Fundamental3Accounting3Principles3Volume313Canadian315th3Edition3Larson3Solutions3Manual
SOLUTIONS3MANUAL
to3accompany
Fundamental Accounting Principles3 3
15th3Canadian3Edition
by3Larson/Jensen/Dieckmann
Revised3for3the315th 3 Edition3by:
Praise3Ma,3Kwantlen3Polytechnic3University
Technical3checks3by:
Rhonda3Heninger,3Southern3Alberta3Institute3of3Technology3Mich
elle3Young,3CPA
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-1
,Last 3revised: 3January323,32016
.
Chapter32
Analyzing3and3Record
ing3Transactions
Chapter3Opening3Critical3Thinking3Challenge3Questions*
Alexandre3Bilodeau3experienced3a3huge3setback3in3achieving3his3goal3of3winning3gold3i
n3the320063Olympics.3In3the3face3of3this3challenge,3he3reflected3on3the3experience,3set3hi
s3personal3goal3and3had3a3daily3action3plan3to3achieve3it.3These3same3steps3can3 be3appl
ied3to3your3life.3 For3instance,3you3may3experience3a3setback3in3 this3accounting3course.3
For3instance,3you3may3not3perform3as3well3on3a3homework3assignment3or3exam3as3you3
would3have3liked.3 Like3Alexandre3Bilodeau,3take3a3moment3 to3understand3why3you3may3
have3experience3this3setback,3commit3to3a3personal3goal3and3have3a3detailed3 action3pla
n3to3achieve3it.3This3may3include3reading3the3chapters3before3class,3setting3aside3a3few 3
hours3each3day3to3work3on3the3homework,3meeting3up3with3a3friend3 once3a3week3to3disc
uss3challenging3topics3and3 going3to3office3hours.3You3can3also3learn3from3Alexandre3Bil
odeau’s3determination3in3pursuing3your3career3and3in3facing3challenges3in3the3workplac
e.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-2
,Last 3revised: 3January323,32016
.
Concept3Review3Questions
1. Welcome3to3Lululemon!3We3are3happy3to3have3you3as3a3co-
op3student.3The3fundamental3steps3in3the3accounting3process3are3those3involved3in
3the3accounting3cycle:3 Analyze3transactions3to3determine3if3an3economic3exchange
3has3taken3place3and,3if3so,3journalize3and3post3 the3transaction.3 An3unadjusted3trial
3balance3is3then3prepared3to3help3identify3potential3adjustments.3 Appropriate3adjus
ting3entries3are3journalized3and3posted3and3an3adjusted3trial3balance3is3 generated3f
rom3which3the3 financial3statements3are3prepared.3 Closing3entries3are3then3journaliz
ed3and3posted.3Finally,3a3post-closing3trial3balance3is3prepared.
The3accounting3cycle3helps3 Lululemon3keep3track3of3its3business3activities.3 These3
business3transactions3include3buying3fabric,3selling3yoga3clothing3and3 paying3empl
oyees.3The3accounting3cycle3 helps3produce3financial3statements3which3provide3Lul
ulemon3the3information3to3make3 good3business3decisions.
2. An3account3receivable3is3an3amount3due3to3a3company,3but3the3amount3can3 be3incr
eased3 by3the3customer3(debtor)3 by3making3additional3purchases.3An3account3receiv
able3is3not3a3single3document3 but3represents3the3result3of3several3written,3 oral,3or3i
mplied3promises3to3pay3the3creditor.3A3note3receivable3is3a3formal3document3that3s
pecifies3the3fixed3amount3due3to3a3company3on3a3fixed3date3or3on3demand.
3. Four3different3asset3accounts3would3include3any3of3 the3following3from3Danier’s3Jun
e328,320143 balance3sheet:3Cash,3Accounts3receivable,3Income3taxes3recoverable,3In
ventories,3Prepaid3expenses,3Property3and3equipment,3Computer3software3and3Def
erred3income3tax3asset.3Three3different3liability3accounts3would3include3any3of3the3 f
ollowing:3Payables3and3accruals3(same3as3Accounts3 payable3and3accrued3 liabilitie
s),3Deferred3revenue,3Sales3return3provision3and3Deferred3lease3inducements3and3r
ent3liability.
4. A3debit3will3decrease3and3a3credit3will3increase3the3following3accounts:3Accounts3P
ayable,3Owner’s3capital3and3Revenue.3 Answers3will3vary,3but3can3include3liability3(
accounts3payable,3notes3payable,3unearned3revenue3and3bank3loan),3owner’s3capita
l3and3revenue3accounts.
5. Three3debit3balance3accounts3from3WestJet’s3December331,320143balance3sheet3mig
ht3include3any3of3the3following:3Cash3and3cash3equivalents;3Restricted3cash;3Acco
unts3receivable;3Prepaid3expenses,3deposits3and3other;3Inventory;3Assets3held3for3
sale;3Property3and3equipment;3Intangible3assets;3or3Other3assets.3Three3credit3bala
nce3accounts3might 3include3any3of3the3following:3Accounts3payable3and3accrued3liab
ilities;3Advance3ticket3sales;3Non-
refundable3 guest3credits;3Current3 portion3of3maintenance3provisions;3Current3 porti
on3of3long-term3debt;3Maintenance3provisions;3Long-
term3debt;3Other3liabilities;3Deferred3income3tax;3Share3capital;3Equity3reserves;3He
dge3reserves;3or3Retained3earnings.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-3
, Last 3revised: 3January323,32016
.
6. When3a3company3sells3services3or3goods,3they3will3exchange3their3service3or3goo
d3for3cash.3When3the3company3sells3services3or3goods,3they3earn3revenue.3In3the3
account3equation,3Cash3 (Asset)3increases3and3Revenue3(Equity)3increases.3If3the3
customer3does3not3pay3today,3the3company3records3an3accounts3receivable3inste
ad3of3cash.3Accounts3receivable3holds3value3for3the3company3 because3it3is3a3pro
mise3from3the3customer3to3pay3in3the3future.3When3the3customer3pays3cash,3the3c
ompany3 no3longer3has3an3accounts3receivable.3With3the3accounting3equation,3Acc
ounts3receivable3(Asset)3increases3and3Revenue3(Equity)3increases.
Account (1)3 Type3of (2)3Normal (3)3Financial3stat (4)3 Time3period
3accoun 3Balanc ement
t e
Accounts3re Asset Debit Balance3Sheet A3specific3point3in3ti
ceivable me
Revenue Equity Credit Income3Statement Period3of3time
7. Owner’s3withdrawals3are3when3a3business3owner3takes3out3money3that3was3earned
3 in3the3business3for 3personal3use.3 An3example3is3when3an3owner 3needs3to3take3ou
t3money3for3a3personal3vacation.3 An3expense3 occurs3when3a3cost3is3needed3to3run3
the3normal3operations3 of3the3business.3 An3example3is3that3a3business3 needs3to3 pa
y3its3employees3for3selling3clothes3at3a3retail3store.
Account (5)3 Type3 of (6)3 Normal (7)3Financial3state
account Balance ment
Owner’s3withdrawals Equity Debit Statement3 of3Change
s3in3Equity
Expense Equity Debit Income3Statement
8. Debited3accounts3are3recorded3first.3The3credited 3accounts3are3indented.
9. A3transaction3should3first3 be3recorded3in3a3journal3to3create3a3complete3record3of3t
he3transaction3in3 one3 place.3Then3the3transaction3is3posted3to3the3ledger3where3ent
ries3are3summarized3by3type,3i.e.,3cash,3accounts3payable,3interest3expense,3etc.,3 to
3enable3 analysis3by3account.3This3arrangement3also3means3that3fewer 3errors3will3be
3made3in3the3accounts.
10. Accounting3software3is3a3tool3that3makes3recording3accounting3transactions3easier
.3You3are3still3the3“brain”3 behind3the3accounting.3 You3will3need3to3 decide3when3to3r
ecord3a3transaction,3 how 3to3record3the3transaction,3how 3to3interpret3the3 financial3st
atements3and3what3 business3decisions3to3make.3Knowing3how 3to3record3accountin
g3manually3will3help3you3understand3the3entire3accounting3process3and3what3happ
ens3behind3the3software.3There3are3errors3in3software3programs.3Over3relying3on3a3
software3program3can3result3in3large3errors.3 When3you3are3writing3a3report3using3t
he3computer,3you3still3 need3to3know 3how 3to3write3paragraphs3and3how 3to3explain3y
our3content.3 Just3like3accounting3software,3the3computer3is3only3a3tool.
11. Not3preparing3a3trial3balance3can3cause3errors3in3the3financial3statements.3The3trial3
balance3helps3to3identify3and3correct3errors.3If3the3debits3do3not3equal3the3credits3i
n3the3trial3 balance,3this3is3a3clue3that3errors3need3to3be3corrected.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-4
SOLUTIONS3MANUAL
to3accompany
Fundamental Accounting Principles3 3
15th3Canadian3Edition
by3Larson/Jensen/Dieckmann
Revised3for3the315th 3 Edition3by:
Praise3Ma,3Kwantlen3Polytechnic3University
Technical3checks3by:
Rhonda3Heninger,3Southern3Alberta3Institute3of3Technology3Mich
elle3Young,3CPA
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-1
,Last 3revised: 3January323,32016
.
Chapter32
Analyzing3and3Record
ing3Transactions
Chapter3Opening3Critical3Thinking3Challenge3Questions*
Alexandre3Bilodeau3experienced3a3huge3setback3in3achieving3his3goal3of3winning3gold3i
n3the320063Olympics.3In3the3face3of3this3challenge,3he3reflected3on3the3experience,3set3hi
s3personal3goal3and3had3a3daily3action3plan3to3achieve3it.3These3same3steps3can3 be3appl
ied3to3your3life.3 For3instance,3you3may3experience3a3setback3in3 this3accounting3course.3
For3instance,3you3may3not3perform3as3well3on3a3homework3assignment3or3exam3as3you3
would3have3liked.3 Like3Alexandre3Bilodeau,3take3a3moment3 to3understand3why3you3may3
have3experience3this3setback,3commit3to3a3personal3goal3and3have3a3detailed3 action3pla
n3to3achieve3it.3This3may3include3reading3the3chapters3before3class,3setting3aside3a3few 3
hours3each3day3to3work3on3the3homework,3meeting3up3with3a3friend3 once3a3week3to3disc
uss3challenging3topics3and3 going3to3office3hours.3You3can3also3learn3from3Alexandre3Bil
odeau’s3determination3in3pursuing3your3career3and3in3facing3challenges3in3the3workplac
e.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-2
,Last 3revised: 3January323,32016
.
Concept3Review3Questions
1. Welcome3to3Lululemon!3We3are3happy3to3have3you3as3a3co-
op3student.3The3fundamental3steps3in3the3accounting3process3are3those3involved3in
3the3accounting3cycle:3 Analyze3transactions3to3determine3if3an3economic3exchange
3has3taken3place3and,3if3so,3journalize3and3post3 the3transaction.3 An3unadjusted3trial
3balance3is3then3prepared3to3help3identify3potential3adjustments.3 Appropriate3adjus
ting3entries3are3journalized3and3posted3and3an3adjusted3trial3balance3is3 generated3f
rom3which3the3 financial3statements3are3prepared.3 Closing3entries3are3then3journaliz
ed3and3posted.3Finally,3a3post-closing3trial3balance3is3prepared.
The3accounting3cycle3helps3 Lululemon3keep3track3of3its3business3activities.3 These3
business3transactions3include3buying3fabric,3selling3yoga3clothing3and3 paying3empl
oyees.3The3accounting3cycle3 helps3produce3financial3statements3which3provide3Lul
ulemon3the3information3to3make3 good3business3decisions.
2. An3account3receivable3is3an3amount3due3to3a3company,3but3the3amount3can3 be3incr
eased3 by3the3customer3(debtor)3 by3making3additional3purchases.3An3account3receiv
able3is3not3a3single3document3 but3represents3the3result3of3several3written,3 oral,3or3i
mplied3promises3to3pay3the3creditor.3A3note3receivable3is3a3formal3document3that3s
pecifies3the3fixed3amount3due3to3a3company3on3a3fixed3date3or3on3demand.
3. Four3different3asset3accounts3would3include3any3of3 the3following3from3Danier’s3Jun
e328,320143 balance3sheet:3Cash,3Accounts3receivable,3Income3taxes3recoverable,3In
ventories,3Prepaid3expenses,3Property3and3equipment,3Computer3software3and3Def
erred3income3tax3asset.3Three3different3liability3accounts3would3include3any3of3the3 f
ollowing:3Payables3and3accruals3(same3as3Accounts3 payable3and3accrued3 liabilitie
s),3Deferred3revenue,3Sales3return3provision3and3Deferred3lease3inducements3and3r
ent3liability.
4. A3debit3will3decrease3and3a3credit3will3increase3the3following3accounts:3Accounts3P
ayable,3Owner’s3capital3and3Revenue.3 Answers3will3vary,3but3can3include3liability3(
accounts3payable,3notes3payable,3unearned3revenue3and3bank3loan),3owner’s3capita
l3and3revenue3accounts.
5. Three3debit3balance3accounts3from3WestJet’s3December331,320143balance3sheet3mig
ht3include3any3of3the3following:3Cash3and3cash3equivalents;3Restricted3cash;3Acco
unts3receivable;3Prepaid3expenses,3deposits3and3other;3Inventory;3Assets3held3for3
sale;3Property3and3equipment;3Intangible3assets;3or3Other3assets.3Three3credit3bala
nce3accounts3might 3include3any3of3the3following:3Accounts3payable3and3accrued3liab
ilities;3Advance3ticket3sales;3Non-
refundable3 guest3credits;3Current3 portion3of3maintenance3provisions;3Current3 porti
on3of3long-term3debt;3Maintenance3provisions;3Long-
term3debt;3Other3liabilities;3Deferred3income3tax;3Share3capital;3Equity3reserves;3He
dge3reserves;3or3Retained3earnings.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-3
, Last 3revised: 3January323,32016
.
6. When3a3company3sells3services3or3goods,3they3will3exchange3their3service3or3goo
d3for3cash.3When3the3company3sells3services3or3goods,3they3earn3revenue.3In3the3
account3equation,3Cash3 (Asset)3increases3and3Revenue3(Equity)3increases.3If3the3
customer3does3not3pay3today,3the3company3records3an3accounts3receivable3inste
ad3of3cash.3Accounts3receivable3holds3value3for3the3company3 because3it3is3a3pro
mise3from3the3customer3to3pay3in3the3future.3When3the3customer3pays3cash,3the3c
ompany3 no3longer3has3an3accounts3receivable.3With3the3accounting3equation,3Acc
ounts3receivable3(Asset)3increases3and3Revenue3(Equity)3increases.
Account (1)3 Type3of (2)3Normal (3)3Financial3stat (4)3 Time3period
3accoun 3Balanc ement
t e
Accounts3re Asset Debit Balance3Sheet A3specific3point3in3ti
ceivable me
Revenue Equity Credit Income3Statement Period3of3time
7. Owner’s3withdrawals3are3when3a3business3owner3takes3out3money3that3was3earned
3 in3the3business3for 3personal3use.3 An3example3is3when3an3owner 3needs3to3take3ou
t3money3for3a3personal3vacation.3 An3expense3 occurs3when3a3cost3is3needed3to3run3
the3normal3operations3 of3the3business.3 An3example3is3that3a3business3 needs3to3 pa
y3its3employees3for3selling3clothes3at3a3retail3store.
Account (5)3 Type3 of (6)3 Normal (7)3Financial3state
account Balance ment
Owner’s3withdrawals Equity Debit Statement3 of3Change
s3in3Equity
Expense Equity Debit Income3Statement
8. Debited3accounts3are3recorded3first.3The3credited 3accounts3are3indented.
9. A3transaction3should3first3 be3recorded3in3a3journal3to3create3a3complete3record3of3t
he3transaction3in3 one3 place.3Then3the3transaction3is3posted3to3the3ledger3where3ent
ries3are3summarized3by3type,3i.e.,3cash,3accounts3payable,3interest3expense,3etc.,3 to
3enable3 analysis3by3account.3This3arrangement3also3means3that3fewer 3errors3will3be
3made3in3the3accounts.
10. Accounting3software3is3a3tool3that3makes3recording3accounting3transactions3easier
.3You3are3still3the3“brain”3 behind3the3accounting.3 You3will3need3to3 decide3when3to3r
ecord3a3transaction,3 how 3to3record3the3transaction,3how 3to3interpret3the3 financial3st
atements3and3what3 business3decisions3to3make.3Knowing3how 3to3record3accountin
g3manually3will3help3you3understand3the3entire3accounting3process3and3what3happ
ens3behind3the3software.3There3are3errors3in3software3programs.3Over3relying3on3a3
software3program3can3result3in3large3errors.3 When3you3are3writing3a3report3using3t
he3computer,3you3still3 need3to3know 3how 3to3write3paragraphs3and3how 3to3explain3y
our3content.3 Just3like3accounting3software,3the3computer3is3only3a3tool.
11. Not3preparing3a3trial3balance3can3cause3errors3in3the3financial3statements.3The3trial3
balance3helps3to3identify3and3correct3errors.3If3the3debits3do3not3equal3the3credits3i
n3the3trial3 balance,3this3is3a3clue3that3errors3need3to3be3corrected.
Solutions3 Manual3to3accompany3 Fundamental3Accounting 3Principles,315th 3Canadian 3Edition.3©320163McGraw-Hill3 Education 3Ltd. 2-4
