.0 times $97,400/$643,825 x 365 days = 55.2 days Analysis comment: It appears that during a period of increasing sales, Palmer has been efficient […]

Quick Study 5-22B (15 minutes) Goods available for sale Inventory, January 1………………….……………..…………………………..$190,000 Cost of goods purchased (net)…………………………………….….…… 352,000 Goods available for sale (at cost)……….……………….……..….……..542,000 Quick Study 5-23 (10 minutes) a. Both IFRS and U.S. GAAP provide broad and similar guidance […]

VISUAL #5-2 Schedule of Cost of Goods Available Units Cost* Total Jan. 1 Beginning Inventory 60 @ $10 = $ 600 Mar. 27 Purchase 90 @ 11 = 990 Aug. 15 Purchase 100 @ 13 = 1,300 Nov. 6 Purchase […]

CHAPTER 5 INVENTORIES AND COST OF SALES Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Identify the items making up merchandise inventory. 2, 12, 16 5-1, 5-23 5-1 5-8 C2. Identify […]

Serial Problem — SP 4 (Concluded) Part 6 BUSINESS SOLUTIONS Balance Sheet March 31, 2016 Assets Current assets Cash………….…………………….……..….…….…….…….…… $ 68,057 Accounts receivable*………………………………….………. 22,867 Merchandise inventory………………….…………….……… 704 Computer supplies……………………………..………………. 2,005 Prepaid insurance……………………………………….……… 1,110 Prepaid rent…………….……………………..….…….…….….. 825 Total plant assets…………………………………..…….…….. 24 […]

Serial Problem — SP 4 (Continued) Part 2 Ledger accounts as of March 31 before posting of March 31 adjusting entries Cash Acct. No. 101 Date Explanation PR Debit Credit Balance Dec. 31 Balance 48,372 Jan. 4 625 47,747 5 […]

Problem 4-5B (Concluded) Part 4 Current assets Cash ……………………………………..…………….….….….… $ 7,400 Merchandise inventory ………………………………..….… 21,300 Store supplies ………….……………………….….….….…… 3,700 Prepaid insurance ………………..…………….…………..… 3 ,800 * Total current assets…………..……………………….….….. $ 36,200 Current liabilities…………………………..…………………..… $ 18,000 Current ratio ($36,200 / $18,000)………………………………. 2.01 […]

PROBLEM SET B Problem 4-1B (40 minutes) May 2 Merchandise Inventory……………………………….. 10,000 Accounts Payable—Havel……………….…… 10,000 Purchased goods on credit, terms 1/15, n/30. 5 Merchandise Inventory……………………………….. 250 Cash………………………………………………….… 250 Paid freight on incoming goods. 9 Cash…………….……………….………….…….…………. 2,500 Sales……………..……………………………………. 2,500 Sold goods […]

Problem 4-2A (Concluded) Aug. 15 Cash………………………………………….….…….…….. 4,508 Sales Discounts*…………….………………………..… 92 Accounts Receivable—Laird………………… 4,600 Collected receivable within 2% discount period. *[($5,200 – $600) x 2%] 22 Sales Returns and Allowances……………..….…. 500 Accounts Receivable—Tux….………………. 500 Issued credit memorandum. 29 Cash…………..……………………………..….…….….…. 4,257 Sales […]

Exercise 4-12 (10 minutes) Multiple-Step Income Statement — Sales Related Information Only Sales (gross)………………..……………………………….……. $200,000 Less: Sales discounts…………….……………..………… $ 4,000 Exercise 4-13 (20 minutes) The employee’s oversight in omitting these goods from the physical count would cause the cost of […]

EXERCISES Exercise 4-1 (30 minutes) Note: The original missing numbers are blocked. (a) (b) (c) (d) (e) Sales……………….…..….. $62,000 $43,500 $46,000 $79,000 $25,600 Cost of goods sold Merch. inv. (beg.)…….. 8,000 17,050 7,500 8,000 4,560 Total cost of merch. purchases…………….. […]

Alternate Demonstration Problem #1 Chapter Four The following data was taken from ledger account balances and supplementary data for the Whisk Company. Whisk Company uses periodic inventory method to account for its inventory. Merchandise inventory, beginning……………….……..….….….….….. $ 20,000 Merchandise inventory, […]

VISUAL #4-2 COMPONENTS OF NET INCOME (FROM OPERATIONS) Steps: (a) Net Sales X (b) –Cost of Goods Sold* – X (c) Gross Profit on Sales X (d) –Operating Expenses – X (e) Net Income (Loss) from Operations X (c) Net […]

CHAPTER 4 ACCOUNTING FOR MERCHANDISING OPERATIONS Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Describe merchandising activities and identify income components for a merchandising company. 1, 2, 3, 4 4-1, 4-18 […]

Reporting in Action — BTN 3-1 1. The revenue recognition principle requires that revenue be recorded when 2. Apple provides information on revenue recognition in its Note 1 titled “Summary of Significant Accounting Policies.” It reports that “The Company recognizes […]

Serial Problem, SP 3 (Continued) Part 4 BUSINESS SOLUTIONS Income Statement For Three Months Ended December 31, 2015 Revenue Computer services revenue……….……………………….. $31,284 Expenses Depreciation expense—Office equipment………….… $ 400 Depreciation expense—Computer equipment……… 1,250 Wages expense…………………..…………….……….…….… 3,875 Repairs expense—Computer…………………………..….. 1,305 Total […]

Problem 3-6B (Continued) Common Stock Acct. No. 307 Date Explanation PR Debit Credit Balance Retained Earnings Acct. No. 318 Date Explanation PR Debit Credit Balance July 31 Closing 2,725 2,725 31 Closing 2,000 725 Dividends Acct. No. 319 Date Explanation […]

Problem 3-5B (50 minutes) Part 1 SPEEDY COURIER Income Statement For Year Ended December 31, 2015 Revenues Delivery fees earned……….….………….…….… $611,800 Interest earned…………………………….…………. 34,000 Total revenues…………..…….….…………..…….. $645,800 Expenses Depreciation expense—Trucks…..….……….. 29,000 Depreciation expense—Equipment…..…….. 48,000 Salaries expense…………………..….…….……… 74,000 Wages expense……………………….……………… 300,000 […]

Problem 3-3B (90 minutes) Parts 1 and 2 Cash Accounts Payable Bal. 60,000 Bal. 11,200 Accounts Receivable Salaries Payable Teaching Supplies Unearned Training Fees Unadj. Bal. 70,000 Unadj. Bal. 28,600 (b) 50,000 (e) 28,600 Adj. Bal. 20,000 Adj. Bal. 0 […]

Problem 3-6A (Continued) Part 6 Closing entries April 30 Commissions Earned……………….………….…405 9,750 Income Summary…………………………….901 9,750 To close the revenue account. 30 Income Summary………………………….….…….901 7,553 Depreciation Exp–Computer Equip…..612 500 Salaries Expense……………………..………622 3,620 Insurance Expense…………………………..637 133 30 Retained Earnings………………….………….…..318 1,500 Dividends…………………….….…………..….319 1,500 […]

Problem 3-4A (Continued) Part 2 JKL COMPANY Income Statement For Year Ended July 31, 2015 Revenues Consulting fees earned …………….……………. $134,240 Expenses Depreciation expense—Office equipment. . $ 6,000 Salaries expense ………………….….…….……… 74,000 Interest expense ………………..………….………. 2,200 JKL COMPANY Statement of […]

Exercise 3-15C (30 minutes) 1. Adjusting entries Oct. 31 Rent Expense……………..……….….….….……… 2,800 Rent Payable………………..………..….……. 2,800 To record accrued rent expense. 31 Rent Receivable………………….….….….…….… 850 Rent Earned…………………..…….….……… 850 To record accrued rent income. 3. Reversing entries and subsequent entries Nov. 1 […]

Exercise 3-4 (30 minutes) a. Unearned Fee Revenue…………………………………………….. 5,000 Fee Revenue………………………………………………………… 5,000 To record earned portion of fee received in advance ($15,000 x 1/3). b. Wages Expense………………………………………….…….……… 8,000 Wages Payable………………………………………….…………. 8,000 To record wages accrued but not yet paid. g. […]

Quick Study 3-15 (15 minutes) Accounts Debited and Credited Financial Statement a. Debit Unearned Revenue Balance Sheet Credit Revenue Earned Income Statement b. Debit Wages Expense Income Statement Credit Wages Payable Balance Sheet Quick Study 3-16 (15 minutes) The answer […]

Chapter 3 Adjusting Accounts for Financial Statements QUESTIONS 2. The accrual basis of accounting generally provides a better indication of company performance and financial condition than does the cash basis. Also, the accrual basis increases the comparability of financial statements […]

VISUAL #3-1 ACCRUAL BASIS ACCOUNTING (Follows GAAP) Requires that the Income Statement (for a period) report ALL REVENUES EARNED in period (Collected or Not) Minus ALL EXPENSES INCURRED in period (Paid or Not) Equals Net Income or Net Loss for […]

CHAPTER 3 ADJUSTING ACCOUNTS FOR FINANCIAL STATEMENTS Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: A2. Compute current ratio and describe what it reveals about a company’s financial condition. 3-25 3-11 3-5, […]

Taking It to the Net — BTN 24-5 Period Cash flow Cumulative cash flow 0……………………………………..….….….…….…….…….$(15,000) $(15,000) 1……………………………………..….….….…….…….…….1,000 (14,000) $3,000/$7,000 = 0.43 The project has a payback period of 4.43 years, about 1.77 years more than the original cash flows provided […]

Problem 24-6B (40 minutes) Part 1: Payback period Period Cash flow Cumulative cash flow 0……………………………………..….….….…….…….…….$(800,000) $(800,000) 1……………………………………..….….….…….…….…….450,000 (350,000) The payback period is about 1.9 years. Part 2: Break-even time Period Cash Flow Present Value of 1 at 10% Present Value […]

Problem 24-6A (Concluded) Part 5 While the total cash flows are identical to those in Problem 24-5A, the cash flows are reversed, with the largest cash flows coming in the early years of the project. This will shorten the payback […]

PROBLEM SET A Problem 24-1A (50 minutes) Part 1 Part 2 Net Net Cash Income Flow Expected annual sales of new product……….….…..$1,840,000 $1,840,000 Expected costs of new product Direct materials…………….…….….….….….….….….… (480,000) (480,000) Direct labor…….………………….….…..….….….….….… (672,000) (672,000) Overhead excluding depr. on […]

Exercise 24-5 (20 minutes) a. Payback period = = = 2.21 years where Annual net cash flow……..…….……..……..…..……..……..………………..$235,000 *Annual depreciation = = $85,000 b. Payback period = = = 3.62 years where Annual after-tax income……..……..……..…….…………..……..………..…$ 60,000 Plus depreciation*…..……..……..…….…………..……..…….……..……..…. 45,000 Annual net […]

Chapter 24 Capital Budgeting and Investment Analysis QUESTIONS 1. Capital budgeting decisions require careful analysis because they are generally 2. Capital budgeting is the process of planning the acquisition or sale of plant assets. 3. Capital budgeting decisions are risky […]

Chapter Outline 4. When cash flows are unequal, trial and error must be used; select any reasonable discount rate and compute the NPV. a. If amount is positive, recompute NPV using higher discount rate; if amount is negative, recompute NPV […]

CHAPTER 24 CAPITAL BUDGETING AND INVESTMENT ANALYSIS Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Analytical objectives: P1. Compute the payback period and describe its use. 24-1, 24-2, 24-3, 24-4, 24-5, 24-6 24-1, 24-4, […]

Problem 23-6B (Continued) Part 3 ESME COMPANY Reconciliation of Combined Income with Forecasted Income Combined net income …………..……………..………………………………………$ 48,600 Less Dept. Z’s lost sales…………….…………………….….…….….…….….…..(175,000) ANALYSIS Department Z’s avoidable expenses of $181,960 are $6,960 greater than its revenues of $175,000. This […]

Problem 23-2B (concluded) Total overhead……………….……………….…..………..………. $1,375,000 Fixed overhead (20%)………….………………..……………….. 275,000 New business variable overhead cost…………………….. $ 100,000 Total selling expenses…….……………..…………………..…. $ 275,000 Fixed selling expenses (60%)………..……………………….. 165,000 Variable selling expenses……………………..……….………. 110,000 Units of output…………………………………………….……..…. 550,000 Cost per unit………………………………..…..…..………..…….. $ 0.20 […]

Problem 23-3A (30 minutes) Part 1 INCREMENTAL COST OF MAKING RX5 Variable costs: Direct materials (50,000 units x $5.00 per unit)………….….……….. $250,000 Direct labor (50,000 units x $8.00 per unit)…………….……….……… 400,000 * Total overhead = 50,000 units x $9.00 per […]

Exercise 23-4 (20 minutes) Make Buy Variable costs (65,000 @ $1.95)…………….….…… $126,750 —- Incremental fixed costs………………..….….….….… 75,000 Total…………..………………………………..……..….….… $201,750 $211,250 RECOMMENDATION : Note that the allocated fixed costs of $62,000 are not relevant to this managerial decision because they will […]