Skip to content
Textbook Guides

Solution Manual for Fundamental Accounting Principles, Fifteenth Canadian Edition

Get a deeper understanding of your subject with Solution Manual for Fundamental Accounting Principles, Fifteenth Canadian Edition , a well-organized textbook guide.

Preview 16 of 964 pages

See the first 16 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 1 SOLUTIONS MANUAL to accompany Fundamental Accounting Principles 1 5 th Canadian Edition by Larson/Jensen /Dieckmann Revised for the 15 th Edition by: Praise Ma, Kwantlen Polytechnic University Technical checks by: Rhonda Heninger, Southern Alberta Institute of Technnology Michelle Young, CPA

  2. Page 2
  3. Page 3
    Read page 3 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 2 Chapter 1 Accounting in Business Chapter Opening Vignette Critical Thinking Challenge Questions * 1. What questions might Zane need the answers to in order to get a loan from a bank? The key question the bank wants answered is whether Zane can repay the loan. In order to assess this, they would ask questions such as: • Financial Results: How much is the business earning per year? How profitable has the food truck been for the past year? How much are revenues and expenses? How are the results compared to the past year or couple of years? Where do you expect results to be in the next few years? • Cash: How much cash does Zane currently have? How much does he want for the loan? What is his credit score? • Debt: Are there any outstanding loans? If so, what is the balance outstanding, the term, the payments, and the interest rate? • Assets: What personal or business assets does Zane have? The bank may want to take some of Zane’s assets as collateral. • Customers: How many customers on average are served per day? How many customers are new or repeat customers? • Employees: How many employees does he need to hire to serve his customers? Does Zane pay his employees a salary or a wage? How much does he pay them? Does he have the cash in the bank to pay his employees? • Food Truck: Does Zane own his food trucks? If the trucks are purchased, did he pay cash or does he owe money on it? If he owes money, does he pay interest? Does he lease them? Does he have insurance? • Toronto Pearson Airport Location: How much is the rent? • Food (Inventory): How much food is purchased in advance? How does Zane manage his food to prevent spoilage? Does Zane need to pay his suppliers right away or can he pay on credit? • Advertising: Does Zane advertise? If so, how much does he pay? • Taxes: What is the amount of income tax he has to pay? • There are many other questions that could be asked. 2. Who else might require accounting information from Zane ’s business? Other stakeholders that might require accounting information from Zane ’s business include Canada Revenue Agency (CRA), employees, and potential investors.

  4. Page 4
    Read page 4 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 3 *The Chapter 1 Critical Thinking Challenge questions are asked at the beginning of this chapter . Students are reminded at the conclusion of the chapter to refer to the Critical Thinking Challenge questions at the beginning of the chapter. The solutions to the Critical Thinking Challenge questions are available here in the Solutions Manual and accessible to students at Connect .

  5. Page 5
    Read page 5 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 4 Concept Review Questions 1. Accounting will provide Zane useful information to make good decisions. For instance, it is important for Zane to track his revenues and expenses to determine whether his business is profitable (his revenues are exceeding his expenses). Based on the accounting information, Zane can make decisions on how to price his food and where he can decrease expenses to improve his profits. Accounting will provide Zane important information on his business’ performance to make informed decisions on his expansion strategy. 2. Businesses offering products include Danier Leather . , Lululemon , NIKE, and Reebok which produce apparel; Dell, Hewlett - Packard, and Apple which produce computer equipment; and Abercrombie and Fitch GAP , and Zara which produce clothing . Service business examples include: WestJet Airlines which provides airline services; Bell Canada , Rogers Communications , and Telus provide information communication services; and Google, Twitter, Skype, Facebook and Instagram which provide internet services . 3. “Accounting is relevant to all students even if they do not plan on becoming an accountant. If you are pursuing a career in marketing, you will need to understand information such as sales volume, advertising costs, promotion costs, salaries of sales pe rsonnel, and sales commissions. If you are studying human resources, you will need to understand the financial position of your company to determine whether you have the resources to hire new employees or provide existing employees a pay increase. Even if you do not pursue a career in business, understanding the basics of accounting can help you better understand your own personal finances and the world around us. I am convinced that this course will be a good investment of our time.” 4. Answers will vary on what students would sell. Business organizations can be organized in one of three forms: sole proprietorship, partnership, or corporation. These forms have implications for legal liability, taxation, continuity, number of owners, and legal status as follows: Sole Proprietorship Partnership Corporation Legal entity no no yes Limited liability no no yes Unlimited life no no yes Business income taxed no no yes One owner allowed yes no yes Answers and reasons will vary for the best form of business. Possible answers include: A sole proprietorship would be easiest to form for a student. A partnership would be helpful in bringing people with multiple skills and/or resources together. A corporation would be the easiest to obtain financing and to limit liability. 5 . The equity section of the balance sheet reports a Hailey Walker , Capital account. The presence of the owner’s capital account indicates that Organico has been organized as a sole proprietorship. 6 . The two organizations for which accounting information is available in Appendix III at the end of the book are WestJet Airlines and Danier Leather . 7 . Hospitals, colleges, prisons, and bus lines are examples of organizations that can be formed as profit - oriented businesses, government units, or nonprofit establishments.

  6. Page 6
    Read page 6 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 5 8 . External users and their uses of accounting information include: ( 1 ) lenders for measuring the return of loans; ( 2 ) shareholders for assessing the acquisition of shares; ( 3 ) members of the board of directors for overseeing management; and ( 4 ) potential employees for judging employment opportunities. Other users are auditors, consultants, regulators, unions, suppliers, and appraisers. Internal users and their uses of accounting information include: ( 1 ) management for overseeing performance, financial position, and cash flow ; ( 2 ) current employees for generating special purpose reports to assist management ; (3) internal auditors for identifying high risk areas to audit; and (4) Sales staff to determine how to increase sales. 9 . The internal role of accounting is to serve the organization’s internal operating functions by providing useful information in completing their tasks more effectively and efficiently. By providing this information, accounting helps the organization reach its overall goals. 1 0 . “Tyler, there are a number of areas you could pursue within accounting. There are also a number of opportunities within those accounting areas. I have put together some information to help with your decision .” Accounting professionals practice in four broad fields including: Accounting - related opportunities within each field are numerous and include: Financial accounting - Statement preparation - Statement analysis - Auditing - Regulatory - Consulting - Planning - Criminal investigation Managerial accounting - General accounting - Cost accounting - Budgeting - Internal auditing - Management advisory services Taxation - Preparation - Planning - Regulatory - Investigations - Consulting Accounting - related - Lenders - Consultants - Analysts - Traders - Managers - Directors - Underwriters - Planners - Appraisers 11 . The independent auditor for WestJet is KPMG LLP.

  7. Page 7
    Read page 7 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 6 1 2 . The purpose of accounting is to provide decision makers with information helping them make better decisions. Examples include information for people making investments, loans and similar decisions. 1 3 . Accounting professionals deal with a variety of information about their employers and clients that is not generally available to the public. Ethical issues arise concerning the possibility that accounting professionals might personally benefit by using confidential information. There is also the possibility that their employers and clients might be harmed if certain information is not kept confidential. 1 4 . An income statement user must know what time period is covered to judge whether the company’s performance is satisfactory. For example, a statement user would not be able to assess whether the amounts of revenue and profit are satisfactory without knowing whether they were earned over a week, a month, or a year. 1 5 . The revenue recognition principle provides guidance that managers and auditors need for knowing when to recognize revenue. For example, if revenue is recognized too early, the income statement reports income earlier than it should and the business looks more profitable than it really is. On the other hand, if the revenue is not recognized on time, the income statement shows lower amounts of revenue and profit than it should and the business looks less profitable than it really is. Basically, this principle requires revenue to be recognized when it is earned and can be measured reliably. The amount of revenue should equal the value of the assets received from the customers. 1 6 . The four financial statements are: the income statement, the balance sheet, the statement of changes in equity, and the statement of cash flows. 17 . An income statement reports on the business’s performance during the period. It shows whether the business earned a profit (or loss). The statement does not simply report the amount of profit or loss but lists the types and amounts of the revenues and expenses. The balance sheet reports on the financial position of a business at a specific point in time. It is often called the statement of financial position. It provides information that helps users understand a company’s financial status. The balance sheet lists the types and dollar amounts of assets, liabilities, and equity of the business. 18 . Cash has purchasing power and can be used to acquire other assets. A business that sells products to a customer and does not collect cash immediately has c reated an Accounts Receivable. This account represents a future collection of cash. Supplies are resources that will help a business carry on it s operations. 19 . I disagree with Rachel. While an accounts receivable and an accounts payable both show up on the balance sheet and in the accounting equation, an accounts receivable is an asset and an accounts payable is a liability. These two accounts also represent two different perspectives. When a company sells products or services on credit, an accounts receivable is created. When a company buys products on credit, an accounts payable is created. 20 . A revenue is an inflow of assets received in exchange for goods or services provided to customers as part of the major or central operations of the business. A revenue also may occur as a decrease in liabilities as when a service or product is delivered having been paid for in advance. The accountant has recorded revenue incorrectly. The accountant should record $5,000 in revenue from the sale of frozen yogurt and $10,000 as an owner’s investment in the owner’s equity account.

  8. Page 8
    Read page 8 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 7 21. A business’s equity is increased by investments into the business made by the owner and by profit . It is decreased by withdrawals made by the owner and by a loss, which is the excess of expenses over revenues. 2 2 . (a) Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. (b) Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. (c) Equity is the residual interest in the assets of an entity that remains after deducting its liabilities. (d) The term “net assets” means the same thing as equity, which is also determined as assets less liabilities. Assets = Liabilities + Equity (Net assets). A celebrity’s assets may include land, real estate , cars and companies. A celebrity’s liabilities may include a mortgage, bank debt and credit card debt. A celebrity’s equity represents their net worth, which is their assets less liabilities. 23 . Financial statements need to be prepared in a specific order because they are integrated. Some of the numbers on one financial statement are inputs for other financial statements. Financial statements should be prepared in the following order: 1) Income S tatement 2) Statement of Changes in Equity 3) Balance Sheet and 4) Statement of Cash Flow. The profit on the income statement is an input in the statement of changes in equity. The ending equity balance on the statement of changes in equity is an input for the balance sheet. The cash balance on the balance sheet corresponds to the ending cash balance on the statement of cash flows.

  9. Page 9
    Read page 9 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 8 QUICK STUDY Quick Study 1 - 1 There are a variety of questions and this list is certainly not exhaustive: 1. How much was spent on advertising last year? And/or how much is projected to be spent this year? 2. What is the effect of advertising on sales? And/or what is the project ed effect of advertising on this year’s sales? 3. How much was spent on delivering flowers last year? And/or how much is projected to be spent this year? 4. How much will it cost to create a webpage and sell flowers online? 5. Can sales be increased by selling online? And/or what is the experience of our competitors in this regard? 6. When pricing flowers, how much is being charged for delivery? 7. Are there enough sales staff to answer phones/emails and/or are sales being lost because of insufficient staffing and/or staffing issues? Quick Study 1 - 2 a. Do not record Meeting with the mechanical staff to determine new machine requirements for next year. b. Record Receiving the company’s utility bill detailing the usage for the past month . c. Do not record Analyzing last year’s sales report to determine if the discount policy is effective in getting customers to buy in mu l tiple quantities d. Record Downloading the online bank statements and identifying customer payments. e. Do not record After an employee is interviewed, hiring them for the accounting position. Quick Study 1 - 3 a. Highlands United Church Non - business d. University of Toronto Business b. Royal Alexandra Hospital Non - business e. Loblaw Business c. Toronto - Dominion Bank Business f. World Vision Non - business Quick Study 1 - 4 1. SP 2. C 3. P 4. SP 5. C 6. C 7. P

  10. Page 10
    Read page 10 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 9 Quick Study 1 - 5 1. A 2. C 3. B 4. A 5. A 6. B 7. B 8. C Quick Study 1 - 6 1. Relevant facts : You have failed your midterms and are at high risk of failing the course. Your university policy will punish all academic acts of dishonesty. You have faced a difficult personal situation during the semester. 2. Ethical issues involve d: Whether it is ethical for you to look at accounting notes during the final exam. 3. Fundamental principles and rules applicable to th e matter in question: Your university policy will punish all academic acts of dishonesty. You believe in the principle of honesty. It is not honest to misrepresent the amount of accounting knowledge you know. 4. Established internal procedures : The university’s policy will punishes all acts of academic dishonesty. 5. Alternative courses of action : Continue engaging in acts of academic dishonesty until you are caught. The consequence will be that you may be caught in the future and be punished for it. Resolve to not engage in any acts of academic dishonesty in the future. The consequence will be that you avoid the chance of being punished for unethical behavior in the future. Conclusion The behaviour in the situation described appears to be unethical based on the application of the Chartered Professional Accountants of Ontario’s Rules of Professional Conduct - Approach to Ethical Conflict Resolution. You are acting against your University’s policy and against your own personal value of being honest. Quick Study 1 - 7 a. Business entity principle b. Revenue recognition principle c. Historical cost accounting standard (see page 18) Quick Study 1 - 8

  11. Page 11
    Read page 11 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 10 1. Revenue Recognition 2. Historical Cost 3. Business Entity 4. Going Concern 5. Currency Quick Study 1 - 9 Currency a. Delco performed work for a client located in China and collected 8,450,000 RMB (Chinese currency), the equivalent of about $1,320,000 Canadian. Delco recorded it as 8,450,000. Revenue Recognition b. Delco collected $180,000 from a customer on December 20, 201 7 for w ork to be done in February 201 8 . The $180,000 was record ed as revenue during 201 7 . Delco’s year end is December 31. Going Concern c. Delco’s December 31, 201 7 balance sheet showed total assets of $840,000 and liabilities of $1,120,000. The income statement for the past 6 years has shown a trend of increasing losses. Historical Cost d. Included in Delco’s assets was land and building purchased for $310,000 and reported on the balance sheet at $470,000. Business Entity e. Delco’s owner, Tom Del, consistently buys personal supplies and charges them to the company. Qu ick Study 1 - 1 0 a. Equity = $ 75,000 – $ 40,500 = $ 34,500 b. Liabilities = $300,000 – $ 85,500 = $214,500 c. Assets = $187,500 + $ 95,400 = $282,900 Quick Study 1 - 1 1 a. Equity = $374,700 – $252,450 = $122,250 b. Liabilities = $150,900 – $126,000 = $ 24,900 c. Assets = $ 37,650 + $112,500 = $150,150

  12. Page 12
    Read page 12 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 11 Quick Study 1 - 1 2 a. Allin Servicing Income Statement For Month Ended April 30, 201 7 Revenues $300 Expenses 125 Profit (loss) 175 Allin Servicing Statement of Changes in Equity For Month E nded April 30, 201 7 Tim Allin, capital, April 1 $ 50 Add: Investments by owner $ 30 Profit 175 205 Total $255 Less: Withdrawals by owner 15 Tim Allin, capital, April 30 $240 Allin Servicing Balance Sheet April 30, 201 7 Assets Liabilities Cash $ 60 Accounts payable $ 25 Equipment 205 Equity Tim Allin, capital 240 Total liabilities and Total assets $265 equity $265 b. Allin Servicing Income Statement For Month Ended May 31, 201 7 Revenues $135 Expenses 85 Profit (loss) $ 50 Allin Servicing Statement of Changes in Equity For Month Ended May 31, 201 7 Tim Allin, capital, May 1 $240 Add: Investments by owner $ 60 Profit 50 $110 Total 350 Less: Withdrawals by owner 75 Tim Allin, capital, May 3 1 $ 275 Allin Servicing Balance Sheet May 31, 201 7 Assets Liabilities Cash $120 Accounts payable $ 45 Equipment 200 Equity Tim Allin, capital 275 Total liabilities and Total assets $320 equity $ 320

  13. Page 13
    Read page 13 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 12 Quick Study 1 - 1 3 1. $20,000 - $15,000 = $5,000 beginning capital on Jan uary 1, 201 7 2. $5,000 + $3,000 + $8,000 - $4,000 = $12,000 end ing capital on December 31, 201 7 Quick Study 1 - 1 4 Assets = Liabilities + Equity a. Increase/Decrease b. Increase Increase c. Decrease Decrease d. Increase Decrease e. Decrease Decrease Quick Study 1 - 1 5 c 1. Supplies ................................ ................... $10 a 2. Supplies expense ................................ .... 22 c 3. Accounts receivable ................................ 25 c 4. Accounts payable ................................ .... 12 c 5. Equipment ................................ ................ 40 b 6. Tim Roadster’s withdrawals in April ...... 35 c 7. Notes payable ................................ .......... 30 a 8. Utilities expense ................................ ....... 10 c 9. Furniture ................................ ................... 20 a 10. Revenue ................................ .................... 70 a 11. Rent revenue ................................ ............. 35 a 12. Salaries expense ................................ ...... 45 b 13. Tim Roadster’s investments in April ....... 60 a+b 14. Profit * ................................ ........................ 28 * Calculated as : 70 + 35 – 22 – 10 – 45 = 28

  14. Page 14
    Read page 14 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 13 Quick Study 1 - 1 6 1. Total revenues ................................ ............. 70 + 35 = 105 2. Total operating expenses ............................ 22 + 10 + 45 = 77 3. Profit ................................ ............................. 105 – 77 = 28 4. Total assets ................................ .................. 10 + 25 + 40 + 20 = 95 5. Total liabilities ................................ .............. 12 + 30 = 42 6. Tim R oadster, capital (April 30, 201 7 ) ........ 60 – 35 + 28 = 53 7. Total liabilities and equity ........................... 42 + 53 = 95 Q uick Study 1 - 1 7 d 1. Loss ................................ ........................ 2 Income statement & Statement of changes in equity d 2. Rent expense ................................ .......... 22 Income statement b 3. Rent payable ................................ .......... 6 a 4. Accounts receivable .............................. 14 d 5. Joan Bennish ’s investments in May ..... 30 Statement of changes in equity d 6. Interest income ................................ ...... 2 Income statement d 7. Joan Bennish’s , capital, May 1, 201 7 .... 0 Statement of changes in equity a 8. Repair supplies ................................ ....... 5 b 9. Notes payable ................................ .......... 25 d 10. Joan Bennish ’s withdrawals in May ...... 5 Statement of changes in equity a 11. Truck ................................ ........................ 15 d 12. Consulting revenue ................................ . 18 Income statement c 13. Joan Bennish , capital, May 31, 201 7 ...... 23 * a 14. Cash ................................ ......................... 20 * See QS1 - 1 8 for details on how this amount was calculated ; this calculation was not a requirement of QS1 - 1 7 .

  15. Page 15
    Read page 15 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 14 Quick Study 1 - 1 8 CORNERSTONE CONSULTING Income Statem ent For Month Ended May 31, 201 7 Revenues: Consulting revenue ................................ ........... $18 Interest income ................................ .................. 2 Total revenues ................................ ........................... $20 Operating expenses: Rent expense ................................ ..................... 22 Loss ................................ ................................ .... $ 2 CORNERSTONE CONSULTING Statement of Changes in Equ ity For Month Ended May 31, 201 7 Joan Bennish , capital, May 1 .............................. $ 0 Add: Investments by owner ............................ 30 Total ................................ ............................... $30 Less: Withdrawals by owner .............................. $ 5 Loss ................................ ............................ 2 7 Joan Bennish , capital, May 31 ............................ $23 CORNERSTONE CONSU LTING Balance Sheet May 31, 201 7 Assets Liabilities Cash ................................ ................ $20 Rent payable ............................. $ 6 Accounts receivable ...................... 14 Notes payable ........................... 25 Repair supplies .............................. 5 Total liabilities .......................... $31 Truck ................................ ............... 15 Equity Joan Bennish , capital ............... 23 Total liabilities and Total assets ................................ .... $54 equity ................................ ..... $54

  16. Page 16
    Read page 16 as text

    Last revised : May 24 , 2016 Solutions Manual to accompany Fundamental Accounting Principles, 1 5 th Canadian Edition. 1 - 15 EXERCISES Exercise 1 - 1 (10 minutes) a. Corporation b. Sole proprietorship c. Corporation d. Partnership e. Sole proprietorship f. Sole proprietorship g. Corporation Exercise 1 - 2 ( 10 minutes) External Users Decisions Investor Whether to invest in the company. Whether to buy or sell their stocks in the company. Supplier Whether to sell to Starbucks? Will Starbucks be able to pay for products? Does Starbucks represent ethical/socially responsible practices that suppliers want to align their image with? Canada Revenue Agency Has Starbucks filed their tax return? Have they appropriately reported their financial information and paid their taxes? Should we audit Starbucks? Customer Will the company be here to serve me in the long - run? Will Starbucks continue to honour their loyalty program? Does Starbucks represent ethical/socially responsible practices that suppliers want to align their image with? External Auditors Has Starbucks reported all of their financial information appropriately in accordance with the appropriate accounting standards? Have they recorded all of their transactions and are they recorded at the correct amounts? Has Starbucks disclosed all the necessary information to provide useful information to it’s investors and other financial statement users? Lenders Should we provide a loan to Starbucks? Will Starbucks be able to repay the loan? Should we take any assets as collateral?

948 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Accounting study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.