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College Accounting (Chapters 1-24) 14th Edition Solution Manual

College Accounting (Chapters 1-24) 14th Edition Solution Manual is your ultimate textbook solutions guide, providing answers to the most difficult questions.

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    Chapter Opener: Thinking Critically Fast Facts • • • • Managerial Implications: Thinking Critically Discussion Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. CHAPTER 1 ACCOUNTING: THE LANGUAGE OF BUSINESS Google’s mission is to organize the world’s information and make it universally accessible and useful. “Googol” is the mathematical term for a 1 followed by 100 zeros. Google’s play on the term reflects the company’s mission to organize the immense amount of information available on the web. Google’s interface can be customized into more than 100 languages. The purpose of the Public Company Accounting Oversight Board is to oversee the accounting profession through its investigative and enforcement powers and to discipline corrupt accountants and auditors. SEC, AICPA, AAA. The Public Company Accounting Reform and Investor Protection Act of 2002 was passed in response to the wave of corporate accounting scandals starting with the demise of Enron Corporation in 2001, the arrest of top executives at WorldCom and Adelphia Communications Corporations, and ultimately, the demise of Arthur Andersen, an international public accounting firm. Managers use financial information to make decisions about adding new products and services, offering current products and services, and choosing vendors. Statements of Financial Accounting Standards. Google’s culture is unlike any in corporate America—lava lamps and large rubber balls dot company headquarters and the company’s chef used to cook for the Grateful Dead. Google Inc. puts employees first when it comes to daily life in all of their offices. Owners and managers: evaluate operations. Suppliers: assess ability of a firm to pay debts. Banks: ability to repay loans. Tax authorities: determine a tax base. Governmental agencies: legal compliance. Employees: wage levels and profit-sharing plans. Auditing, tax, and management advisory services. Measure business performance; separate entity. Sole proprietorship (owned by one person). Partnership (owned by two or more people). Corporation (can be owned by one person or many). Public, managerial, and governmental. Advice on how to structure financial affairs in order to reduce taxes without violating tax laws. Establish accounting policies, direct the accounting system, prepare and interpret financial statements, provide financial advice, prepare tax forms. Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. Regulation of financial reporting by publicly owned corporations. Stockholders, the IRS, SEC, banks, lenders and creditors are all examples of organizations that would be interested in how Google is performing. 1-1

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    CRITICAL THINKING PROBLEM 1.1 Sole proprietorship: Advantage—Heidi would be her own boss and could direct the business as she wants. Partnership: Corporation: Student answers will vary. The student’s reasons for choosing one form of ownership over another are more important than the specific choice made. Generate a discussion on the proposed name of the business. Ask the students if they think the name is creative. Disadvantages—A corporation is a more complicated form of ownership and is usually more expensive to form. There is also more government regulation and, consequently, more paperwork with a corporation. Disadvantages—Heidi would be responsible for the debts and taxes of the business and may be limited in the amount of capital she could borrow to finance the business. Advantage—Heidi would have one or more partners to assist with business operations and to contribute capital. Disadvantages—Heidi would have to share control of the business, as well as its profits. Heidi could be liable for the debts of the partnership. Advantages—The business would be a separate entity. Capital would be easier to raise and liability would be limited to the assets of the business. 1-2

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    SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. 2. 3. 4. 5. 6. 7. 8. Ethical Dilemma: Yes. Ethics and accounting are intertwined. Financial Statement Analysis: Analyze Online: 1. Clothing, accessories, outerwear and footwear. 2. Investors, suppliers, and banks. To assist the users when making financial decisions. 3. 15 to 25 year-olds. 4. Economic entity because it is a business for profit. Teamwork: Internet Connection: The bank will ask for information to assess the firm's finanacial position. Questions such as how much property does the firm own?; how much debt does the firm owe?; how much cash does the firm have? Anticipated cost of expansion and future income projections may also be requested. Banks might also require a list of your customers and vendors. There is no requirement to indicate to the bank problems you are having with certain customers and vendors. Yes. The firm’s financial records need to be separate from the owner’s personal financial records in order to evaluate and measure the performance of the business. The manager makes financial decisions based upon the financial information provided by the accountant. The number of Accounting Standards Update used will vary from year to year. Accounting Standards Update are cited as “ASU2016-1 (year) (standard number in chronological order). These standards are important to management because they enhance comparability of reporting practices. Questions asked might include: What is the profit or loss?, How much cash does the business have?, How much money do customers owe the business?.How much money is owed to suppliers?, What is the change in sales volume?, and what is the cost of merchandise sold? Financial information is used to evaluate performance and make decisions about a business or a nonprofit Keep your employees, creditors, and investors happy. Yes, financial information is a tool for making business decisions that will yield the above results. Inaccurate accounting records and poor business decisions. Every business needs an efficient accounting system which accumulates financial data, classifies and summarizes the information. Without an accounting system, suppliers, lenders, investors, and governmental tax authorities would not be able to accurately make decisions based on the financial information of the company. 1-3

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    Part A True-False 1. TRUE 2. TRUE 3. FALSE 3. FALSE 4. TRUE 5. FALSE 6. FALSE 7. FALSE 8. TRUE 9. TRUE 10. TRUE 11. FALSE 12. FALSE Part B Completion 1. language of business 2. international accounting 3. FBI 4. governmental accounting 5. AAA 6. AICPA 7. generally accepted accounting principles 8. SEC 9. IRS 10. stockholders or shareholders 11. shares of stock 12. partnerships 13. social entity 14. recording, classifying 15. financial statements SOLUTIONS TO PRACTICE TEST 1-4

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    Chapter Opener: Thinking Critically Fast Facts • • • Managerial Implications: Thinking Critically Discussion Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. For the fiscal year 2012, the company’s net income was $421 million while its total operating revenue was $17.09 billion. Assets = Liabilities + Owner’s Equity Assets: property owned. Liabilities: debts. Owners’ equity: owner’s financial interest. Assets, liabilities, and owner’s equity. Outflow of money/assets for costs used to produce revenue. withdrawals ending capital balance. Beginning-of-period capital balance, additional investments, net income/loss for period, less Revenue and expenses; net income or loss Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. Inflow of money/assets resulting from sales or use of property. Balance sheet shows position at particular date; increase of operations for a period of time Firm name, title of statement, date of statement or the period of time covered CHAPTER 2 ANALYZING BUSINESS TRANSACTIONS In 2012 Southwest served 63.3 million cans of soda, juices, and water; 14.1 million alcoholic beverages; 37.2 million bags of pretzels; 88.3 million bags of peanuts; 22.9 million Select-A- Snacks; and 45.5million other snacks. Answers will vary. Students should mention total assets and the type of assets, the liabilities the business would be responsible for, and whether the business is making a profit. The individuals in charge of keeping track of these transactions at Southwest as well as in other companies, are known as accountants. When recording the transactions, accountants are required to follow a set of rules and regulations known as GAAP. For every financial transaction that Southwest has, their accountants determine the accounts that were affected and then they record, report and then analyze these transactions. By doing so they can, at a specific point in time and over a stipulated period, be able to assess the company’s financial performance including profitability of the airline, assets owned by the company and of course the amount owed to creditors and owners. Southwest Airlines opened in 1971 with three planes flying between Houston, Dallas, and San Antonio. Southwest Airlines currently flies over 100 million passengers a year to 97 cities all across the country. 2-1

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    Discussion Questions (continued) 10. 11. 12. EXERCISE 2.1 Assets: Liabilities: Owners’ Equity EXERCISE 2.2 1. $22,240 2. $19,020 3. $5,675 4. $36,725 5. $8,875 EXERCISE 2.3 Assets = Liabilities + 1. I I = Increase (-) 2. I I D = Decrease (+) 3. I/D 4. I/D 5. I 6. D 7. I 8. I/D 9. D 10. D D EXERCISE 2.4 = + 1. Cash $13,500 Accounts Payable $23,180 + David Malone, Capital $28,520 2. Dental Supplies 3,650 = + 3. Dental Equipment 26,550 = + 4. Office Furniture 8,000 = + 5. Total $51,700 = $23,180 + $28,520 $99,675 D b. one asset increase and another decrease; no change in total assets c. assets decrease, liabilities decrease d. assets increase, owner’s equity increase e. assets decrease, owner’s equity decrease I I f. assets decrease, owner’s equity decrease Transaction $125,900 $26,225 Owners’ Equity I Subtract total expenses from revenue Increases owner's equity a. assets increase, owner’s equity increase Owner’s Equity Liabilities Assets D 2-2

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    EXERCISE 2.5 = Liabilities + Cash + Accounts Receivable + Equipment = Accounts Payable + John Amos Capital + Revenue - Expenses 1. +$60,000 +$60,000 2. +22,000 +22,000 3. +3,100 +3,100 4. -4,600 +4,600 5. +5,050 +5,050 6. -4,450 4,450 7. +3,200 -3,200 8. -13,000 -13,000 Totals $44,250 + $,1,850 + $26,600 = $9,000 + $60,000 + $8,150 - $4,450 EXERCISE 2.6 Net income of $23,000 Revenue Repair Fees ………………………………………….. $51,150 Expenses Advertising Expense ………………………………………….. $6,300 Salaries Expense ………………………………………….. 19,100 Telephone Expense ………………………………………….. 1,150 Utilities Expense ………………………………………….. 1,600 Total Expenses ………………………………………….. $28,150 Net Income ………………………………………….. $23,000 EXERCISE 2.7 1. Services were performed for cash. 2. Equipment was purchased for cash. 3. A payment was made on the amount owed to a creditor. 4. An expense was paid in cash. 5. Cash was received from charge customer. 6. Services were performed on credit. 7. An expense was paid in cash. Owner’s Equity Assets 2-3

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    Revenue Fees Income 77 9 0 0 00 Expenses Advertising Expense 6 5 0 0 00 Salaries Expense 16 0 0 0 00 Telephone Expense 8 0 0 00 Total Expenses 23 3 0 0 00 Net Income 54 6 0 0 00 EXERCISE 2.9 Net Loss of $1,150 Revenue Service Revenue ………………………………………….. Expenses Advertising Expense………………………………………….. $3,100 Telephone Expense………………………………………….. 800 Salaries Expense ………………………………………….. 2,600 Cleaning Expense ………………………………………….. 450 Total Expense ………………………………………….. Net Loss ……………………………………………….. EXERCISE 2.10 Alexandria Perez, Capital, September 1, 2016 26 7 0 0 00 Net Income for September 54 6 0 0 00 Less Withdrawals for September 9 0 0 0 00 Increase in Capital 45 6 0 0 00 Alexandria Perez, Capital, September 30, 2016 72 3 0 0 00 Statement of Owner’s Equity Month Ended September 30, 2016 $5,800 $6,950 -$1,150 Perez Investment Services Perez Investment Services Income Statement Month Ended September 30, 2016 EXERCISE 2.8 2-4

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    Assets Liabilities Cash 33 1 0 0 00 Accounts Payable 5 7 0 0 00 Accounts Receivable 4 0 0 0 00 Office Supplies 3 4 0 0 00 Owner's Equity Office Equipment 37 5 0 0 00 Alexandria Perez, Capital 72 3 0 0 00 Total Assets 78 0 0 0 00 Total Liabilities and Owner's Equity 78 0 0 0 00 EXERCISE 2.10 (continued) Perez Investment Services Balance Sheet September 30, 2016 2-5

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    PROBLEM 2.1A = Liabilities + Owner's Equity Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Owner’s Capital 1. +$97,000 +$97,000 2. -$19,750 +$19,750 3. +$14,400 +$14,400 4. -$11,800 -$11,800 5. +$30,000 +$30,000 6. +$8,200 +$8,200 7. +$6,300 +$6,300 8. -$4,000 -$4,000 9. +$3,500 -$3,500 10. -$6,460 + $6,460 11. -$9,000 -$9,000 Totals $87,690 + $2,800 + $6,460 + $34,150 = $2,600 + $128,500 Analyze: The ending balance in the Cash account is $87,690. PROBLEM 2.2A = Liabilities + Cash + Accounts Receivable + Office Furniture + Auto = Accounts Payable + M. Dickey Capital + Revenue - Expenses $61,000 + $16,600 + $35,800 + $23,500 = $11,200 + $91,500 + $58,600 - $24,400 1. +6,680 +6,680 61,000 + 23,280 + 35,800 + $23,500 = 11,200 + 91,500 + 65,280 - 24,400 2. -1,700 +1,700 59,300 + 23,280 + 37,500 + $23,500 = 11,200 + 91,500 + 65,280 - 24,400 3. +11,200 -11,200 Assets New Balances New Balances Assets Owner’s Equity Beginning Balances 2-6

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    PROBLEM 2.2A (continued) = Liabilities + Cash + Accounts Receivable + Office Furniture + Auto = Accounts Payable + M. Dickey Capital + Revenue - Expenses 70,500 + 12,080 + 37,500 + $23,500 = 11,200 + 91,500 + 65,280 - 24,400 4. -880 +880 69,620 + 12,080 + 37,500 + $23,500 = 11,200 + 91,500 + 65,280 - 25,280 5. -4,500 -4,500 65,120 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 25,280 6. -9,700 +9,700 55,420 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 34,980 7. -1,120 +1,120 54,300 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 36,100 8. +10,500 +10,500 64,800 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 75,780 - 36,100 9. -2,350 +2,350 62,450 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 75,780 - 38,450 10. + +12,500 +12,500 $62,450 + $24,580 + $37,500 + $23,500 = $6,700 + $91,500 + $88,280 - $38,450 Analyze: Total assets equal $148,030. New Balances New Balances New Balances New Balances Assets Owner’s Equity New Balances New Balances New Balances New Balances 2-7

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    Assets Cash 34 3 0 0 00 24 0 0 0 00 Supplies 6 3 8 0 00 Accounts Receivable 13 2 0 0 00 Equipment 78 0 0 0 00 107 8 8 0 00 Total Assets 131 8 8 0 00 131 8 8 0 00 Revenue Fees Income 7 8 8 0 00 Expenses Utilities Expense 9 8 0 00 Salaries Expense 8 9 0 0 00 Telephone Expense 3 1 4 00 Total Expenses 10 1 9 4 00 Net Loss (2 3 1 4 00) Taylor Cotton, Capital, May 1, 2016 50 6 0 0 00 Net Loss for May (2 3 1 4 00) Less Withdrawal for May 3 0 0 0 00 Decrease in Capital 5 3 1 4 00) Taylor Cotton, Capital, May 31, 2016 45 2 8 6 00 Total Liabilities and Owner's Equity February 29, 2016 Liabilities Accounts Payable PROBLEM 2.3A Brown Equipment Repair Service Owner's Equity James Brown, Capital Analyze: Owner's Equity is $107,880 at February 29, 2016. Balance Sheet Statement of Owner's Equity Month Ended May 31, 2016 Cotton Cleaning Service Income Statement Month Ended May 31, 2016 PROBLEM 2.4A Cotton Cleaning Service 2-8

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    PROBLEM 2.4A (continued) Assets Cash 4 6 8 6 00 4 9 0 0 00 Accounts Receivable 5 9 0 0 00 Supplies 5 8 0 0 00 Equipment 33 8 0 0 00 45 2 8 6 00 Total Assets 50 1 8 6 00 50 1 8 6 00 Analyze: The amount of $45,286 (Taylor Cotton, Capital) was transferred to the balance sheet. Cotton Cleaning Service Balance Sheet May 31, 2016 Liabilities Accounts Payable Owner's Equity Taylor Cotton, Capital Total Liabilities and Owner's Equity 2-9

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    PROBLEM 2.1B = Liabilities + Owner's Equity Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Owner’s Capital 1. +$72,000 +$72,000 2. -$32,000 +$32,000 3. +$12,000 +$12,000 4. -$6,000 -$6,000 5. +$12,000 +$12,000 6. +$8,400 +$8,400 7. +$7,300 +$7,300 8. -$5,200 -$5,200 9. +$5,000 -$5,000 10. -$6,300 + $6,300 11. -$10,000 -$10,000 Totals $37,900 + $2,300 + $6,300 + $44,000 = $6,000 + $84,500 Analyze: Transaction 3 increased the Company's debt by $12,000. PROBLEM 2.2B = Liabilities + Cash + Accounts Receivable + Supplies + Office Furniture = Accounts Payable + S. Cravens Capital + Revenue - Expenses $38,000 + $12,000 + $12,800 + $24,000 = $10,000 + $49,800 + $52,000 - $25,000 1. +8,000 +8,000 38,000 + 20,000 + 12,800 + 24,000 = 10,000 + 49,800 + 60,000 - 25,000 2. -2,880 +2,880 35,120 + 20,000 + 12,800 + 24,000 = 10,000 + 49,800 + 60,000 - 27,880 3. +10,000 +10,000 Assets Assets Owner’s Equity Beginning Balances New Balances New Balances 2-10

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    PROBLEM 2.2B (continued) = Liabilities + Cash + Accounts Receivable + Supplies + Office Furniture = Accounts Payable + S. Cravens Capital + Revenue - Expenses 45,120 + 20,000 + 12,800 + 24,000 = 10,000 + 49,800 + 70,000 - 27,880 4. -1,600 +1,600 43,520 + 20,000 + 12,800 + 24,000 = 10,000 + 49,800 + 70,000 - 29,480 5. -4,800 -4,800 38,720 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 29,480 6. -1,920 +1,920 36,800 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 31,400 7. -14,000 +14,000 22,800 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 45,400 8. +11,200 +11,200 34,000 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 81,200 - 45,400 9. +2,000 +2,000 34,000 + 20,000 + 14,800 + 24,000 = 7,200 + 49,800 + 81,200 - 45,400 10. +6,000 + -6,000 $40,000 + $14,000 + $14,800 + $24,000 = $7,200 + $49,800 + $81,200 - $45,400 Analyze: Owner's Equity balance is $85,600; $49,800 + ($81,200 - $45,400). New Balances New Balances New Balances New Balances Assets Owner’s Equity New Balances New Balances New Balances New Balances 2-11

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