Instructor's Solutions Manual for College Accounting: A practical Approach By: Robert Chamberlain Connie Belden Michael P. Griffin
College Accounting Fourteenth Edition
Jeffrey Slater Mike Deschamps
1 Accounting Concepts and Procedures ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 1.
The functions of accounting are to analyze, record, classify, summarize, report, interpret, and communicate financial information. 2. Sole proprietorship—1 owner; unlimited liability; easy to form; limited life Partnership—2 or more owners; unlimited liability; easy to form; limited life Corporation—Stockholders; limited liability; difficult to form; unlimited life 3. Businesses are classified as service, merchandise, or manufacturing. 4. Computer technology has greatly reduced the time required for performing the bookkeeping function. 5. The three elements of the basic accounting equation are assets, liabilities, and owner's equity. 6. Capital is the owner's current investment or equity in the assets of a business. It is one subdivision of owner's equity. 7. True. The sum of the left side of the equation (assets) must equal the sum of the right side of the equation (liabilities and owner's equity). 8. False. That is the income statement. 9. False. Revenue is a subdivision of owner's equity. 10. Owner's equity is subdivided into Capital, Withdrawals, Revenue, and Expenses. 11. False. It is a subdivision of owner's equity and records payments of the owner’s personal (non-business) expenses or distributions direct to the owner. It is not a business expense. 12. Reject. As expenses increase, owner's equity decreases. 13. Revenue less Expenses; an income statement shows performance over time. 14. False. It calculates ending capital. 15. The question in this case is whether Paul should be allowed to "pad" his expense account with an additional $100 of expenses. This would be unethical. Paul should only expense those items that are business related. Paul's argument that he is entitled to an additional $100 is not a valid assumption. However, he should be reimbursed for any business expenses during the weekend.
.
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SOLUTIONS TO CONCEPT CHECKS
1.
a. A b. A c. L d. A e. OE f. A
2.
a. Liabilities b. Total Assets c. Accounts Payable
3.
a. I b. S
4.
Total assets = Cash $26,000 + Computer equipment $20,000 = $46,000
5.
b. J. Penny, Capital d. J. Penny, Withdrawals f. Advertising Expense g. Taxi Fees Earned
6.
c. Accounts Payable d. Grooming Fees Earned
7.
a, b, d
8.
a. IS b. BS c. BS d. BS e. IS f. IS g. OE h. BS
9.
a. OE b. BS c. BS d. IS
.
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SOLUTIONS TO SET A EXERCISES 1A-1. a. b. c.
$17,500 $65,000 $15,000
= $6,000 + $11,500 = $5,000 + $60,000 = $12,000 + $3,000
1A-2. Assets + Equipment
Cash a. b. c.
+124,000 (1,300)
= =
Liabilities Accounts Payable
+
+ Owner’s Equity Morgan, Capital +124,000
+1,300 +900
+900
1A-3. RABBIT COMPANY CLEANERS BALANCE SHEET SEPTEMBER 30, 201X
Liabilities and Owner’s Equity
Assets Cash Equipment
$67 0 0 0 7 0 0 0
Total Assets
$74 0 0 0
.
Liabilities Accounts Payable Total Liabilities
$13 0 0 0 13 0 0 0
Owner's Equity B. Rabbit, Capital
61 0 0 0
Total Liabilities and Owner's Equity
$74 0 0 0
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EXERCISES (CONTINUED) 1A-4. ASSETS
=
Accounts Cash
a.
+
Rec.
Computer +
Equip.
Accounts =
Payable
+80,000 +4,000
c.
+
B.
B.
Baker,
Baker, –
Capital
Withd.
+125 +13,600
+13,600 +30,000
f. g.
Expenses
+4,000
(125)
e.
+ Revenues –
+80,000
b.
d.
LIABILITIES + OWNER'S EQUITY
+30,000
(4,100) (1,490)
+4,100 +1,490
Remember, as withdrawals or expenses increase, the end result is to reduce owner's equity .
1A-5. (a) FREEMAN REALTY INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Professional Fees Operating Expenses: Salaries Expense Utilities Expense Rent Expense Total Operating Expenses Net Income
$3 $
1 0 0
4 5 0 1 5 0 4 5 0 1 1 0 5 0 $2 0 5 0
(b) FREEMAN REALTY STATEMENT OF OWNER’S EQUITY MONTH ENDED JUNE 30, 201X S. Freeman, Capital, June 1, 201X
$10 2 4 5
Net Income for June
$2
Less: Withdrawals for June
0 5 0 (2 2 5)
Increase in Capital
1 8 2 5
S. Freeman, Capital, June 30, 201X
.
$12 0 7 0
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