Chapter 7 Accounting Information Systems QUESTIONS 1.
The five The five comp compon onen ents ts of an acco accoun unti ting ng syst system em are are sour source ce !o !ocu cume ment nts" s" inpu inputt !evices" information processors" information storage" an! output !evices.
#. #.
Source Source !ocuments !ocuments contain contain !ata !ata a$out a$out $usiness $usiness transact transactions ions or or events events that are are put into into the accoun accountin ting g system system an! proces processe! se!.. E%amp& E%amp&es es of source source !ocume !ocuments nts are invoices from supp&iers" chec's receive! from customers" an! payro&& forms fi&&e! out $y emp&oyees.
(.
The five The five fun!am fun!ament enta& a& princip princip&es &es of accounti accounting ng informa informatio tion n system systems s are are )a* contro& contro& princip&e" )$* re&evance princip&e" )c* compati$i&ity princip&e" )!* f&e%i$i&ity princip&e" an! )e* cost+$enefit princip&e.
,.
An input input !evice !evice is use! to transf transfer er !ata from from source source !ocume !ocuments nts to the inform informati ation on processor)s*. E%amp&es of input input !evices for computer systems inc&u!e 'ey$oar!s" 'ey$oar!s" scanners" an! $ar+co!e rea!ers.
-.
ata store! /off+&ine/ are not imme!iate&y avai&a$&e avai&a$&e to the information information processor)s*" processor)s*" 0hi&e /on&ine/ !ata are imme!iate&y avai&a$&e.
. Outp Outpu ut !evic evices es prov provi! i!e e the the mean means s $y 0h 0hic ich h info nformat rmatio ion n is ta'en a'en from rom the accounting system an! ma!e avai&a$&e for use. 7.
2our types 2our types of transac transactio tions ns usua&&y usua&&y recor recor!e! !e! in specia& specia& 3ourn 3ourna&s a&s are are (a) sa&es on cre!it" (b) purchases on cre!it" (c) cash receipts" an! (d) cash !is$ursements.
4.
The )a* initi initia& a& an! )$* )$* page num$er num$er of the the 3ourna& 3ourna& from from 0hich the the amount amount is poste! poste! is entere! in the 5osting 6eference co&umn of the &e!ger account.
. .
The !ou$&e The !ou$&e postin posting g !oes not not cause the tria& tria& $a&an $a&ance ce to $e out of $a&ance $a&ance $ecau $ecause se on&y one cre!it is poste! to the genera& &e!ger8the su$si!iary &e!ger posting an! its $a&ances are not part of a tria& $a&ance )they give !etai&s of genera& &e!ger accounts*.
19. :hen copies copies of the sa&es sa&es invoices invoices are use! use! as a sa&es 3ourna&" 3ourna&" each invoi invoice ce tota& is poste! poste! to the proper proper custom customer er accoun accountt in the su$si! su$si!iar iary y Account ccounts s 6eceiv 6eceiva$& a$&e e ;e!ger" ;e!ger" after after 0hich the invoices invoices are $oun! in numerica& numerica& or!er. or!er. Then at the en! of the perio! the $oun! invoice copies are tota&e! an! the tota& is !e$ite! to Accounts 6eceiv 6eceiva$& a$&e e an! cre!i cre!ite! te! to Sa&es. Sa&es. Th This is metho! metho! is ca&&e! ca&&e! direct posting of sales invoices.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
177
11. 11. @oth 'in!s 'in!s of cre!its cre!its must must not $e $e p&ace! in in the same same co&umn $ecause $ecause the the sum of the cre!i cre!its ts to the custom customer er accoun accounts ts must must $e poste! poste! to the Accoun Accounts ts 6eceiv 6eceiva$& a$&e e contro&&ing account )the Other Accounts co&umn tota& is not poste!8instea!" each amount is in!ivi!ua&&y in!ivi!ua&&y poste! to its genera& &e!ger account*. 5&acing these cre!its in separate co&umns ma'es it possi$&e to post the Accounts 6eceiva$&e co&umn tota& to its contro&&ing account. 1#. Imme!iate Imme!iate recor!in recor!ing g an! posting posting of cre!it cre!it sa&es an! cash receipts receipts from from customers customers provi! provi!es es up+to+ up+to+!at !ate e infor informati mation on for use in !ecisi !ecision ons s a$out a$out granti granting ng cre!i cre!itt to customers. customers. A&so" A&so" up+to+!ate up+to+!ate account account $a&ances $a&ances are nee!e! nee!e! if customers customers inuire inuire a$out their $a&ances. 1(. In its note 1# )Segment )Segment 6eporting 6eporting*" *" 5o&aris 5o&aris !iscusses !iscusses its sing&e sing&e reporta$&e reporta$&e segmentB segmentB the Companys segments have simi&ar )1* economic characteristics" )#* pro!ucts an! services" )(* pro!uction processes" ),* customers" )-* !istri$ution channe&s an! )* regu&a regu&ator tory y enviro environme nments nts.. There Th erefor fore" e" 5o&ari 5o&aris s report reports s on one e report reporta$& a$&e e $usine $usiness ss segment. 1,. Des. Des. @ecause @ecause Arctic Arctic Cat reports reports one $usiness $usiness segment" segment" the segment segment information information on its Income Income Statement Statement is at the $usiness $usiness segment segment &eve&. As such" such" net income $y segment is not a&so inc&u!e! in its note )Segment 6eporting*. 1-. T=s T=s three three reporta$ reporta$&e &e segments segments are Europe" Europe" North North America" America" an! Others. Others. Note that that segment information is foun! in the Enc&osures to the Notes to the Conso&i!ate! 2inancia& Statements" as references in its note # )Segment ) Segment Information*. 1. No. Informati Information on regar!in regar!ing g any assets assets o0ne! o0ne! $y 5iaggi 5iaggios os $usine $usiness ss segments segments is not reporte! on the $a&ance $a&ance sheet. ?o0ever" certain information is !etai&e! in the notes notes to its financia& statements )not repro!uce! in Appen!i% A*. A*.
QUIC STUIES Quic' Stu!y 7+1 )19 minutes* 1.
A
,.
E
#.
C
-.
@
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Quic' Stu!y 7+# )- minutes* 1. #. (. ,.
$atch net0or' scanner ente enterp rpri rise se res resou ourc rce e p&an p&anni ning ng
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
17"
Fundamental Accounting Principles, 1st !dition
11. 11. @oth 'in!s 'in!s of cre!its cre!its must must not $e $e p&ace! in in the same same co&umn $ecause $ecause the the sum of the cre!i cre!its ts to the custom customer er accoun accounts ts must must $e poste! poste! to the Accoun Accounts ts 6eceiv 6eceiva$& a$&e e contro&&ing account )the Other Accounts co&umn tota& is not poste!8instea!" each amount is in!ivi!ua&&y in!ivi!ua&&y poste! to its genera& &e!ger account*. 5&acing these cre!its in separate co&umns ma'es it possi$&e to post the Accounts 6eceiva$&e co&umn tota& to its contro&&ing account. 1#. Imme!iate Imme!iate recor!in recor!ing g an! posting posting of cre!it cre!it sa&es an! cash receipts receipts from from customers customers provi! provi!es es up+to+ up+to+!at !ate e infor informati mation on for use in !ecisi !ecision ons s a$out a$out granti granting ng cre!i cre!itt to customers. customers. A&so" A&so" up+to+!ate up+to+!ate account account $a&ances $a&ances are nee!e! nee!e! if customers customers inuire inuire a$out their $a&ances. 1(. In its note 1# )Segment )Segment 6eporting 6eporting*" *" 5o&aris 5o&aris !iscusses !iscusses its sing&e sing&e reporta$&e reporta$&e segmentB segmentB the Companys segments have simi&ar )1* economic characteristics" )#* pro!ucts an! services" )(* pro!uction processes" ),* customers" )-* !istri$ution channe&s an! )* regu&a regu&ator tory y enviro environme nments nts.. There Th erefor fore" e" 5o&ari 5o&aris s report reports s on one e report reporta$& a$&e e $usine $usiness ss segment. 1,. Des. Des. @ecause @ecause Arctic Arctic Cat reports reports one $usiness $usiness segment" segment" the segment segment information information on its Income Income Statement Statement is at the $usiness $usiness segment segment &eve&. As such" such" net income $y segment is not a&so inc&u!e! in its note )Segment 6eporting*. 1-. T=s T=s three three reporta$ reporta$&e &e segments segments are Europe" Europe" North North America" America" an! Others. Others. Note that that segment information is foun! in the Enc&osures to the Notes to the Conso&i!ate! 2inancia& Statements" as references in its note # )Segment ) Segment Information*. 1. No. Informati Information on regar!in regar!ing g any assets assets o0ne! o0ne! $y 5iaggi 5iaggios os $usine $usiness ss segments segments is not reporte! on the $a&ance $a&ance sheet. ?o0ever" certain information is !etai&e! in the notes notes to its financia& statements )not repro!uce! in Appen!i% A*. A*.
QUIC STUIES Quic' Stu!y 7+1 )19 minutes* 1.
A
,.
E
#.
C
-.
@
(.
Quic' Stu!y 7+# )- minutes* 1. #. (. ,.
$atch net0or' scanner ente enterp rpri rise se res resou ourc rce e p&an p&anni ning ng
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
17"
Fundamental Accounting Principles, 1st !dition
Quic' Stu!y 7+( )1- minutes* 1.
@
7.
@
#.
E
4.
@
(.
E
.
A
,.
E
19.
-.
A
11.
@
.
C
1#.
Quic' Stu!y 7+, )19 minutes* a. $. c. !. e. f. g. h.
Sa&es Fourna& 5urchases Fourna& Cash Cash is$ is$ur urse seme ment nts s Fou Fourn rna& a& Cash 6ec 6eceipts pts Fo Fourna rna& Cash 6ec 6eceipts pts Fourna rna& 5urchases Fo Fourna& Cash Cash is$ is$ur urse seme ment nts s Fou Fourn rna& a& Cash Cash is$ is$ur urse seme ment nts s Fou Fourn rna& a&
Quic' Stu!y 7+- )1- minutes* >enera& Fourna& Nov Nov. #
GIn GIn 5urc 5urcha hase ses s Four Fourna na&H &H
Nov. Nov. 1#
Automo$ Automo$i&es i&es.... ......... ......... ........ ......... ......... ........ ......... ........... ............. ............... ............. ..... 17"999 17"999 T. @i&o%i" Capita&................................................
17"999
#$ner contributed an auto to the business%
Nov Nov. 1
GIn GIn Sa& Sa&es es Four Fourna na&H &H
Nov Nov. 1
Sa&e Sa&es s 6etu 6eturn rns s an! an! A&& A&&o0 o0an ance ces. s... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts 6eceiva$&e8. =yer.......................
171717-
Customer returned ($orthless) merchandise% merchandise%
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
17&
Quic' Stu!y 7+ )1- minutes* a* Accounts 6eceiva$&e ;e!ger ACCOUNTS 6ECEIA@;E ;E>E6 ate Fan. 19 #9
Stern Company E%p&anation 56 e$it S1 ,"999 61
ate Fan. 1 #4
iaJ @rothers E%p&anation 56 S1 61
e$it 1"99
ate Fan. #( (1
6e% Company E%p&anation 56 S1 61
e$it #"-99
Cre!it #"999 Cre!it 1"99 Cre!it 1"(99
@a&ance ,"999 #"999 @a&ance 1"99 9 @a&ance #"-99 1"#99
$* >enera& ;e!ger >ENE6A; ;E>E6 ate Fan. (1 (1
Accounts 6eceiva$&e E%p&anation 56 e$it S1 4"199 61
Cre!it ,"99
@a&ance 4"199 ("#99
Office Supp&ies r.
Other Accounts r.
Quic' Stu!y 7+7 )#9 minutes* 5U6C?ASES FOU6NA; ate of Invoice
Terms
rause" Inc.................. -K91
nK(9
19"199
1, Store Supp&iesK Chang Co................. -K1,
nK(9
#,9
17 =on!er -K17 Company....................
nK(9
#9
ate
Account
=ay 1
56
Account s 5aya$&e Cr.
Inventory r.
19"199 #,9 #9
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1"'
Fundamental Accounting Principles, 1st !dition
Quic' Stu!y 7+4 )19 minutes* =ay 1
5urchases Fourna& 4
Sa&es Fourna&
1,
5urchases Fourna&
17
5urchases Fourna&
#,
Cash 6eceipts Fourna&
#4
Cash is$ursements Fourna&
#
Cash is$ursements Fourna&
Quic' Stu!y 7+ )(9 minutes* Part 1
ACCOUNTS 6ECEIA@;E ;E>E6
Fu&y 4
Eric ?orner 11"199
Fu&y # #
=ary =ac' 4"99 7"(99
Fu&y 1,
?ong Fiang #9"-99
Fu&y 19 #9
Troy :i&son 1(",99 11"#99
Part
>ENE6A; ;E>E6 Accounts 6eceiva$&e Fu&y (9 7#"199
Sa&es Fu&y (9
7#"199
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1"1
Quic' Stu!y 7+ )Conc&u!e!* Part
:A6TON CO=5AND Sche!u&e of Accounts 6eceiva$&e Fu&y (9 Eric ?orner.........................................................
L11"199
?ong Fiang.........................................................
#9"-99
=ary =ac'..........................................................
1-"99
Troy :i&son........................................................
#,"99
Tota& accounts receiva$&e.................................
L7#"199
Quic' Stu!y 7+19 )1- minutes* Segment
Segment Operating Income
Average Segment Assets
Segment 6eturn on Assets
Americas.......................L1("-(4
L("(94
,9.(M
Europe...........................11"-#4
#",-
,.,
Fapan............................. #",41
44
#7.(
nterpretation The Europe segment reports the highest return on segment assets. ?o0ever" each of its other segments has a re&ative&y high return on segment assets as 0e&&.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1"
Fundamental Accounting Principles, 1st !dition
Quic' Stu!y 7+19 )Conc&u!e!* 5ro!uct
5ro!uct Sa&es
5ercent of Tota& Sa&es
i5hone............................................
L ,7"9-7
,(.-M
i5a!.................................................
#9"(-4
14.4
i5o!.................................................
7",-(
.
es'tops........................................
",(
-.
5orta$&es........................................
1-"(,,
1,.#
Other...............................................
11"-4
19.7
Tota&................................................
L194"#,
199.9M
nterpretation Sa&es of App&es i5hone ma'e up its &argest percentage of tota& in!ivi!ua& pro!uct sa&es. es'tops an! i5o!s ma'e up the sma&&est percentage of tota& pro!uct sa&es.
Quic' Stu!y 7+11 )1- minutes* >enera& Fourna& 1. GIn 5urchases Fourna&H #. GIn Sa&es Fourna&H (. Sa&es 6eturns an! A&&o0ances........................... Accounts 6eceiva$&e8Customer..............
#",99 #",99
Customer returned ($orthless) merchandise%
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1"
EE6CISES E%ercise 7+1 )1- minutes* SA;ES FOU6NA;
ate
Account e$ite!
Invoice Num$er
56
Accounts 6eceiva$&e r. Sa&es Cr.
Cost of >oo!s So&! r. Inventory Cr.
=ay 7 F. ryer...................................... -79,
1"#-9
499
1# 6. ;am$..................................... -79-
(,9
#99
#-
7-9
-99
-79
E%ercise 7+# )19 minutes* =ay #
Cash 6eceipts Fourna&
-
5urchases Fourna&
7
Sa&es Fourna&
4
Cash 6eceipts Fourna&
1#
Sa&es Fourna&
1
Cash 6eceipts Fourna&
1
Cash 6eceipts Fourna&
#-
Sa&es Fourna&
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1"*
Fundamental Accounting Principles, 1st !dition
E%ercise 7+( )#9 minutes* CAS? 6ECEI5TS FOU6NA;
ate
Account Cre!ite!
E%p&anation
Account Sa&es s Other Cash iscount 6ec$&e. Sa&es Accounts 56 r. r. Cr. Cr. Cr.
Nov. Notes 5aya$&e............. Note to $an'
("7-9
("7-9
1( F. A&i" Capita&.............. Contri$ution
-"999
-"999
1 Sa&es.......................... Cash sa&e
((9
#7 F. Than....................... Invoice" 11K7
49
Cost of >oo!s So&! r. Inventory Cr.
((9
#-9
4
#9
1"999
E%ercise 7+, )19 minutes* Novem$er (
5urchases Fourna&
7
Sa&es Fourna&
Cash 6eceipts Fourna&
1(
Cash 6eceipts Fourna&
14
Cash 6eceipts Fourna&
##
Cash is$ursements Fourna&
#7
Cash 6eceipts Fourna&
(9
Cash is$ursements Fourna&
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1"+
E%ercise 7+- )1- minutes* a* Accounts 5aya$&e ;e!ger
ate Fan. 1
ACCOUNTS 5ADA@;E ;E>E6 @ai&ey Company E%p&anation 56 e$it 51 1 19"199
Cre!it 1,"999
@a&ance 1,"999 ("99
ate Fan. 14 #7
Fohnson @rothers E%p&anation 56 e$it 51 1 "99
Cre!it "99
@a&ance "99 9
ate Fan. ## (1
5reston Company E%p&anation 56 e$it 51 1 -",99
Cre!it "#99
@a&ance "#99 499
Cre!it #"499
@a&ance #"499 ,"799
$* >enera& Fourna& >ENE6A; FOU6NA; Accounts 5aya$&e E%p&anation 56 e$it 51 1 ##"199
ate Fan. (1 (1
E%ercise 7+ )#- minutes* CAS? IS@U6SE=ENTS FOU6NA; C'. No.
5ayee
#19
itt Corp............................ Store Supp&ies.............................................. -9
17
#11
City @an'........................... Notes 5aya$&e.............................................. 1",99 1",99
#4
#1#
;ite................................... ;ite.............................................................. ,",19 9
#
#1(
@. oc'............................. Sa&ariesE%pense........................................... 1"499 1"499
(9
#1,
Seth" Inc............................. Seth" Inc....................................................... #"-9
ate
Apr.
Account e$ite!
56
Cash Cr.
Other Accounts Inventory Accounts 5aya$&e Cr. r. r.
-9
,"-99 #"-9
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1"
Fundamental Accounting Principles, 1st !dition
E%ercise 7+7 )19 minutes* Apri& ( 1# 17 #9 #4 # (9
5urchases Fourna& Cash is$ursements Fourna& Sa&es Fourna& Cash is$ursements Fourna& 5urchases Fourna& Cash is$ursements Fourna& Cash is$ursements Fourna& Cash is$ursements Fourna&
E%ercise 7+4 )19 minutes* 1. :hen crossfooting the 5urchases Fourna&. #. :hen the sche!u&e of accounts paya$&e is prepare!. (. :hen the tria& $a&ance is prepare!. ,. :hen the sche!u&e of accounts paya$&e is prepare!. -. :hen the sche!u&e of accounts paya$&e is prepare!.
E%ercise 7+ )19 minutes* a. )i*
The Fune - purchase 0ou&! $e recor!e! in the 5urchases Fourna&.
)ii* The Fune 1, payment 0ou&! $e recor!e! in the Cash is$ursements Fourna&. $. The error in 3ourna&iJing the Fune 1, transaction shou&! $e !iscovere! in the process of crossfooting the Cash is$ursements Fourna&.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1"7
E%ercise 7+19 )(9 minutes* Part 1 ACCOUNTS 6ECEIA@;E SU@SIIA6D ;E>E6 Anna 5age =ay 1"4-9 =ay #9 17
(-9
Sara 6ee! =ay #",9 19 #- 1"(,9
Aaron 6ec'ers =ay ("449
Part
>ENE6A; ;E>E6 Accounts 6eceiva$&e =ay 19"919 =ay (-9 (1 #9
Inventory =ay 4"999 (1
Sa&es =ay 19"919 (1
Sa&es 6eturns an! A&&o0ances =ay #9 (-9
Cost of >oo!s So&! =ay (1 4"999
Part
=OUNTAIN IE: Sche!u&e of Accounts 6eceiva$&e =ay (1 Anna 5age.............................................. L 1"-99 Sara 6ee!............................................... ,"#49 Aaron 6ec'ers....................................... ("449 Tota& accounts receiva$&e.................... L "9
Accounts 6eceiva$&e Contro&&ing Account Tota& !e$it................................................... L19"919 Cre!it for return.......................................... )(-9* @a&ance as of =ay (1................................. L "9
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1""
Fundamental Accounting Principles, 1st !dition
E%ercise 7+11 )#9 minutes*
Segment
Segment Income )in L mi&.* #91( #91#
Segment Assets )in L mi&.* #91( #91#
Segment 6eturn on Assets #91(
Specia&ty S'iing >roup.............. L 7#
L 4
L -1
L ,-9
1(.4M
S'ating >roup............
1
1
(
-#
((.9M
Specia&ty 2oot0ear.......
(#
#
1-
1,
#9.M
Other Specia&ty...........
#1
1,
,7
(,
-1.M
Su$tota&.......................
1,,
1#7
4
4#
South America............
,#
,
(1-
#4,
1,.9M
Unite! States..............
17
14
#
,-
(1.4M
Europe.........................
1-
1(
#,
##
-.#M
Su$tota&.......................
7,
77
,91
(-1
Tota&............................... L#14
L#9,
L1"#7
L1"9((
>enera& =erchan!ise
Anal-sis and interpretation This company sho0s so&i! profita$i&ity in a&& segments $ase! on segment return on assets.
2or the specia&ty segments" the POther Specia&ty has the highest segment return on assets at -1.M in #91(" 0hereas the s'iing segment has the &o0est return on segment assets at 1(.4M. 2or the geographic segments" the highest segment return on assets is pro!uce! $y the European segment 0ith -.#M in #91(" 0hereas the South American segment has the &o0est return of 1,.9M.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1"&
56O@;E= SET A 5ro$&em 7+1A (7' minutes) Parts 1, and
ate
SA;ES FOU6NA; Invoice Accounts 6eceiva$&e r. Account e$ite! Num$er 56 Sa&es Cr. 79 5age A&istair......................................... ,"999 71 5au&a ohr........................................... 4"999 7# Nic Ne&son........................................... 19"-99 7( 5age A&istair......................................... -"199 7, 5au&a ohr........................................... ("179 7Nic Ne&son........................................... "799
Apr. ( 11 1( #7 #7 (9 Tota&s...................................................
ate
Apr.1( 1, 1 14 #9 #( (9 (9
Account Cre!ite!
CAS? 6ECEI5TS FOU6NA; Sa&es Cash iscoun E%p&anation 56 r. t r.
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)191*
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1&1
5ro$&em 7+1A ) Continued) Parts and
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E%p&anation
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5ro$&em 7+1A ) Continued) Parts and
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E%p&anation
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<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1&
Fundamental Accounting Principles, 1st !dition
5ro$&em 7+1A (Continued) Parts and (continued)
ate Apr. ( 1( 1( #(
ACCOUNTS 6ECEIA@;E ;E>E6 5age A&istair E%p&anation 56 e$it S( ,"999 6( S( -"199 6(
ate Apr. 1, #7
5au&a ohr 56 e$it S( 4"999 6( S( ("179
ate Apr. 11 #9 #7
E%p&anation
E%p&anation
Nic Ne&son 56 e$it S( 19"-99 6( S( "799
Cre!it ,"999 -"199
Cre!it 4"999
Cre!it 19"-99
@a&ance ,"999 9 -"199 9
@a&ance 4"999 9 ("179 @a&ance 19"-99 9 "799
Part *
:ISET CO=5AND Tria& @a&ance Apri& (9 Cash...................................................................... Accounts receiva$&e............................................ Inventory............................................................... ;ong+term notes paya$&e.................................... @. :iset" Capita&................................................... Sa&es...................................................................... Sa&es !iscounts.................................................... Cost of goo!s so&!.............................................. Tota&s.....................................................................
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<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1&
5ro$&em 7+1A (Concluded) Part * (continued)
:ISET CO=5AND Sche!u&e of Accounts 6eceiva$&e Apri& (9 5au&a ohr..................................................
L("179
Nic Ne&son...................................................
"799
Tota& accounts receiva$&e..........................
L"479
Part + Anal-sis component
To fin! the error)s*" first re+a!! the account $a&ances on the sche!u&e of accounts receiva$&e to confirm that the a!!ition is correct. Then" trace the $a&ances &iste! on the sche!u&e of accounts receiva$&e $ac' to the su$si!iary accounts to confirm that they are &iste! correct&y on the sche!u&e. Ne%t" reca&cu&ate the $a&ance of each su$si!iary account to confirm that the a!!itions an! su$tractions are correct. Ne%t" trace the postings from each su$si!iary account an! from the contro&&ing account $ac' to the appropriate 3ourna&s. Since the sa&es an! cash receipts 3ourna&s 0ere foote! an! crossfoote! $efore posting" the previous steps shou&! !isc&ose the error.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1&*
Fundamental Accounting Principles, 1st !dition
5ro$&em 7+#A )1#9 minutes* Parts 1 and 5U6C?ASES FOU6NA;
ate
Account
ate of Invoice
Terms
56
Accounts 5aya$&e Cr.
,K# ... #K19" nK9 Apr. # Noth Company....................................
1,"(99
,K#..... nK19" EO= ( Office Supp&iesKCuster Inc.................
1",49
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#- Noth Company.............................,K#,
#K19" nK9
(9 Tota&s...........................................
1,"(99 1",49
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Apr. , -47 :or&! ie0............................................. A!vertising E%pense..................................... -4 ........................ 4 1# -44 Noth Company......................................... Noth Company.................................................... .................. 1,"91, #4
1,"(99
1 -4 5ayro&&................................................... Sa&es Sa&aries E%pense......................................................... #1 19"7-9 19"7-9 # -9 >rant Company..................................... >rant Company................................................. .................... 1#"7,9 #9
1("999
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RRRRR
<#91( $y =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
(9
Tota&s.....................................................
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<#91( $y =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Fundamental Accounting Principles, 1st !dition
1&
5ro$&em 7+#A (Continued) Parts 1 and 2continued >ENE6A; FOU6NA; Apr. Accounts 5aya$&e++Custer Inc................................. #91K Office Supp&ies.................................................. 1#,
5age ( 49 49
3eceived a credit memorandum%
#( Accounts 5aya$&e++>rant Co................................. #91K Inventory............................................................ 11 3eceived a credit memorandum%
Parts and
7-9 7-9
5ro$&em 7+#A (Continued) Parts 1 and 2continued >ENE6A; FOU6NA;
5age (
Apr. Accounts 5aya$&e++Custer Inc................................. #91K Office Supp&ies.................................................. 1#,
49 49
3eceived a credit memorandum%
#( Accounts 5aya$&e++>rant Co................................. #91K Inventory............................................................ 11
7-9 7-9
3eceived a credit memorandum%
Parts and
ate =ar. (1 Apr. (9
ate =ar. (1 Apr. #( (9 (9
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ate Apr. (
Office Supp&ies E%p&anation 56 e$it 5( 1",49 >(
Acct. No. 1#, Cre!it @a&ance 1",49 49 1",99
ate Apr. #9
Store Supp&ies 56 e$it 5( 4(9
Acct. No. 1#Cre!it @a&ance 4(9
E%p&anation
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1&7
5ro$&em 7+#A (Continued) /eneral 4edger2continued ate Apr.
Store Euipment E%p&anation 56 e$it 5( 1#"1#-
Acct. No. 1Cre!it @a&ance 1#"1#-
ate Apr. #( (9 (9
Accounts 5aya$&e E%p&anation 56 e$it >( 49 >( 7-9 5( ( #7"(99
Acct. No. #91 Cre!it @a&ance )49* )4(9* -("49 -("9(9 #-"7(9
;ong+Term Notes 5aya$&e E%p&anation 56 e$it
Acct. No. #-1 Cre!it @a&ance 119"999
@. :iset" Capita& E%p&anation 56 e$it
Acct. No. (91 Cre!it @a&ance 199"999
ate Apr. 1 (9
Sa&es Sa&aries E%pense E%p&anation 56 e$it ( 19"7-9 ( 19"7-9
Acct. No. #1 Cre!it @a&ance 19"7-9 #1"-99
ate Apr. ,
A!vertising E%pense E%p&anation 56 e$it ( 4
Acct. No. -Cre!it @a&ance 4
ate =ar. (1
ate =ar. (1
ACCOUNTS 5ADA@;E ;E>E6 ate Apr. ( ate Apr. 17 #( #
E%p&anation
E%p&anation
Custer" Inc. 56 e$it 5( >( 49 >rant Company 56 e$it 5( >( 7-9 ( 1("999
Cre!it 1",49
@a&ance 1",49 1",99
Cre!it 1("7-9
@a&ance 1("7-9 1("999 9
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1&"
Fundamental Accounting Principles, 1st !dition
5ro$&em 7+#A (Concluded) Parts and 2continued Accounts Pa-able Pa-able 4edger2continu 4edger2continued ed ate Apr. #9
ate Apr. # 1# #-
E%p&anation
?a&s Supp&y 56 e$it 5( 5(
Noth Company E%p&anation 56 e$it 5( ( 1,"(99 5(
Cre!it 1#"1#4(9
@a&ance 1#"1#1# 1#"--
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@a&ance 1,"(99 9 11"(7-
11"(7-
Part *
:ISET CO=5AND CO=5AND Tria& @a&ance Apri& (9
e$it Cash.................. Cash............................... ........................................... .............................. L (-"4,7 Inventory..................................................... 1("1# Office supp&ies............... supp&ies............................................ ............................. 1",99 4(9 Store supp&ies................ supp&ies............................................. ............................. Store euipment............... euipment............................ ........................... .............. 1#"1#-
Cre!it
Accounts Accounts paya$&e....................................... paya$&e....................................... ;ong+term notes paya$&e........................... @. :i :iset" Ca Capita&.......................................... #1"-99 Sa&es sa&aries e%pense................ e%pense............................... ............... 4 A!vertising A!vertising e%pense................ e%pense................................... ................... Tota&s............................................................ L#(-"7(9
L #-"7(9 119"999
:ISET CO=5AND CO=5AND Sche!u&e of Accounts 5aya$&e Apri& (9 Custer" Inc.................................................... ?a&s Supp&y................................................. Noth Company............................................ Tota& ac accounts pa paya$&e...............................
199"999
L#(-"7(9
L 1" 1",99 1#"-11"(7L#-"7(9
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1&&
5ro$&em 7+(A )199 minutes* Parts 1 and
ate ate
SA;ES FOU6NA; Invoice Accounts 6eceiva$&e r. Num$er 56 Sa&es Cr.
Accoun ount e$ite ite!
5age # Cost of >oo!s So&! r. Inventory Cr.
=ar =ar. # =in =in Cho.... Cho......... .......... .......... .......... ............. ................ ............... 4-, 4....... ,
1"499
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1"#(9
ate
ate of Invoice
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(K... 1 =ar. =ar. 1 an an In! In!us ustr trie ies............................. s............................. ........... ........
Terms
(K Offic Office e Eui Euip.K p.KSp Spe& e&&& Supp Supp&y...................... &y......................
nK19" EO=
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nK19" EO=
56
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Office Supp&ies r. r.
1"#(9
#1"4-9
1#-K
(1 Tota&s. ta&s........ .............. .............. .............. .............. ........................ .................
5age # Other Accounts r. r.
#1"4-9
(#"#-
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<#91( $y =c>ra0+?i&& =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Fundamental Accounting Principles, 1st !dition
''
5ro$&em 7+(A (Continued) Parts 1 and 2continued
CAS? 6ECEI5TS FOU6NA; Account Cre!ite! ate
E%p&anation
56
Cash r. r.
Sa&es iscoun t r. r.
5age # Accounts 6eceiva$&e Cr. Cr.
Other Accts. Cr. Cr.
Sa&es Cr. Cr.
#-1 #-1 . 4#"999 =ar. =ar. ;.T ;.T.. Note Notes s 5ay 5ay........................................ Note Note to $an'............................................................ $an'............................................................ .............. ........ ......
Cost of >oo!s So&! r. Inventory Cr.
4#"999
1# =in =in Cho..... Cho............ .............. .................... Invoi Inv .............................. oice ce"" (K#..................................................... ................. 1",, ................ ........ (( 1"4............... 99 ....... 1( ;in! ;in!a a :itt. :itt........ .............. .............. Invoi Inv .............. oice .............. ce (K(.................................................... (K.............. (.................................................... ........... .... .................. .......... " #9, 19"#............... 99 ....... 1- Sa&e Sa&es..... s............ .............. .............. .............. Cash Ca.............. sh sa&e sa ................ &es.................................................. s.................................................. .............. ..... (,"49 ..........................(.,"49
#9"#19
#9 Fov Fovita ita A&$an &$any..... y............ .............. Invoi Inv ............................. oice ce" ...................... " (K19......................................................................... (K19......................................................................... .. -",44 11# -"99 (1 Sa&e Sa&es..... s............ .............. .............. .............. Cash Ca.............. sh sa&e sa ................ &es.................................................. s.................................................. .............. ..... (9"149 RRR .......................... RRRRR (.9"149
RRRRR
1"4#9
(1 Tota&s. ta&s........ .............. .............. .............. .............. ........................ ................. 174" 174"49 494 4
-#
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CAS? IS@U6SE=ENTS FOU6NA; C'
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5age # Inventory
5ro$&em 7+(A (Continued) Parts 1 and 2continued
CAS? 6ECEI5TS FOU6NA; Account Cre!ite! ate
E%p&anation
56
Cash r. r.
Sa&es iscoun t r. r.
5age # Accounts 6eceiva$&e Cr. Cr.
Other Accts. Cr. Cr.
Sa&es Cr. Cr.
#-1 #-1 . 4#"999 =ar. =ar. ;.T ;.T.. Note Notes s 5ay 5ay........................................ Note Note to $an'............................................................ $an'............................................................ .............. ........ ......
Cost of >oo!s So&! r. Inventory Cr.
4#"999
1# =in =in Cho..... Cho............ .............. .................... Invoi Inv .............................. oice ce"" (K#..................................................... ................. 1",, ................ ........ (( 1"4............... 99 ....... 1( ;in! ;in!a a :itt. :itt........ .............. .............. Invoi Inv .............. oice .............. ce (K(.................................................... (K.............. (.................................................... ........... .... .................. .......... " #9, 19"#............... 99 ....... 1- Sa&e Sa&es..... s............ .............. .............. .............. Cash Ca.............. sh sa&e sa ................ &es.................................................. s.................................................. .............. ..... (,"49 ..........................(.,"49
#9"#19
#9 Fov Fovita ita A&$an &$any..... y............ .............. Invoi Inv ............................. oice ce" ...................... " (K19......................................................................... (K19......................................................................... .. -",44 11# -"99 (1 Sa&e Sa&es..... s............ .............. .............. .............. Cash Ca.............. sh sa&e sa ................ &es.................................................. s.................................................. .............. ..... (9"149 RRR .......................... RRRRR (.9"149
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CAS? IS@U6SE=ENTS FOU6NA; ate
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The C C Co... Co....... ....... ....... ....... ....... The Th ....... e....... C ....... Comp Co ....... ....... mpan ....... any.............................................. ........ y.............................................. .... ................. ......... ... #"- 9, ...........
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<#91( $y =c>ra0+?i&& =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
'1
<#91( $y =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Fundamental Accounting Principles, 1st !dition
'
5ro$&em 7+(A (Continued) Parts 1 and 2continued
>ENE6A; FOU6NA;
5age #
=ar. 17 Accounts 5aya$&e8C Co........................................ #91K #",# Inventory................................................................ 11
#",#-
3eceived a credit memo for returns%
1 Accounts 5aya$&e8Spe&& Supp&y............................. #91K Office Euipment................................................... 1( 3eceived a credit memo for returns%
>ENE6A; ;E>E6
(9 (9
5ro$&em 7+(A (Continued) Parts 1 and 2continued
>ENE6A; FOU6NA;
5age #
=ar. 17 Accounts 5aya$&e8C Co........................................ #91K #",# Inventory................................................................ 11
#",#-
3eceived a credit memo for returns%
1 Accounts 5aya$&e8Spe&& Supp&y............................. #91K Office Euipment................................................... 1(
(9 (9
3eceived a credit memo for returns%
>ENE6A; ;E>E6
ate =ar. (1 (1 ate =ar. (1 (1 ate =ar. 1 17 (1 (1 (1 (1
e$it 174"494
Acct. No. 191 Cre!it @a&ance 174"494 194"#, "44,
Accounts 6eceiva$&e E%p&anation 56 e$it S# -1"4#6#
Acct. No. 19 Cre!it @a&ance -1"4#(#"99 1"##-
E%p&anation
E%p&anation
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Inventory 56 ># 5# # S# 6#
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5ro$&em 7+(A (Continued) ate =ar. 1
Office Euipment E%p&anation 56 e$it 5# #1"4-9 >#
Acct. No. 1( Cre!it @a&ance #1"4-9 (9 #1"##9
ate =ar. 17 1 (1 (1
Accounts 5aya$&e E%p&anation 56 e$it ># #",#># (9 5# # 7("499
Acct. No. #91 Cre!it @a&ance )#",#-* )("9--* 191"974"9#9 #,"##9
ate =ar.
;ong+Term Notes 5aya$&e E%p&anation 56 e$it 6#
Acct. No. #-1 Cre!it @a&ance 4#"999 4#"999
. Church" Capita& E%p&anation 56 e$it
Acct. No. (91 Cre!it @a&ance 19"999
ate =ar. 1
ate =ar. (1 (1
E%p&anation
Sa&es 56 S# 6#
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Acct. No. ,1( Cre!it @a&ance -1"4#-1"4#,"49 11"4-
ate =ar. (1
Sa&es iscounts E%p&anation 56 e$it 6# -#
Acct. No. ,1Cre!it @a&ance -#
ate =ar. (1 =ar. (1
Cost of >oo!s So&! E%p&anation 56 e$it 6# (7"9(9 S# #7"99
Acct. No. -9# Cre!it @a&ance (7"9(9 ,"(9
ate =ar. 1(1
Sa&es Sa&aries E%pense E%p&anation 56 e$it # 14"(99 # 14"(99
Acct. No. #1 Cre!it @a&ance 14"(99 ("99
5ro$&em 7+(A (Continued) ACCOUNTS 6ECEIA@;E ;E>E6
ate =ar. 19 #9 #7
ate =ar. # 1#
ate =ar. ( 1( #4
E%p&anation
E%p&anation
E%p&anation
Fovita A&$any 56 e$it S# -"99 6# S# 1,"19 =in Cho 56 S# 6#
e$it 1"499
;in!a :itt 56 e$it S# 19"#99 6# S# ,"(1-
Cre!it -"99
Cre!it 1"499
Cre!it 19"#99
@a&ance -"99 9 1,"19
@a&ance 1"499 9
@a&ance 19"#99 9 ,"(1-
ACCOUNTS 5ADA@;E ;E>E6 ate =ar. 1, 17 #(
ate =ar. ( 1
ate =ar. 1
ate =ar. 1 1(
E%p&anation
E%p&anation
E%p&anation
E%p&anation
C Company 56 e$it 5# ># #",## (9"#99
Cre!it (#"#-
@a&ance (#"#(9"#99 9
Cre!it 1"#(9 1"779
@a&ance 1"#(9 ("999
Spe&& Supp&y 56 e$it 5# ># (9
Cre!it #1"4-9
@a&ance #1"4-9 #1"##9
an In!ustries 56 e$it 5# # ,("99
Cre!it ,("99
@a&ance ,("99 9
>a$e& Company 56 e$it 5# 5#
5ro$&em 7+(A (Concluded) Part
C?U6C? CO=5AND Tria& @a&ance =arch (1 e$it Cash...................................................................... L "44, Accounts receiva$&e............................................1"##Inventory............................................................... 17", Office supp&ies.....................................................1"#(9 Store supp&ies......................................................1"779 Office euipment.................................................. #1"##9 Accounts paya$&e................................................ ;ong+term notes paya$&e.................................... . Church" Capita&................................................ Sa&es...................................................................... Sa&es !iscounts.................................................... -# Cost of goo!s so&!..............................................,"(9 Sa&es sa&aries e%pense........................................ ("99 Tota&s..................................................................... L#(#"9-
Cre!it
L #,"##9 4#"999 19"999 11"4 RRRRRRRR L#(#"9-
C?U6C? CO=5AND Sche!u&e of Accounts 6eceiva$&e =arch (1 Fovita A&$any.......................................................... L1,"19 ;in!a :itt................................................................ ,"(1Tota& accounts receiva$&e...................................... L1"##-
C?U6C? CO=5AND Sche!u&e of Accounts 5aya$&e =arch (1 >a$e& Company...................................................... L ("999 Spe&& Supp&y............................................................ #1"##9 Tota& accounts paya$&e.......................................... L#,"##9
56O@;E= SET @ 5ro$&em 7+1@ )79 minutes* Parts 1 and
ate
Fu&y 1( 1, # (9 (1
ate
Account e$ite!
SA;ES FOU6NA; Invoice Accounts 6eceiva$&e r. Num$er 56 Sa&es Cr.
5age ( Cost of >oo!s So&! r. Inventory Cr.
14 im Nett&e............................ ..................
1"#99
19"-99
1 6uth @&a'e............................................. #9 Ashton =oore........................................ #1 im Nett&e.............................................. ## 6uth @&a'e............................................. #( Ashton =oore........................................ Tota&s.....................................................
7"-99 4"--9 -"199 17"-99 1"4#9 7,"79
,"(99 -"#(9 ("499 19"4-9 "4,9 ,,"-#9
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Account Cre!ite!
CAS? 6ECEI5TS FOU6NA; Sa&es Cash iscoun E%p&anation 56 r. t r.
Accounts 6eceiva$&e Cr.
Sa&es Cr.
Other Accts. Cr.
5age ( Cost of >oo!s So&! r. Inventory Cr.
Fu&y 1- im Nett&e.............................................. Sa&e of 7K-.................................................. 14"41 (4, ...................... 1"#99 ...... 1- Sa&es...................................................... Cash sa&es.................................................. 114"(-9 .......................... 114"(-9 .
7"((9
1 6uth @&a'e............................................. Sa&e of 7K.................................................. 7"(-9 1-9 ...................... 7"-99 ...... #-1 . 1-"999 #1 ;.T. Notes 5ay........................................ Note to $an'............................................................ ..............
1-"999
#( Ashton =oore........................................ Sa&e of 7K1(............................................................... 4"(7 171 4"--9............. #, im Nett&e.............................................. Sa&e of 7K1,............................................................... ,"4 19# -"199............. (1 Sa&es...................................................... Cash sa&es.................................................. 49"#,, RRR .......................... RRRRR 49"#,, .
RRRRR
(1 Tota&s.......................................... ...........
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5ro$&em 7+1@ (Continued) Parts and >ENE6A; ;E>E6
ate Fune (9 Fu&y (1
ate Fu&y (1 (1
ate
#-("1(7
Acct. No. 191 Cre!it @a&ance 199"999 (-("1(7
Accounts 6eceiva$&e E%p&anation 56 e$it S( 7,"79 6(
Acct. No. 19 Cre!it @a&ance 7,"79 ,9"(-9 (,"(#9
E%p&anation
Cash 56 6(
E%p&anation
Inventory 56
e$it
e$it
Acct. No. 11 Cre!it @a&ance
5ro$&em 7+1@ (Continued) Parts and >ENE6A; ;E>E6
ate Fune (9 Fu&y (1
ate Fu&y (1 (1
ate Fune (9 Fu&y (1 (1
ate Fune (9 Fu&y #1
ate Fune (9
ate Fu&y (1 (1
#-("1(7
Acct. No. 191 Cre!it @a&ance 199"999 (-("1(7
Accounts 6eceiva$&e E%p&anation 56 e$it S( 7,"79 6(
Acct. No. 19 Cre!it @a&ance 7,"79 ,9"(-9 (,"(#9
E%p&anation
Cash 56 6(
E%p&anation
Inventory 56
e$it
e$it
S( 6( ;ong+Term Notes 5aya$&e E%p&anation 56 e$it 6( 6. Acorn" Capita& E%p&anation 56 e$it
E%p&anation
Sa&es 56 S( 6(
e$it
Acct. No. 11 Cre!it @a&ance #99"999 ,,"-#9 1--",49 1(9"14#-"#Acct. No. #-1 Cre!it @a&ance #99"999 1-"999 #1-"999 Acct. No. (91 Cre!it @a&ance 199"999 Acct. No. ,1( Cre!it @a&ance 7,"79 7,"79 14"-, #7("#,
ate Fu&y (1
Sa&es iscounts E%p&anation 56 e$it 6( 497
Acct. No. ,1Cre!it @a&ance 497
ate Fu&y (1 (1
Cost of >oo!s So&! E%p&anation 56 e$it S( ,,"-#9 6( 1(9"14-
Acct. No. -9# Cre!it @a&ance ,,"-#9 17,"79-
5ro$&em 7+1@ (Continued) Parts and (continued)
ACCOUNTS 6ECEIA@;E ;E>E6 ate Fu&y 1 # ate Fu&y 1( #( (9 ate Fu&y 1, 1#,
E%p&anation
6uth @&a'e 56 S( 6( S(
e$it 7"-99
7"-99 17"-99
Ashton =oore E%p&anation 56 e$it S( 4"--9 6( S( 1"4#9 E%p&anation
im Nett&e 56 S( S( 6( 6(
Cre!it
e$it 1"#99 -"199
Cre!it 4"--9
Cre!it 1"#99 -"199
Part *
ACO6N INUST6IES Tria& @a&ance Fu&y (1 e$it L(-("1(7 Cash...................................................................... Accounts receiva$&e............................................(,"(#9 #-"#Inventory............................................................... ;ong+term notes paya$&e.................................... 6. Acorn" Capita&.................................................. Sa&es...................................................................... Sa&es !iscounts.................................................... 497 17,"79Cost of goo!s so&!.............................................. L-44"#, Tota&s.....................................................................
Cre!it
L#1-"999 199"999 #7("#, RRRRRRR L-44"#,
@a&ance 7"-99 9 17"-99 @a&ance 4"--9 9 1"4#9 @a&ance 1"#99 #,"(99 -"199 9
5ro$&em 7+1@ (Concluded) Part *2continued
ACO6N INUST6IES Sche!u&e of Accounts 6eceiva$&e Fu&y (1 6uth @&a'e............................................................... L17"-99 Ashton =oore......................................................... 1"4#9 Tota& accounts receiva$&e................
L(,"(#9
Part +
Ana&ysis component To fin! the error)s*" first re+a!! the account $a&ances on the sche!u&e of accounts receiva$&e to confirm that the a!!ition is correct. Then" trace the $a&ances &iste! on the sche!u&e of accounts receiva$&e $ac' to the su$si!iary accounts to confirm that they are &iste! correct&y on the sche!u&e. Ne%t" reca&cu&ate the $a&ance of each su$si!iary account to confirm that the a!!itions an! su$tractions are correct. Ne%t" trace the postings from each su$si!iary account an! from the contro&&ing account $ac' to the appropriate 3ourna&s. Since the sa&es an! cash receipts 3ourna&s 0ere foote! an! crossfoote! $efore posting" the previous steps shou&! !isc&ose the error.
5ro$&em 7+#@ )49 minutes* Parts 1 and 5U6C?ASES FOU6NA; ate of Invoice
ate
Account
Terms
Fu&y 1
Teton Company..................................... K(9 #K19" nK(9
56
Accounts 5aya$&e Cr.
5age ( Office Other Inventory Supp&ies Accounts r. r. r.
"-99
"-99
7 Store Supp.K5&aine Inc......................7K7 ...... nK19" EO=
1#-K
1"#-9
1"#-9
Store Euip.KCharms Supp&y.................... 7K4 nK19" EO=
1-K
(4"##9
(4"##9
17 ra'e Company..................................... 7K17 #K19" nK(9
7"#99
#9 Office Supp.KCharms Supp&y.................... 7K1 nK19" EO=
-9
# Teton Company..................................... 7K# #K19" nK(9
"779
"779
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(1 Tota&s
7"#99 -9 RRR
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-9
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CAS? IS@U6SE=ENTS FOU6NA;
ate
C'. No.
5ayee
Account e$ite!
56
Cash Cr.
Inventory
Other Accounts r.
Cr. Fu&y (99 (
5age ( Accounts 5aya$&e r.
The :ee'&y ........................................... A!vertising E%pense..................................... -#- ........................ #-
19 (91
Teton Company..................................... Teton Company................................................. .................... "(79 1(9
1- (9#
5ayro&&.................................................... Sa&es Sa&aries E%pense......................................................... #1 (1"4-9 (1"4-9
#7 (9(
ra'e Company..................................... ra'e Company............................................. ........................ ,"79,
,"499
(1 (9,
5ayro&&................................................... Sa&es Sa&aries E%pense......................................................... #1 (1"4-9 RRR (1"4-9
RRRRR
(1
Tota&s.....................................................
"-99
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##
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11"(99
)191*
)11*
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5ayro&&................................................... Sa&es Sa&aries E%pense......................................................... #1 (1"4-9 RRR (1"4-9
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(1
Tota&s.....................................................
7-"(
##
,"(#-
11"(99
)191*
)11*
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)#91*
5ro$&em 7+#@ (Continued) Parts 1 and 2continued
>ENE6A; FOU6NA; Fu&y 4 Accounts 5aya$&e85&aine.................... Store Supp&ies..................................
5age ( #91K 1#-
#-9
#91K 11
#",99
#-9
3eceived a credit memorandum%
#, Accounts 5aya$&e8ra'e.................... Inventory.......................................... 3eceived a credit memorandum%
Parts and
#",99
5ro$&em 7+#@ (Continued) Parts 1 and 2continued
>ENE6A; FOU6NA; Fu&y 4 Accounts 5aya$&e85&aine.................... Store Supp&ies..................................
5age ( #91K 1#-
#-9
#91K 11
#",99
#-9
3eceived a credit memorandum%
#, Accounts 5aya$&e8ra'e.................... Inventory..........................................
#",99
3eceived a credit memorandum%
Parts and
>ENE6A; ;E>E6
ate Fune (9 Fu&y (1
ate Fune (9 Fu&y #, (1 (1
E%p&anation
Cash 56
e$it
(
E%p&anation
Inventory 56 >( 5( (
e$it
#(",79
Acct. No. 191 Cre!it @a&ance 199"999 7-"( #,"91 Acct. No. 11 Cre!it @a&ance #99"999 #",99 17"99 ##1"979 ## ##9"4,,
ate Fu&y (1
Office Supp&ies E%p&anation 56 e$it 5( -9
Acct. No. 1#, Cre!it @a&ance -9
ate Fu&y 7 4
Store Supp&ies E%p&anation 56 e$it 5( 1"#-9 >(
Acct. No. 1#Cre!it @a&ance 1"#-9 #-9 1"999
5ro$&em 7+#@ (Continued) /eneral 4edger2continued ate Fu&y
Store Euipment E%p&anation 56 e$it 5( (4"##9
Acct. No. 1Cre!it @a&ance (4"##9
ate Fu&y 4 #, (1 (1
Accounts 5aya$&e E%p&anation 56 e$it >( #-9 >( #",99 5( ( 11"(99
Acct. No. #91 Cre!it @a&ance )#-9* )#"-9* ("-9 9",9 ,",9
;ong+Term Notes 5aya$&e E%p&anation 56 e$it
Acct. No. #-1 Cre!it @a&ance #99"999
6. Acorn" Capita& E%p&anation 56 e$it
Acct. No. (91 Cre!it @a&ance 199"999
ate Fu&y 1(1
Sa&es Sa&aries E%pense E%p&anation 56 e$it ( (1"4-9 ( (1"4-9
Acct. No. #1 Cre!it @a&ance (1"4-9 ("799
ate Fu&y (
A!vertising E%pense E%p&anation 56 e$it ( #-
Acct. No. -Cre!it @a&ance #-
ate Fune (9
ate Fune (9
ACCOUNTS 5ADA@;E ;E>E6 ate Fu&y #9
ate Fu&y 17 #, #7
Charms Supp&y E%p&anation 56 e$it 5( 5( ra'e Company E%p&anation 56 e$it 5( >( #",99 ( ,"499
Cre!it (4"##9 -9
Cre!it 7"#99
@a&ance (4"##9 (4"479
@a&ance 7"#99 ,"499 9
5ro$&em 7+#@ (Concluded) Parts and 2continued Accounts Pa-able 4edger2continued
ate Fu&y 7 4
ate Fu&y 1 19 #
E%p&anation
5&aine" Inc. 56 5( >(
e$it
Cre!it 1"#-9
@a&ance 1"#-9 1"999
Cre!it "-99
@a&ance "-99 9 "779
#-9
Teton Company E%p&anation 56 e$it 5( ( "-99 5(
"779
Part *
ACO6N INUST6IES Tria& @a&ance Fu&y (1 e$it Cre!it L #,"91 Cash...................................................................... ##9"4,, Inventory............................................................... Office supp&ies..................................................... -9 Store supp&ies...................................................... 1"999 (4"##9 Store euipment................................................... L ,",9 Accounts paya$&e................................................ ;ong+term notes paya$&e.................................... #99"999 6. Acorn" Capita&.................................................. 199"999 ("799 Sa&es sa&aries e%pense........................................ A!vertising e%pense............................................ #- RRRRRRRR L(,",9 L(,",9 Tota&s.....................................................................
ACO6N INUST6IES Sche!u&e of Accounts 5aya$&e Fu&y (1 Charms Supp&y...................................... 5&aine" Inc................................................ Teton Company...................................... Tota& accounts paya$&e..........................
L(4"479 1"999 "779 L,",9
5ro$&em 7+(@ (1'' Minutes) Parts 1 and
ate
SA;ES FOU6NA; Invoice Accounts 6eceiva$&e r. Num$er 56 Sa&es Cr.
Account e$ite!
5age # Cost of >oo!s So&! r. Inventory Cr.
Nov. 4 Cy! 6oun!er....................................... ,(
"--9
("19
19 Car&os =ante&....................................... ,,9
1("-99
4"-99
1- Tori Tripp............................................. ,,1
-"#-9
#",-9
## Car&os =ante&....................................... ,,#
("-
#"99
#, Tori Tripp............................................. ,,(
,"#49
#"1(9
(9 Tota&s...................................................
(("#7-
1"9-9
)19K,1(*
)-9#K11*
5U6C?ASES FOU6NA;
ate
ate of Invoice
Account
Terms
Accounts 5aya$&e Cr.
56
Nov. 1 Office Euip.K@run Supp&y................... 11K1... nK19" EO= 1(K
-"9-4
#K19" nK(9 , @;6 In!ustries...................................... 11K(
(("-99
- Store Supp&iesK>re$e Company ................. 11K- nK19" EO= 1#-K
Inventory r.
Office Supp&ies r.
5age # Other Accounts r. -"9-4
(("-99
1"9,9
1"9,9
#K19" nK(9 11 ;o Company.......................................... 11K19
#"--7
#"--7
1 >re$e Company..................................... 11K1 nK19" EO=
,-
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,-
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,#"1,
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(9 Tota&s.....................................................
5ro$&em 7+(@ (Continued) CAS? 6ECEI5TS FOU6NA; ate
Account Cre!ite!
E%p&anation
56
Cash r.
Sa&es iscoun t r.
5age # Accounts 6eceiva$&e Cr.
Other Accts. Cr.
Sa&es Cr.
#-1K . 44"-99 Nov. # ;.T. Notes 5ay........................................ Note to $an'............................................................ ..............
Cost of >oo!s So&! r. Inventory Cr.
44"-99
1- Sa&es...................................................... Cash sa&es............................................ ............................... ..14"179 14"179
"999
14 Cy! 6oun!er.......................................... Invoice" 11K4................................................................ ........... ",1 1(1 "--9 1 Car&os =ante&......................................... Invoice" 11K19.......................................................................... 1("#(9 #79 1("-99 #- Tori Tripp................................................ Invoice" 11K1-.......................................................................... -"1,19-"#-9 (9 Sa&es...................................................... Cash sa&es............................................ ............................... ..1"79( 1"79( RRR RRRRR
RRRRR
19"#99
(9 Tota&s..................................................... 1,4"17 )191*
-9
#-"(99
(,"47(
44"-99
1"#99
),1-*
)19*
),1(*
) *
)-9#K11*
CAS? IS@U6SE=ENTS FOU6NA; ate
C'. No.
5ayee
Account e$ite!
56
Cash Cr.
5age # Inventory Cr.
Other Accounts r.
Accounts 5aya$&e r.
5ro$&em 7+(@ (Continued) CAS? 6ECEI5TS FOU6NA; Account Cre!ite!
ate
E%p&anation
56
Cash r.
Sa&es iscoun t r.
5age # Accounts 6eceiva$&e Cr.
Other Accts. Cr.
Sa&es Cr.
#-1K . 44"-99 Nov. # ;.T. Notes 5ay........................................ Note to $an'............................................................ ..............
Cost of >oo!s So&! r. Inventory Cr.
44"-99
1- Sa&es...................................................... Cash sa&es............................................ ............................... ..14"179 14"179
"999
14 Cy! 6oun!er.......................................... Invoice" 11K4................................................................ ........... ",1 1(1 "--9 1 Car&os =ante&......................................... Invoice" 11K19.......................................................................... 1("#(9 #79 1("-99 #- Tori Tripp................................................ Invoice" 11K1-.......................................................................... -"1,19-"#-9 (9 Sa&es...................................................... Cash sa&es............................................ ............................... ..1"79( 1"79( RRR RRRRR
RRRRR
19"#99
(9 Tota&s..................................................... 1,4"17 )191*
-9
#-"(99
(,"47(
44"-99
1"#99
),1-*
)19*
),1(*
) *
)-9#K11*
CAS? IS@U6SE=ENTS FOU6NA; C'. No.
ate
Nov. 1# ((
5ayee
Account e$ite!
56
Cash Cr.
5age # Inventory Cr.
Other Accounts r.
@;6 In!ustries....................................... @;6 In!ustries........................................ (#"4(9 .............................. 79
Accounts 5aya$&e r. (("-99
1- (,
#1 5ayro&&................................................... Sa&es Sa&aries E%pense......................................................... "-4"-4-
1 (-
;o Co..................................................... ;o Company............................................. .. 1"9 ........................... ,9
#"999
(9 (
#1 5ayro&&................................................... Sa&es Sa&aries E%pense......................................................... "-4RRR "-4-
RRRRR
(9
Tota&s.....................................................
,7"9
719
1("179
(-"-99
)191*
)11*
) *
)#91*
5ro$&em 7+(@ (Continued) >ENE6A; FOU6NA;
5age #
Nov. 17 Accounts 5aya$&e8;o Co........................... #91K Inventory.................................................11
--7 --7
3eceived a credit memo for returns%
# Accounts 5aya$&e8@run Supp&y................ #91K Office Euipment..................................... 1(
## ##
3eceived a credit memo for returns%
>ENE6A; ;E>E6 C
h
A
t N
191
5ro$&em 7+(@ (Continued) >ENE6A; FOU6NA; Nov. 17 Accounts 5aya$&e8;o Co........................... #91K Inventory.................................................11
5age # --7 --7
3eceived a credit memo for returns%
# Accounts 5aya$&e8@run Supp&y................ #91K Office Euipment..................................... 1(
## ##
3eceived a credit memo for returns%
>ENE6A; ;E>E6 ate Nov. (9 (9 ate Nov. (9 (9 ate Nov. 1 17 (9 (9 (9 (9 ate Nov. (9
ate Nov. -
e$it 1,4"17
Acct. No. 191 Cre!it @a&ance 1,4"17 ,7"9 199"#97
Accounts 6eceiva$&e E%p&anation 56 e$it S# (("#76#
Acct. No. 19 Cre!it @a&ance (("#7#-"(99 7"7-
E%p&anation
E%p&anation
Cash 56 6# #
Inventory 56 e$it ># 5# # S# 6#
("9-7
Acct. No. 11 Cre!it @a&ance ,9"999 --7 (",,( 7-"-99 719 7,"79 1"9-9 --"7,9 1"#99 ("-,9
E%p&anation
Office Supp&ies 56 e$it 5# ,-
Acct. No. 1#, Cre!it @a&ance ,-
E%p&anation
Store Supp&ies 56 e$it 5# 1"9,9
Acct. No. 1#Cre!it @a&ance 1"9,9
5ro$&em 7+(@ (Continued) ate Nov. 1 #
ate Nov. 17 # (9 (9
ate Nov. #
ate Nov. 1
ate Nov. (9 (9
E%p&anation
E%p&anation
Office Euipment 56 e$it 5# -"9-4 >#
Acct. No. 1( Cre!it @a&ance -"9-4 ## ,"1(
Accounts 5aya$&e 56 e$it ># --7 ># ## 5# # (-"-99
Acct. No. #91 Cre!it @a&ance )--7* )1",7* ,#"1, ,1"1(-"(-
;ong+Term Notes 5aya$&e E%p&anation 56 e$it 6#
Acct. No. #-1 Cre!it @a&ance 44"-99 44"-99
C. >rass&ey" Capita& E%p&anation 56 e$it
Acct. No. (91 Cre!it @a&ance ,9"999
Sa&es 56 e$it S# 6#
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ate Nov. (9 (9
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Acct. No. #1 Cre!it @a&ance "-41("179
ate Nov. (9
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5ro$&em 7+(@ (Continued) ACCOUNTS 6ECEIA@;E ;E>E6
ate Nov. 19 1 ##
ate Nov. 4 14
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ate Fan. 7 # =ar. 4 (1
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56
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Other Accounts r.
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nKa nKa nKa nKa
;yn A!!ie............................................. :ages E%pense :ages 5aya$&e Not specifie!........................................ =erchan!ise Inventory ansas Corp........................................ ansas Corp ;yn A!!ie............................................. :ages E%pense
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ate Fan. 7 # =ar. 4 (1
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56
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Cr. Fan. , 117 (1 2e$. 1 ( 1# #7 =ar. 11 1 (1 (1
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;yn A!!ie............................................. :ages E%pense :ages 5aya$&e Not specifie!........................................ =erchan!ise Inventory ansas Corp........................................ ansas Corp ;yn A!!ie............................................. :ages E%pense ?i&&si!e =a&&......................................... 5repai! 6ent ansas Corp........................................ ansas Corp Not specifie!........................................ A!vertising E%pense A. ;opeJ............................................... A. ;opeJ" :ith!ra0a&s ;yn A!!ie............................................. :ages E%pense A. ;opeJ............................................... =i&eage E%pense Not Specifie!....................................... 6epairs E%pense ?arris Off. 5ro!.................................... ?arris Office 5ro!ucts A. ;opeJ............................................... =i&eage E%pense Tota&s...................................................
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>ENE6A; FOU6NA;
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Accounts 6eceiva$&e8A&e%s Eng. Co......19.1 -"-99 Unearne! Computer Services 6evenue....#( 1"-99 ...................................................................Computer Services ,9( 7"999
Seria& 5ro$&em" Success Systems (Concluded) Part
>ENE6A; FOU6NA;
5age #
#91,
Fan. -..............................................................................Cash 191 #-"999 ...................................................................A. ;opeJ" Capita& (91 #-"999 Additional investment b- o$ner%
11
Accounts 6eceiva$&e8A&e%s Eng. Co......19.1 -"-99 Unearne! Computer Services 6evenue....#( 1"-99 ...................................................................Computer Services ,9( ................................................................ 7"999
6evenue
Completed $or5 on pro6ect%
#9
Sa&es 6eturns an! A&&o0ances...................,1, -99 ...................................................................Accounts 6eceiva$&e 8;iu Corp 19.-..............................................................-99 Customer returned defective goods% An optional additional entr- for Fan. #9 is to !e$it P;oss from efective =erchan!ise an! cre!it PCost of >oo!s So&! for L(#9.
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Comprehensive 5ro$&em Comprehensive 5ro$&em" Co&o Company )1-9 minutes* Part 1
SA;ES FOU6NA; ate
Account e$ite!
Invoice Num$er
5age #
Accounts 6eceiva$&e r. Cost of >oo!s So&! r. 56 Sa&es Cr. Inventory Cr.
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"199
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1,"#19
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(1"1-9
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<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
&
Comprehensive 5ro$&em" Co&o Company (Part 12Continued) 5U6C?ASES FOU6NA; ate of Invoice
ate
Account
=ay ,
Store Supp.K>ear Supp............................. -K9, Office Euip.K>ear Supp........................... -K19 >arcia" Inc................................................ -K19 2in' Corp................................................. -K1, Store Supp.K>ear Supp............................. -K#, 5eyton 5ro!ucts....................................... -K#( Tota&s.......................................................
19 11 17 #, #(1
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<#91( $y =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
1
Comprehensive 5ro$&em" Co&o Company (Part 12Continued) CAS? IS@U6SE=ENTS FOU6NA; ate
C'. No.
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>ENE6A; FOU6NA; =ay
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5age # 1717-
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C'. No.
=ay 1 (,19 4 (,11 1- (,1# 1 #( # # (9 (1
(,1( (,1, (,1(,1 (,17
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Other Accounts 5ayee Account e$ite! 56 r. SV5 =gmt. Co.......................................... 6ent E%p.Se&&ing Space.......... ,#.......... .......... ........ ........... ...... .... #"4 6ent E%p.Office Space........... ,1.......... .......... ("719.......... .......... ........ .. 7,# 5eyton 5ro!ucts....................................... 5eyton 5ro!ucts....................................................................... "17, 1# 5ayro&&...................................................... Sa&es Sa&aries E%pense......... #1 .......... .......... .......... ........ .............. -"(#9 Office Sa&aries E%pense......... #9 .......... .......... ............................... 4",79 ("1-9 >arcia" Inc................................................ >arcia" Inc................................................................................. 4"#, 17 2in' Corp................................................. 2in' Corp.................................................................................. 1("(77 #7( 5erennia& 5o0er....................................... Uti&ities E%pense....................................................................... 9 1"#4( 1"#4( Fenny Co&o............................................... F. Co&o" :ith!ra0a&s................................................................. (9# 7"999 7"999 5ayro&&...................................................... Sa&es Sa&aries E%pense......... #1 .......... .......... .......... ........ .............. -"(#9 Office Sa&aries E%pense......... #9 .......... .......... ............................... 4",79 RRR ("1-9 Tota&s....................................................... -7"194 -7#4"(( )191* )11* ) * Cash Cr.
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17-
( Accounts 5aya$&e85eyton 5ro!ucts............................. #91K Inventory......................................................................... 11 3eceived a credit memo for returns%
74
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4-,
17-
74
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.Mc/ra$0ill Companies, nc%, '1
Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued)
Part
CO;O CO=5AND :or' Sheet for =onth En!e! =ay (1" #91( Una!3uste! Tria& @a&ance Account e$it Cre!it Cash........................................................ 1(-"11 Accounts receiva$&e.............................. 14"#99 =erchan!ise inventory......................... 14"-1 Office supp&ies....................................... 7( Store supp&ies........................................ ("(91 5repai! insurance.................................. ("(14 Office euipment................................... #-"9 Accum. !epr. Office euipment......... "44 Store euipment.................................... (4"#9 Accumu&ate! !epr. Store euip......... 17"-- Accounts paya$&e.................................. -("9- Fenny Co&o" Capita&............................... (94"94Fenny Co&o" :ith!ra0a&s...................... 7"999 Sa&es........................................................ 1-",## Sa&es !iscounts..................................... (-9 Sa&es returns an! a&&o0ances.............. 17Cost of goo!s so&!................................ "19 epr. E%penseOffice euipment........ epr. E%penseStore euipment......... Office sa&aries e%pense.........................
A!3ustments e$it Cre!it
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Comprehensive 5ro$&em" Co&o Company (Continued)
Part
CO;O CO=5AND :or' Sheet for =onth En!e! =ay (1" #91( Una!3uste! Tria& @a&ance Account e$it Cre!it Cash........................................................ 1(-"11 Accounts receiva$&e.............................. 14"#99 =erchan!ise inventory......................... 14"-1 Office supp&ies....................................... 7( Store supp&ies........................................ ("(91 5repai! insurance.................................. ("(14 Office euipment................................... #-"9 Accum. !epr. Office euipment......... "44 Store euipment.................................... (4"#9 Accumu&ate! !epr. Store euip......... 17"-- Accounts paya$&e.................................. -("9- Fenny Co&o" Capita&............................... (94"94Fenny Co&o" :ith!ra0a&s...................... 7"999 Sa&es........................................................ 1-",## Sa&es !iscounts..................................... (-9 Sa&es returns an! a&&o0ances.............. 17Cost of goo!s so&!................................ "19 epr. E%penseOffice euipment........ epr. E%penseStore euipment......... Office sa&aries e%pense......................... "(99 Sa&es sa&aries e%pense......................... 19",9 Insurance e%pense................................ 6ent e%pense" office space.................. 7,# 6ent e%pense" se&&ing space................. #"4 Office supp&ies e%pense....................... Store supp&ies e%pense........................ Uti&ities e%pense.................................... 1"#4( Tota&s.......................................................-,-"9#9 Net income............................................. Tota&s.......................................................
A!3ustments e$it Cre!it
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<#91( $y =c>ra0+?i&& E!ucation . This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
.Mc/ra$0ill Companies, nc%, '1 *
Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued A!3usting entries ) Part * =ay (1 Insurance E%pense..................................................... (7 5repai! Insurance................................................. 1#4
--( --(
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(1 Store Supp&ies E%pense............................................ -1 Store Supp&ies....................................................... 1#-
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Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued A!3usting entries ) Part * =ay (1 Insurance E%pense..................................................... (7 5repai! Insurance................................................. 1#4
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8o ad6ust for store supplies used%
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#4 #4
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-7 -7
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(# (#
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<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
+
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued C&osing entries ) Part * =ay (1 Sa&es............................................................................ ,1( 1-",## Income Summary.................................................. 91
1-",##
8o close temporar- accounts $ith credit balances%
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17(-9 "19 (# -7 "(99 19",9 --( 7,# #"4 #4 1"#4(
8o close temporar- accounts $ith debit balances%
=ay (1 Income Summary......................................91 F. Co&o" Capita&..................................... (91
(1",7 (1",7
8o close income summar- to o$ner;s capital%
=ay (1 F. Co&o" Capita&..........................................(91 F. Co&o" :ith!ra0a&s............................(9#
7"999 7"999
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<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued >ENE6A; ;E>E6
ate E%p&anation Apr. (9 @a&ance =ay (1 (1
Cash 56 6# #
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ate Apr. (9 =ay # (1 (1
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ate Apr. (9 =ay ( (1 (1 (1 (1
=erchan!ise Inventory E%p&anation 56 e$it @a&ance ># # 5# 79"7## 6# S#
Acct. No. 11 Cre!it @a&ance ##9"949 74 #1"#4# -7#14"797 #4",# 49"799 #94"7# 1"#19 14"-1
ate E%p&anation Apr. (9 @a&ance =ay (1 (1
ate E%p&anation Apr. (9 @a&ance =ay , #, (1
Office Supp&ies 56 e$it 5# >#
((
Store Supp&ies 56 e$it 5# 6# 5# >#
-7, (9
Acct. No. 1#, Cre!it @a&ance ,(9 7( #4 -9, Acct. No. 1#Cre!it @a&ance #",,7 ("9#1 (-9 #"71 ("(91 #"(#
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Solutions Manual, Chapter 7
7
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued 5repai! Insurance ate E%p&anation 56 e$it Apr. (9 @a&ance =ay (1 >#
Acct. No. 1#4 Cre!it @a&ance ("(14 --( #"7-
Office Euipment ate E%p&anation 56 e$it Apr. (9 @a&ance =ay 19 5# ,"97, 1# >#
Acct. No. 1( Cre!it @a&ance ##",79 #"-,, 4-, #-"9
Accumu&ate! epreciationOffice Euipment Acct. No. 1, ate E%p&anation 56 e$it Cre!it @a&ance Apr. (9 @a&ance "44 =ay (1 ># (# 19"##7
ate E%p&anation Apr. (9 @a&ance
Store Euipment 56 e$it
Acct. No. 1Cre!it @a&ance (4"#9
Accumu&ate! epreciationStore Euipment Acct. No. 1 ate E%p&anation 56 e$it Cre!it @a&ance Apr. (9 @a&ance 17"-- =ay (1 ># -7 14"1#(
#4"7-9
Acct. No. #91 Cre!it @a&ance 7"94 "(99 -",, 7"(( 41"49 -("9-
Fenny Co&o" Capita& ate E%p&anation 56 e$it Apr. (9 @a&ance =ay (1 ># (1 ># 7"999
Acct. No. (91 Cre!it @a&ance (94"94(1",7 (("7(# ((#"7(#
ate E%p&anation Apr. (9 @a&ance =ay ( 1# (1 (1
Accounts 5aya$&e 56 e$it ># ># 5# #
74 4-,
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Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued
ate =ay # (1
Fenny Co&o" :ith!ra0a&s E%p&anation 56 e$it # 7"999 >#
1-",##
Acct. No. ,1( Cre!it @a&ance (1"1-9 (1"1-9 1#-"#7# 1-",## 9
ate =ay # (1
Sa&es 6eturns an! A&&o0ances E%p&anation 56 e$it ># 17>#
Acct. No. ,1, Cre!it @a&ance 17179
ate =ay (1 (1
Sa&es iscounts E%p&anation 56 e$it 6# (-9 >#
Acct. No. ,1Cre!it @a&ance (-9 (-9 9
ate =ay (1 (1 (1
Cost of >oo!s So&! E%p&anation 56 e$it S# 1"#19 6# 49"799 >#
Acct. No. -9# Cre!it @a&ance 1"#19 "19 "19 9
ate =ay (1 (1 (1
E%p&anation
Sa&es 56 S# 6# >#
Acct. No. (9# Cre!it @a&ance 7"999 7"999 9
e$it
ate =ay (1 (1
epreciation E%pense8Office Euipment Acct. No. 1# E%p&anation 56 e$it Cre!it @a&ance ># (# (# ># (# 9
ate =ay (1 (1
epreciation E%pense8Store Euipment Acct. No. 1( E%p&anation 56 e$it Cre!it @a&ance ># -7 -7 ># -7 9
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Solutions Manual, Chapter 7
&
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued
ate =ay 1(9 (1
Office Sa&aries E%pense E%p&anation 56 e$it # ("1-9 # ("1-9 >#
Acct. No. #9 Cre!it @a&ance ("1-9 "(99 "(99 9
ate =ay 1(9 (1
Sa&es Sa&aries E%pense E%p&anation 56 e$it # -"(#9 # -"(#9 >#
Acct. No. #1 Cre!it @a&ance -"(#9 19",9 19",9 9
ate =ay (1 (1
Insurance E%pense E%p&anation 56 e$it ># --( >#
Acct. No. (7 Cre!it @a&ance --( --( 9
ate =ay 1 (1
6ent E%pense" Office Space E%p&anation 56 e$it # 7,# >#
Acct. No. ,1 Cre!it @a&ance 7,# 7,# 9
ate =ay 1 (1
6ent E%pense" Se&&ing Space E%p&anation 56 e$it # #"4 >#
Acct. No. ,# Cre!it @a&ance #"4 #"4 9
ate =ay (1 (1
Office Supp&ies E%pense E%p&anation 56 e$it ># #4 >#
Acct. No. -9 Cre!it @a&ance #4 #4 9
ate =ay (1 (1
Store Supp&ies E%pense E%p&anation 56 e$it ># >#
Acct. No. -1 Cre!it @a&ance 9
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Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued
ate =ay # (1
ate =ay (1 (1 (1
Uti&ities E%pense 56 e$it # 1"#4( >#
Acct. No. 9 Cre!it @a&ance 1"#4( 1"#4( 9
Income Summary E%p&anation 56 e$it ># 1#,"77># ># (1",7
Acct. No. 91 Cre!it @a&ance 1#,"771-",## (1",7 9
E%p&anation
ACCOUNTS 6ECEIA@;E ;E>E6
ate =ay #
ate =ay # 11 1
ate Apr. #4 =ay # -
ate =ay ## (9
E%p&anation
E%p&anation
E%p&anation
E%p&anation
Crane Corp. 56 e$it S# 1,"#19 ?ense& Company 56 e$it S# "199 6# S# ("9 no%" Inc. 56 e$it S# ,"7#># 6# ;ee Services 56 e$it S# "4-9 6#
Cre!it
@a&ance 1,"#19
Cre!it
@a&ance "199 9 ("9
"199
Cre!it 17,"--9
Cre!it "4-9
@a&ance ,"7#,"--9 9
@a&ance "4-9 9
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
*1
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued ACCOUNTS 5ADA@;E ;E>E6
ate =ay 17 #(
ate =ay 11 1
ate =ay , 19 1# #,
ate Apr. # =ay ( 4 #-
E%p&anation
E%p&anation
E%p&anation
E%p&anation
2in' Corp. 56 e$it 5# # 1("-9
Cre!it 1("-9
@a&ance 1("-9 9
>arcia" Inc. 56 e$it 5# # 4"499
Cre!it 4"499
@a&ance 4"499 9
>ear Supp&y Co. 56 e$it 5# 5# ># 4-, 5#
Cre!it (7"7# ,"97,
@a&ance (7"7# ,1"49( ,9", ,"7
5eyton 5ro!ucts 56 e$it 5# ># 74 # "(99 5#
"9(9
Cre!it 7"94 ("949
@a&ance 7"94 "(99 9 ("949
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Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Continued) Part CO;O CO=5AND Income Statement 2or =onth En!e! =ay (1" #91( 6evenue Sa&es........................................................................... ;ess Sa&es !iscounts............................................ Sa&es returns an! a&&o0ances..................... Net sa&es..................................................................... ;ess Cost of goo!s so&!.......................................... >ross profit on sa&es................................................... Operating e%penses Se&&ing e%penses epreciation e%pense8Store euipment............. Sa&es sa&aries e%pense........................................... 6ent e%pense8Se&&ing space................................ Store supp&ies e%pense.......................................... Tota& se&&ing e%penses............................................ >enera& an! a!ministrative e%penses epreciation e%pense8Office euipment............ Office sa&aries e%pense.......................................... Insurance e%pense.................................................. 6ent e%pense8Office space.................................. Office supp&ies e%pense......................................... Uti&ities e%pense...................................................... Tota& genera& an! a!ministrative e%penses.......... Tota& operating e%penses......................................... Net income...................................................................
L1-",## L
(-9 17-
-#1--"47 "19 --"47
-7 19",9 #"4 1,"4,, (# "(99 --( 7,# #4 1"#4( ", #,"(,9 L (1",7
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Solutions Manual, Chapter 7
*
Comprehensive 5ro$&em" Co&o Company (Continued) Part 2continued CO;O CO=5AND Statement of O0ners Euity 2or =onth En!e! =ay (1" #91( Fenny Co&o" Capita&" Apri& (9" #91(................. 5&us Net income............................................. ;ess :ith!ra0a&s $y o0ner.......................... Fenny Co&o" Capita&" =ay (1" #91(..................
L(94"94(1",7 (("7(# )7"999* L((#"7(#
CO;O CO=5AND @a&ance Sheet =ay (1" #91( Assets Current assets Cash............................................................... Accounts receiva$&e.................................... =erchan!ise inventory................................ Office supp&ies.............................................. Store supp&ies............................................... 5repai! insurance........................................ Tota& current assets..................................... 5&ant assets Office euipment.......................................... ;ess accumu&ate! !epreciation.................. Store euipment........................................... ;ess accumu&ate! !epreciation.................. Tota& p&ant assets......................................... Tota& assets.....................................................
L1(-"11 14"#99 14"-1 -9, #"(# #"7L(,"-(1 #-"9 19"##7 (4"#9 14"1#(
1-",( #9"77 ("#9 L(4-"71
;ia$i&ities Current &ia$i&ities Accounts paya$&e.........................................
L -("9-
Euity Fenny Co&o" Capita&........................................ Tota& &ia$i&ities an! euity..............................
((#"7(# L(4-"71
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Fundamental Accounting Principles, 1st !dition
Comprehensive 5ro$&em" Co&o Company (Concluded) Part * CO;O CO=5AND 5ost+C&osing Tria& @a&ance =ay (1" #91( Cash.......................................................................L1(-"11 Accounts receiva$&e............................................ 14"#99 =erchan!ise inventory........................................ 14"-1 Office supp&ies...................................................... -9, Store supp&ies....................................................... #"(# 5repai! insurance................................................ #"7Office euipment.................................................. #-"9 Accumu&ate! !epreciation8Office euip.......... Store euipment................................................... (4"#9 Accumu&ate! !epreciation8Store euip........... Accounts paya$&e................................................. Fenny Co&o" Capita&.............................................. RRRRRRR Tota&s.....................................................................L,1,"1,1
L 19"##7 14"1#( -("9- ((#"7(# L,1,"1,1
CO;O CO=5AND Sche!u&e of Accounts 6eceiva$&e =ay (1" #91( Crane Corp.................................................... L1,"#19 ?ense& Company ......................................... ("9 Tota& accounts receiva$&e............................ L14"#99
CO;O CO=5AND Sche!u&e of Accounts 5aya$&e =ay (1" #91( 5eyton 5ro!ucts........................................... L ("949 >ear Supp&y Co............................................. ,"7 Tota& accounts paya$&e................................ L-("9-
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Solutions Manual, Chapter 7
*+
6eporting in Action 8
@TN 7+1
1. 5o&ariss Note 1# i!entifies its sing&e reporte! $usiness segment. #. 5o&aris i!entifies an! !escri$es its sing&e reporta$&e segment in its Note 1 as fo&&o0s Pits engage! in the !esign" engineering" manufacturing an! mar'eting of innovative" high+ua&ity" high+ performance Off+6oa! ehic&es" Sno0mo$i&es" an! On+6oa! ehic&es" inc&u!ing motorcyc&es an! Sma&& E&ectric ehic&es. (. So&ution !epen!s on the most recent information o$taine!.
Comparative Ana&ysis 8 1.
@TN 7+#
5o&aris + Current Dear 6evenueKSegment Assets omestic segment
L1"4,"9 K G)L-7",7 W L47("14(*K#H X #9(.7M
Internationa& segment L7#"4-9 K G)L#79"-#7 W L144",,*K#H X (,-.-M 5o&aris One Dear 5rior 6evenueKSegment Assets omestic Segment
L1",9-" K G)L47("14( W L(9",#9*K#H X 147.9M
Internationa& Segment L-4-"17( K G)L144",, W L1(("#((*K#H X ((.4M Arctic Cat Current Dear 6evenueKSegment Assets omestic Segment
L#14"-9 K G)L#71"1( W L#,,"9#9*K#H X
Internationa& Segment L#,"91 K G)L1"7,(
W L#"9,*K#H
4,.4M
X 1##4.(M
Arctic Cat One Dear 5rior 6evenueKSegment Assets omestic Segment
L#1-",9K G)L#,,"9#9 W L#,4"#-*K#H
Internationa& Segment L#(-"#4 K G)L#"9, W L#"-,9*K#H #.
X
47.-M
X 19##9.#M
5o&ariss !omestic revenue as a percent of its !omestic assets is mar'e!&y higher than of Arctic Cats for $oth years for the !omestic segment. ?o0ever" for the internationa& segment" Arctic Cats revenue as a percent of assets is mar'e!&y higher than 5o&ariss for $oth years. 2ortunate&y for 5o&aris" its !omestic sa&es are rough&y trip&e its internationa& sa&esB thus" the !omestic revenueKassets ratio has greater
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Fundamental Accounting Principles, 1st !dition
impact. 2or Arctic Cat" its sa&es are rough&y sp&it $et0een !omestic an! internationa&B thus" its higher revenueKassets ratio is very meaningfu& an! positive for its performance assessment.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
*7
Ethics Cha&&enge 8
@TN 7+(
1. In!epen!ence in fact means that the au!itor maintains an o$3ective point of vie0 of the c&ient. In!epen!ence in appearance means that a thir! party vie0ing the re&ationship $et0een the au!itor an! c&ient 0ou&! have no reason to $e&ieve that the au!itor is not in!epen!ent of the c&ient. #. :hi&e au!itors are hire! $y their c&ients to perform au!its" au!itors have a responsi$i&ity to the companys Psta'eho&!ers an! the pu$&ic. In our society" au!itors provi!e cre!i$i&ity to financia& reporting $y offering professiona& au!it opinions a$out companies financia& statements. :hi&e it is sometimes !ifficu&t to $e responsi$&e to c&ients" as 0e&& as to the sta'eho&!ers an! the pu$&ic" au!itors must maintain their in!epen!ence to 'eep the pu$&ics trust. (.
Since Erica >ray is a so&e practitioner it is uestiona$&e 0hether she can consu&t on the c&ients accounting system an! then remain o$3ective in su$seuent years 0hen she performs the au!it of the company. ;arge firms often separate consu&ting an! au!iting engagements for the same c&ient $y having staff statione! in t0o !ifferent geographic $ranches of the firm !o the 0or'. Or a &arge &oca& firm might $e a$&e to perform consu&ting an! au!iting for the same c&ient $y assigning !ifferent personne& to the t0o 3o$s. In this scenario" Erica >ray 0ou&! nee! to !o $oth 3o$s herse&f" ma'ing it !ifficu&t to maintain in!epen!ence in fact an! appearance. )Note to instructors The Sar$anes+O%&ey Act specifica&&y prohi$its au!itors from provi!ing financia& information an! system !esigns for their SEC au!it c&ients. This 0as co!ifie! $y the SEC G2ina& 6u&ing 4H.*
Communicating in 5ractice 8
@TN 7+,
The memo shou&! recommen! the use of specia& 3ourna&s an! su$si!iary &e!gers. It shou&! e%p&ain the time+saving aspect of 3ourna&iJing in &a$e&e! co&umns an! a&so the posting of co&umn tota&s representing the impact of groups of &i'e transactions. The memo shou&! !iscuss the time&y information provi!e! $y su$si!iary &e!gers regar!ing customer an! cre!itor $a&ances. A !iscussion of the uses of a sche!u&e for verifying the accuracy of su$si!iary &e!gers shou&! a&so $e inc&u!e!.
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*"
Fundamental Accounting Principles, 1st !dition
Ta'ing It to the Net 8
@TN 7+-
)See e&&s Note 1, Segment Information*
1. ;arge EnterpriseB 5u$&icB Sma&& an! =e!ium @usinessB an! Consumer. #. The ;arge Enterprise segment reports L1"4-, mi&&ion of operating income an! the ;arge Enterprise segment reports L("194 mi&&ion of assets. These tota&s are &arger than its ne%t &argest segments" 0hich is Sma&& an! =e!ium @usiness segment 0ith L1"- mi&&ion in operating income an! the 5u$&ic segment 0ith L#"((9 mi&&ion in assets. 3.
Dell’s Operating Income and Total Assets by Segment
)L mi&&ions*
Operating Income #91#
Tota& Assets #91# Tota& Assets #911
Segment 6eturn on Assets
;arge Enterprise...........L 1"4-,
L("194 L#"(,
1.,M
5u$&ic............................. L 1",,
L#"((9 L#"-,-
7.,M
Sma&& V =e!ium L 1"@usiness.....................
L1",#1 L1"(4
114.1M
Consumer......................L
L1"-9(" L1",-4
#1.M
(#,
The Sma&& an! =e!ium @usiness ha! the highest segment return on assets for the fisca& year en!e! #91# 0ith a 114.1M return. The other three sho0e! returns on assets ranging from #1M to 7M. ,. The si% pro!uct groups reporte! $y e&& inc&u!e es'top 5Cs" =o$i&ity" Soft0are an! periphera&s" Servers an! net0or'ing" Enhance! services" an! Storage. )L mi&&ions*
#91# 2isca& Dear
=o$i&ity................................................................ L1"19, es'top 5Cs ....................................................... 1,"1,, Soft0are an! periphera&s................................... 19"### Servers an! net0or'ing..................................... 4"(( Services............................................................... 4"(## Storage................................................................. 1",(
(9.4M ##.4 1.1(., 1(., (.1
Tota&s.................................................................... L#"971
199.9M
e&& earne! more8in $oth !o&&ars an! returns8from its =o$i&ity groupB its es'top 5Cs 0as secon! in $oth categories.
<#91( $y =c>ra0+?i&& E!ucation. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 7
*&
Team0or' in Action 8
@TN 7+
2or chec' figures in the imp&ementation of this activity see the so&ution to 5ro$&em 7+(A or 7+(@.
Entrepreneuria& ecision 8
@TN 7+7
1. The fo&&o0ing specia& 3ourna&s are &i'e&y to $e use! •
Sa&es 3ourna& to recor! cre!it sa&es
•
Cash receipts 3ourna& to recor! a&& cash receipts
•
5urchases 3ourna& to recor! cre!it purchases
•
Cash !is$ursements 3ourna& to recor! a&& cash payments
•
>enera& 3ourna& to recor! a&& transactions not in specia& 3ourna&s
The company a&so is &i'e&y to use the fo&&o0ing su$si!iary &e!gers Accounts receiva$&e su$si!iary &e!ger to trac' amounts o0e! $y in!ivi!ua& customers
•
Accounts paya$&e &e!ger to trac' amounts o0e! to in!ivi!ua& ven!ors
•
Inventory &e!ger to 'eep trac' of a&& !ifferent inventory items )inc&u!ing inventory rea!y to se&&" inventory in the process of $eing comp&ete!" an! materia&s to $e use! in the pro!uction of inventory*
•
#. Dear
One Dear ?ence
Sa&es.............................. L199.9 mi& Computations
T0o Dears Three Dears ?ence ?ence
2our Dears ?ence
2ive Dears ?ence
1#9.9 mi&
L17#.- mi&
L#97.9 mi&
L1(4.9 mi&
Dear # L199.9 mi& % 1#9M X L1#9.9 mi& Dear ( L1#9.9 mi& % 11-M X L1(4.9 mi& Dear , L1(4.9 mi& % 1#-M X L17#.- mi& Dear - L17#.- mi& % 1#9M X L#97.9 mi&
If sa&es fo&&o0 the gro0th pro3ecte!" the company 0i&& have more than !ou$&e! the current L199 mi& in annua& sa&es to L#97 mi& annua&&y.
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Fundamental Accounting Principles, 1st !dition