Solutions Manual For Fundamental Accounting Principles Volume 1 Canadian 15th Edition Larson | Newest Version | All Chapters Complete

1. Welcome to Lululemon! We are happy to have you as a co-op student. The fundamental steps in the accounting process are those involved in the accounting cycle: Analyze transactions to determine if an economic exchange has taken place and, if so, journalize and post the transaction. An unadjusted trial balance is then prepared to help identify potential adjustments. Appropriate adjusting entries are journalized and posted and an adjusted trial balance is generated from which the financial statements are prepared. Closing entries are then journalized and posted. Finally, a post-closing trial balance is prepared. The accounting cycle helps Lululemon keep track of its business activities. These business transactions include buying fabric, selling yoga clothing and paying employees. The accounting cycle helps produce financial statements which provide Lululemon the information to make good business decisions. 2. An account receivable is an amount due to a company, but the amount can be increased by the customer (debtor) by making additional purchases. An account receivable is not a single document but represents the result of several written, oral, or implied promises to pay the creditor. A note receivable is a formal document that specifies the fixed amount due to a company on a fixed date or on demand. 3. Four different asset accounts would include any of the following from Danier’s June 28, 2014 balance sheet: Cash, Accounts receivable, Income taxes recoverable, Inventories, Prepaid expenses, Property and equipment, Computer software and Deferred income tax asset. Three different liability accounts would include any of the following: Payables and accruals (same as Accounts payable and accrued liabilities), Deferred revenue, Sales return provision and Deferred lease inducements and rent liability. 4. A debit will decrease and a credit will increase the following accounts: Accounts Payable, Owner’s capital and Revenue. Answers will vary, but can include liability (accounts payable, notes payable, unearned revenue and bank loan), owner’s capital and revenue accounts. 5. Three debit balance accounts from WestJet’s December 31, 2014 balance sheet might include any of the following: Cash and cash equivalents; Restricted cash; Accounts receivable; Prepaid expenses, deposits and other; Inventory; Assets held for sale; Property and equipment; Intangible assets; or Other assets. Three credit balance accounts might include any of the following: Accounts payable and accrued liabilities; Advance ticket sales; Non-refundable guest credits; Current portion of maintenance provisions; Current portion of long-term debt; Maintenance provisions; Long-term debt; Other liabilities; Deferred income tax; Share capital; Equity reserves; Hedge reserves; or Retained earnings. 6. When a company sells services or goods, they will exchange their service or good for cash. When the company sells services or goods, they earn revenue. In the account equation, Cash (Asset) increases and Revenue (Equity) increases. If the customer does not pay today, the company records an accounts receivable instead of cash. Accounts receivable holds value for the company because it is a promise from the customer to pay in the future. When the customer pays cash, the company no longer has an accounts receivable. With the accounting equation, Accounts receivable (Asset) increases and Revenue (Equity) increases. Account (1) Type of account (2) Normal Balance (3) Financial statement (4) Time period Accounts receivable Asset Debit Balance Sheet A specific point in time Revenue Equity Credit Income Statement Period of time 7. Owner’s withdrawals are when a business owner takes out money that was earned in the business for personal use. An example is when an owner needs to take out money for a personal vacation. An expense occurs when a cost is needed to run the normal operations of the business. An example is that a business needs to pay its employees for selling clothes at a retail store. Account (5) Type of account (6) Normal Balance (7) Financial statement Owner’s withdrawals Equity Debit Statement of Changes in Equity Expense Equity Debit Income Statement 8. Debited accounts are recorded first. The credited accounts are indented. 9. A transaction should first be recorded in a journal to create a complete record of the transaction in one place. Then the transaction is posted to the ledger where entries are summarized by type, i.e., cash, accounts payable, interest expense, etc., to enable analysis by account. This arrangement also means that fewer errors will be made in the accounts. 10. Accounting software is a tool that makes recording accounting transactions easier. You are still the “brain” behind the accounting. You will need to decide when to record a transaction, how to record the transaction, how to interpret the financial statements and what business decisions to make. Knowing how to record accounting manually will help you understand the entire accounting process and what happens behind the software. There are errors in software programs. Over relying on a software program can result in large errors. When you are writing a report using the computer, you still need to know how to write paragraphs and how to explain your content. Just like accounting software, the computer is only a tool. 12. The title of the financial statements must have the 1) company name, 2) the name of the financial statement and 3) the date. Dollar signs are used beside the first number in each column and on the total. Some numbers are indented to show a list of similar numbers in a category. For instance, all expenses are indented. This formatting makes the financial statements easier to read. Indentations do not represent debits and credits. The financial statements do not have debits and credits like the trial balance. QUICK STUDY Quick Study 2-1 Answer Answer Detail Account A Asset 1. Buildings E Expenses (Equity) 2. Building Repair Expense E Expenses (Equity) 3. Wages Expense L Liability 4. Wages Payable A Asset 5. Notes Receivable L Liability 6. Notes Payable A Asset 7. Prepaid Advertising E Expenses (Equity) 8. Advertising Expense L Liability 9. Advertising Payable L Liability 10. Unearned Advertising R Revenues (Equity) 11. Advertising Revenue R Revenues (Equity) 12. Interest income E Expenses (Equity) 13. Interest Expense L Liability 14. Interest Payable R Revenues (Equity) 15. Subscription Revenue L Liability 16. Unearned Subscription Revenue A Asset 17. Prepaid Subscription Fees A Asset 18. Supplies E Expenses (Equity) 19. Supplies Expense R Revenues (Equity) 20. Rent Revenue L Liability 21. Unearned Rent Revenue A Asset 22. Prepaid Rent L Liability 23. Rent Payable R Revenues (Equity) 24. Service Revenue W Owner’s Withdrawals (Equity) 25. Jessica Vuong, Withdrawals OE Owner’s Capital (Equity) 26. Jessican Vuong, Capital E Expenses (Equity) 27. Salaries Expense L Liability 28. Salaries Payable A Asset 29. Furniture A Asset 30. Equipment Quick Study 2-2 a. Equipment ................................Debit b. Land ...........................................Debit c. Amrit Sandhu, Withdrawals ....... Debit d. Rent Expense ............................... Debit e. Interest income ............................ Credit f. Prepaid Rent ......................... Debit g. Accounts Receivable ............ Debit h. Office Supplies ..................... Debit i. Notes Receivable .................. Debit j. Notes Payable ....................... Credit k. Amrit Sandhu, Capital .......... Credit l. Rent Revenue ........................ Credit m. Rent Payable ......................... Credit n. Interest Expense ................... Debit o. Interest Payable .................... Credit Quick Study 2-3 a. Credit f. Credit k. Debit b. Credit g. Debit l. Credit c. Credit h. Credit m. Debit d. Debit i. Debit n. Debit e. Credit j. Debit o. Debit Quick Study 2-4 a. Credit f. Debit k. Credit b. Debit g. Credit l. Debit c. Credit h. Credit m. Debit d. Debit i. Credit n. Credit e. Credit j. Debit o. Credit Quick Study 2-5 Note: Students could choose any account number within the specified range. a. 173 f. 203 k. 629 b. 409 g. 106 l. 219 c. 302 h. 622 m. 222 d301i124170 Quick Study 2-6 a. Analysis Assets increase. Assets decrease. Journal entry analysis Debit the furniture account for $400. Credit the cash account for $400. b. Analysis No transaction required. Journal entry analysis c. Analysis Assets increase. Equity increases. Journal entry analysis Debit the Accounts Receivable account for $600. Credit the Revenue account for $600. d. Analysis Liabilities increase. Equity decreases. Journal entry analysis Debit the Cleaning Expense account for $300. Credit the Accounts Payable account for $300. e. Analysis Assets increase. Equity increases. Journal entry analysis Debit the Cash account for $25,000. Credit the Douglas Malone, Capital account for $25,000. Quick Study 2-7 Date Account Titles and Explanation Debit Credit a. Aug. 1 Furniture ............................................................... 400 Cash ............................................................. 400 Purchase of furniture for cash. ........................ b. Aug. 7 No transaction required. c. Aug. 13 Accounts Receivable ........................................... 600 Revenue ....................................................... 600 Provided services on credit. ........................... d. Aug. 14 Cleaning Expense ................................................ 300 Accounts Payable ........................................ 300 Purchased cleaning services on credit. ......... e. Aug. 31 Cash ...................................................................... 25,000 Douglas Malone, Capital ............................. 25,000 Investment by owner ........................................ 2-10 Quick Study 2-8 1 & 2. Cash Accounts Receivable Furniture Accounts Payable Jul 31 25,000 400 Aug 1 Jul 31 1,500 Jul 31 5,000 500 Jul 31 Aug 31 25,000 Aug 13 600 Aug 1 400 300 Aug 14 Bal. 2,100 Bal. 5,400 800 Bal. Bal. 49,600 Douglas Malone, Capital Revenue Cleaning Expense 28,000 Jul 3` 4,500 Jul 31 Jul 31 1,500 25,000 Aug 31 600 Aug 13 Aug 14 300 53,000 Bal. 5,100 Bal. Bal. 1,800 3. The account balance for each T-account is shown above. The accounting equation (Assets = Liabilities + Equity) is proved as follows: $57,100 = $800 + $56,300 Last revised: October 26, 2012 Quick Study 2-9 May 2 Analysis Assets increase. Equity increases. Journal entry analysis Debit the Car account for $8,000. Credit the Dee Bell, Capital account for $8,000. Journal Entry Date Account Titles and Explanation Debit Credit May 2 Car 8,000 Dee Bell, Capital 8,000 Investment by owner. May 10 Analysis Assets increase. Equity increases. Journal entry analysis Debit the Accounts receivable account for $4,000. Credit the Revenue account for $4,000. Journal Entry Date Account Titles and Explanation Debit Credit May 10 Accounts receivable 4,000 Revenue 4,000 Billed customer for work performed. May 12 Analysis Assets increase. Liabilities increase. Journal entry analysis Debit the Cash account by $10,000. Credit the Unearned Revenue account by $10,000. Journal Entry Date Account Titles and Explanation Debit Credit May 12 Cash 10,000 Unearned Revenue 10,000 Collected cash for future services. EMAIL ME: For help with report, Assignment, Essay and thesis writing. Last revised: October 26, 2012 Quick Study 2-9 (Continued) May 15 Analysis Assets decrease. Equity decreases. Journal entry analysis Debit the Wages Expense account for $6,000. Credit the Cash account for $6,000. Journal Entry Date Account Titles and Explanation Debit Credit May 15 Wages Expense 6,000 Cash 6,000 Paid for wages. May 16 Analysis Assets increase. Assets decrease. Journal entry analysis Debit the Cash account for $4,000. Credit the Accounts Receivable account for $4,000. Journal Entry Date Account Titles and Explanation Debit Credit May 16 Cash 4,000 Accounts Receivable 4,000 Collection of cash from customer. May 22 Analysis Assets decrease. Liabilities decrease. Journal entry analysis Debit the Accounts Payable account by $3,000. Credit the Cash account by $5,400. Journal Entry Date Account Titles and Explanation Debit Credit May 22 Accounts Payable 3,000 Cash 3,000 Paid for outstanding accounts payable. Last revised: October 26, 2012 2-13 Quick Study 2-10 1 & 2. Cash 101 Accounts Receivable 106 Car 150 Accounts Payable 202 Apr 30 15,000 6,000 May 15 Apr 30 3,200 4,000 May 16 May 2 8,000 May 22 3,000 6,000 Apr 30 May 12 10,000 3,000 May 22 May 10 4,000 Bal. 8,000 3,000 Bal. May 16 4,000 Bal. 3,200 Bal. 20,000 Unearned Revenue 205 Dee Bell, Capital 301 Revenue 410 Wages Expense 650 1,800 Apr 30 8,900 Apr 30 3,000 Apr 30 Apr 30 1,500 10,000 May 12 8,000 May 2 4,000 May 10 May 15 6,000 11,800 Bal. 16,900 Bal. 7,000 Bal. Bal. 7,500 3. The account balance for each T-account is shown above. The accounting equation (Assets = Liabilities + Equity) is proved as follows: $31,200 = $14,800 + $16,400 Last revised: October 26, 2012 Quick Study 2-11 Accounts Receivable Accounts Payable Service Revenue 1,,000 ,800 2,500 920 1,500 650 1,400 810 3,000 650 3,500 Bal. 2,250 2,300 Bal. 19,810 Bal. Utilities Expense Cash Notes Payable 610 3,900 2,400 4,000 50,000 520 17,800 3,900 8,000 390 14,500 21,800 38,000 Bal. 275 340 Bal. 1,795 Bal. 8,440 Quick Study 2-12 General Journal Page 1 Date Account Titles and Explanation Debit Credit 2017 May 1 Equipment .............................................................. 500 Accounts Payable .......................................... 500 Purchased equipment on account. 2 Accounts Payable .................................................. 500 Cash ................................................................ 500 Paid for the equipment purchased May 1. 3 Supplies .................................................................. 100 Cash ................................................................ 100 Purchased supplies for cash. 4 Wages Expense...................................................... 2,000 Cash ................................................................ 2,000 Paid wages to employees. 5 Cash ........................................................................ 750 Service Revenue ............................................ 750 Performed services for a client for cash. Last revised: October 26, 2012 Quick Study 2-13 General Journal Page 1 Date Account Titles and Explanation Debit Credit 2017 Jan. 3 Cash ........................................................................ 60,000 Equipment .............................................................. 40,000 Stan Adams, Capital .......................................... 100,000 Investment by owner. 4 Office Supplies....................................................... 340 Accounts Payable.............................................. 340 Purchased office supplies on credit. 6 Cash ........................................................................ 5,200 Landscaping Services Revenue ....................... 5,200 Received cash for landscaping services. 15 Accounts Payable .................................................. 200 Cash ................................................................ 200 Paid part of the January 4 credit purchase. 16 Office Supplies....................................................... 700 Accounts Payable .......................................... 700 Purchased supplies on account. 30 Accounts Payable .................................................. 140 Cash ................................................................ 140 Paid the balance owing re January 4 credit purchase; 340 – 200 paid on Jan. 15 = 140. Last revised: October 26, 2012 Quick Study 2-14 Cash Account No. 101 Date Explanation PR Debit Credit Balance 2017 Jan. 3 60,000 60,000 6 5,200 65,200 15 200 65,000 30 140 64,860 Office Supplies Account No. 124 Date Explanation PR Debit Credit Balance 2017 Jan. 4 340 340 16 700 1,040 Equipment Account No. 163 Date Explanation PR Debit Credit Balance 2017 Jan. 3 40,000 40,000 Accounts Payable Account No. 201 Date Explanation PR Debit Credit Balance 2017 Jan. 4 340 340 Stan Adams, Capital Account No. 301 Date Explanation PR Debit Credit Balance 2017 Jan. 3 100,000 100,000 Landscaping Services Revenue Account No. 403 Last revised: October 26, 2012 Quick Study 2-15 Vahn Landscaping Trial Balance January 31, 2017 Acct. No. Account Debit Credit 101 Cash.................................................................... $ 7,000 163 Equipment .......................................................... 9,000 233 Unearned revenue.............................................. $ 2,000 301 Brea Vahn, capital .............................................. 14,000 302 Brea Vahn, withdrawals ..................................... 1,000 401 Revenue .............................................................. 11,000 640 Rent expense ..................................................... 6,000 690 Utilities expense ................................................ 4,000 _ ____ Totals .................................................................. $27,000 $27,000 Quick Study 2-16 The correct answer is c. If a $2,250 debit to Rent Expense is incorrectly posted as a credit, the effect is to understate the Rent Expense debit balance by $4,500. This causes the Debit column total on the trial balance to be $4,500 less than the Credit column total. Quick Study 2-17 1. Subtract total debits in the trial balance from total credits 24,250 - 21,550 = 2,700 2. Divide the difference by 9 2,700 ÷ 9 = 300 3. The quotient equals the difference between the two transposed numbers. 300 is the difference between the two transposed numbers. 4. The number of digits in the quotient tells us the location of the transposition Look for a difference of 3 between the third number from the right and the fourth number from the right. Through a process of elimination, the incorrect value is Rent Expense for $4,100. The correct value must be $1,400. PfRlltthtilblli$1400fthit$4100dthtil Last revised: October 26, 2012 Quick Study 2-18 1. Subtract total debits in the trial balance from total credits 728 - 503 = 225 2. Divide the difference by 9 225 ÷ 9 = 25 The quotient equals the incorrect number. Through a review of the values in the trial balance, the incorrect value is Notes Payable for $25. The correct value must be $250. Proof: Recalculate the trial balance replacing $250 for the incorrect $25 and the trial balance now balances at $728.