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Chapter: 4 -Problem: 3 >> In this group activity, you will create a classified balance sheet by piecing together the information, and using the clues, given to you by your instructor.
Answer Preview: A classified balance sheet is a financial statement that shows a company's assets, liabilities, and …

, Chapter: 3 -Problem: 5 >> The Higher Education College collects tuition for the fall term in August. The fall term runs from September to December. In what month(s) should the college recognize the revenue earned from tuition fees? Explain your reasoning.
Answer Preview: According to the accounting standards, the Higher Education College should record …

, Chapter: 1 -Problem: 8 >> What is the economic entity concept?
Answer Preview: An accounting principle known as the economic entity idea assume…

, Chapter: 7 -Problem: 10 >> Sally’s Sweet Shop’s August 31, 2014, bank balance was $11,135. Th e company’s cash balance at August 31 was $10,760. Other information follows:1. Outstanding cheques were #421 for $160, #485 for $267, #492 for $175, and #494 for $1,173. Cheque #421 was also outstanding on July 31 and was included on July’s bank reconciliation. 2. Included with the statement were EFT deposits totalling $1,750 duri
Answer Preview: (a) Bank Reconciliation: Sallys Sweet Shop Bank Reconciliation August 31, 2014 Bank balance, August …

, Chapter: 6 -Problem: 19 >> What are the differences, if any, in the valuation and reporting of inventory between companies following IFRS and companies following ASPE?
Answer Preview: The International Financial Reporting Standards (IFRS) and Accounting Standards for Private Enterpri…

, Chapter: 5 -Problem: 6 >> In the “All About You” feature, you learned about inventory theft and a relatively new technology to help prevent theft . You have recently accepted a part-time sales position at a clothing store called College Fashions. The owner-manager of the store knows that you are enrolled in a business program and seeks your advice on preventing inventory shrinkage due to theft . The owner-manager is aware
Answer Preview: Solution (a) If the store employs a perpetual inventory system, the owner-manager can calculate the amount of inventory shrinkage by comparing the sys…

, Chapter: 7 -Problem: 9 >> When the accountant of Trillo Company prepared the bank reconciliation on May 31, 2014, there were three outstanding cheques: #690 for $307, #693 for $179, and #694 for $264. There were no deposits in transit as at May 31, 2014. The bank balance at May 31 was $17,690. The balance in the cash account on the May 31, 2014, adjusted trial balance was $16,940. The following is selected information from
Answer Preview: ANSWER (a) The balance per bank statement at June 30 is calculated as follows: Beginning balance (May 31) = $17,690 Add: Deposits in transit = $0 Less…

, Chapter: 1 -Problem: 11 >> At the beginning of March, Brister Software Company had Cash of $12,000, Accounts Receivable of $18,000, Accounts Payable of $4,000, and G. Brister, Capital of $26,000. During the month of March, the following transactions occurred:1. Purchased equipment for $23,000 from Digital Equipment. Paid $3,000 cash and signed a note payable for the balance. 2. Received $12,000 from customers for contracts
Answer Preview: Brister Software Company Transactions Analysis Assets Cash $12,000 Accounts Receivable $18,00…

, Chapter: 1 -Problem: 3 >> Match each of the following forms of business organization with the correct set of characteristics: proprietorship (PP), partnership (P), and corporation (C).(a) _________ Shared control; combined skills and resources (b) _________ Easier to transfer ownership and raise funds; no personal liability; entity pays income tax (c) _________ Simple to set up; founder keeps control
Answer Preview: (a) Partnership (P) - Shared control; combined ski…

, Chapter: 6 -Problem: 12 >> FirstIn Company reported profit of $90,000 in 2013. When counting its inventory on December 31, 2013, the company forgot to include items stored in a separate room in the warehouse. As a result, ending inventory was understated by $7,000. (a) What is the correct profi t for 2013? (b) What effect, if any, will this error have on total assets and owner’s equity reported on the balance sheet at Decem
Answer Preview: (a) The correct profit for 2013 can be calculated by adding the understated ending inventory …

, Chapter: 5 -Problem: 26 >> In a periodic inventory system, closing entries are posted to the Merchandise Inventory account. What is the purpose of these entries?
Answer Preview: The purpose of closing entries in a periodic invento…

, Chapter: 5 -Problem: 3 >> The purpose of this group activity is to improve your understanding of merchandising journal entries. You will be given a merchandising company’s general ledger in T account format with missing transaction data. With your group you will analyze these T accounts to determine the underlying journal entries and balance the general ledger.
Answer Preview: I can provide some guidance on how to analyze T accounts and determine the underlying journal entrie…

, Chapter: 3 -Problem: 3 >> Pierce Dussault, a lawyer, accepts a legal engagement in March, does the work in April, and is paid in May. If Dussault’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
Answer Preview: This engagement's income should be recognized in April since that is when …

, Chapter: 6 -Problem: 7 >> Distinguish between the three methods of determining cost for inventories: specific identification, FIFO, and average. Give an example of a type of inventory for which each method might be used.
Answer Preview: Solution There are three basic approaches in accounting for establishing the cost of inventories: sp…

, Chapter: 6 -Problem: 13 >> If an error in ending inventory in one year will have the reverse effect in the following year, does this error need to be corrected when it is discovered?
Answer Preview: Agreed, a mistake in the final inventory should be fixed as soon as it is fo…

, Chapter: 5 -Problem: 15 >> “The steps in the accounting cycle for a merchandising company are different from those in the accounting cycle for a service company.” Do you agree or disagree? Explain.
Answer Preview: I agree with the statement that the steps in the accounting cycle for a merchandising company are different from those in the accounting cycle for a s…

, Chapter: 7 -Problem: 1 >> Fraud experts often say there are three primary factors that contribute to employee fraud. Identify the factors and explain what is meant by each.
Answer Preview: The three primary factors that contribute to employee fraud are shown below: 1 Opportunity : This re…

, Chapter: 5 -Problem: 10 >> Data for Travel Warehouse are presented in P5–4A.Instructions Record the July transactions for Travel Warehouse, assuming a periodic inventory system is used instead of a perpetual inventory system. What are the costs and benefits for Travel Warehouse of using a perpetual, as opposed to a periodic, system?
Answer Preview: In a periodic inventory system, inventory balances are updated periodically (such as monthly, quarterly, or annually) through physical counts of inven…

, Chapter: 1 -Problem: 9 >> Below are some items found in the financial statements of Stefan Knoler, MD. Indicate (a) whether each of the following items is an asset (A), liability (L), or part of owner’s equity (OE); and (b) which financial statement—income statement (IS), statement of owner’s equity (OE), or balance sheet (BS)—it would be reported on. The first one has been done for you as an example.
Answer Preview: Item Asset (A), Liability (L), or Owner's Equity (OE) Financial Sta…

, Chapter: 2 -Problem: 5 >> Data for Jakmak Interior Design Company are presented in E2–3.Instructions Journalize the transactions.Exercise 2–3:In the first month of business, Jakmak Interior Design Company had the following transactions:Mar. 3 The owner, Jackie MacKenzie, invested $10,000 cash in the business. 4 Borrowed $10,000 from the bank and signed a note payable. 6 Purchased a used car for $9,500 cash, for use in the
Answer Preview: Date Transaction Account Debited Account Credited Increase/Decrease Amount Mar. 3 Owner investment Cash Owner's Equity + $10,000 Mar. 4 Borrowing from …

, Chapter: 5 -Problem: 1 >> The Board Shop, owned by Andrew John, sells skateboards in the summer and snowboards in the winter. The shop has an August 31 fiscal year end and uses a perpetual inventory system. On August 1, 2014, the company had the following balances in its general ledger:                           During August, the last month of the fiscal year, the company had the following transactions:Aug. 1 Paid $1,650
Answer Preview: (a) August 1 Balances: Account Amount Cash $21,385 Merchandise Inventory $64,125 Supplies $3,750 Equipment $70,800 Accumulated Depreciation-Equipment $13,275 Accounts Payable $12,650 Unearned Revenue …

, Chapter: 5 -Problem: 9 >> Data for Norlan Company are presented in P5–3A. Instructions Record the September and October transactions for Norlan Company, assuming a periodic inventory system is used instead of a perpetual inventory system.Why might a periodic system be better than a perpetual system for Norlan Company?
Answer Preview: To record the September and October transactions for Norlan Company under a periodic inventory system, we need to first calculate the cost of goods so…

, Chapter: 3 -Problem: 7 >> Ullmann Maintenance Co. has a $455 monthly contract with the sports store Rackets Plus for general maintenance services. Ullmann invoices Rackets Plus on the first of the month for the previous month’s services provided. Rackets Plus must then pay for the previous month’s services by the 10th of the following month.(a) Ullmann has a November 30 fiscal year end. Why will it need to prepare an adjus
Answer Preview: (a) On November 30, Ullmann must create an adjusting entry to account for income that had been earne…

, Chapter: 5 -Problem: 1 >> Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European mixers. The owner of Kzinski Supply Co. has approached Natalie to become the exclusive Canadian distributor of these fine mixers. The current cost of a mixer is approximately $525 Canadian, and Natalie would sell each one for $1,05
Answer Preview: (a) Answer Natalies questions: The mixers should be classified as inventory since they are items that will be sold for profit. The perpetual inventory …

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12 Reviews for Accounting Principles Part 1 Textbook Questions And Answers