INSTRUCTOR’S SOLUTIONS
MANUAL
Horngren’s Accounting
Thirteenth Canadian Edition
Volume 2
Miller-Nobles/Mattison/ Mowbray/Meissner
Copyright © 2026 Pearson Canada Inc., Toronto, Ontario.
All rights reserved. This work is protected by Canadian copyright laws and is provided solely for the use of instructors in
teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the Internet)
will destroy the integrity of the work and is not permitted. The copyright holder grants permission to instructors who have
adopted Horngren’s Accounting Volume 2, Thirteenth Canadian Edition, by Miller-Nobles, Mattison, Mowbray, and Meissner.
to post this material online only if the use of the website is restricted by access codes to students in the instructor’s class that is
using the textbook and provided the reproduced material bears this copyright notice.
, Chapter 11
Current Liabilities and Payroll
Questions
1. A current liability is one that is payable within the coming year or within the
company’s normal operating cycle if longer than a year. All other liabilities
are long term.
2. Retailers act as collecting agents for the federal government. Stores charge
their customers GST, but the GST belongs to the federal government. The
store has a liability to pay the federal government (Receiver General) the
amount of tax collected less applicable input tax credits.
3. GST Recoverable or Input Tax Credit
4. The company reports current liabilities for the short-term note payable of
$50,000 and for interest payable of $1,000 ($50,000 × 0.04 × 6/12).
5. The balance sheet would show a current liability of $1,000 in an account
called Current Portion of Long-Term Note Payable. The long-term liabilities
section would report $4,000 as the balance of the Note Payable.
6. If current were not separated from long-term debt, two ratios would be
distorted—the current ratio and the acid-test ratio. The understated current
liability would make both of the results more positive than they are in reality,
and users of the financial information would be misled.
7. An accrued expense is an expense that has been incurred but has not been
paid. Because the expense has been incurred but not paid, it must be accrued,
thus it is a liability.
8. Accounts payable and short-term notes payable are both current liabilities—
that is, both are due and payable within one year or within the company’s
operating cycle.
Differences:
• Accounts payable are amounts owed for products or services that are
purchased on open account.
• Accounts payable have no interest obligation (however, if paid late,
interest or late payment charges could be incurred); short-term notes
payable have a defined rate of interest due over the term of the note.
Copyright © 2026 Pearson Canada Inc. 11-1
,Horngren’s Accounting, 13Ce Chapter 11 Instructor’s Solutions Manual
9. At the beginning of the school term, tuition collected in advance is recorded
as a liability of the school because it is an unearned revenue. At the end of the
term, the tuition is moved to a revenue account because the tuition has been
earned.
10. A customer deposit is a liability because the company has not provided
service for the deposit and must refund that cash to its customers under certain
conditions. The security deposit collected by telephone and other utility
companies is an example.
11. The company’s warranty expense for the year is $50,000, the estimate based
on the current year’s sales. The matching objective demands that this expense
be matched against the period’s revenues.
12. A contingent liability is a potential liability that depends on a future event
arising out of past events. The future event will determine the amount and
existence of the liability. A contingent liability may or may not become an
actual obligation.
13. Accounting conservatism (and the CPA Canada Handbook) tell us that
contingent losses must be accrued or disclosed but that gains are not reported
until realized.
14. Service businesses sell their employees’ services, so employment
compensation is their major expense of doing business, just as cost of goods
sold is the largest expense in merchandising.
15. The amount of income tax withheld from employee paycheques depends on
the employee’s gross pay, the amount of non-refundable tax credits claimed
on the Personal Tax Credit Form (TD1), and the tax rate set by CRA.
16. Required deductions: income tax, Canada (or Quebec) Pension Plan, and
Employment Insurance.
17. Employers pay: Canada (or Quebec) Pension, Employment Insurance,
Workers’ Compensation, and, where applicable, provincial payroll taxes
regarding health and education.
18. Employment insurance premiums are determined annually by the federal
government. This answer is appropriate for 2024. Assuming a rate of 1.66
percent on earnings up to $63,200, the maximum employment insurance
premium this employee can pay is $1,049.12. The employer will contribute
1.4 times this amount, or $1,468.77.
19. Some companies use a special payroll bank account to keep the payroll
cheques separate from the day-to-day business cheques. It may be easier to
complete two bank reconciliations that are less complicated than one large
bank reconciliation. Any payroll issues may also be highlighted in a separate
payroll bank-account reconciliation.
20. A contingent liability is reported when it is probable that it will occur. The
IFRS standard is lower than for ASPE.
Copyright © 2026 Pearson Canada Inc. 11-2
, Horngren’s Accounting, 13Ce Chapter 11 Instructor’s Solutions Manual
Starters
(10 min.) S11-1
General Journal
Date Post.
20X2 Account Titles and Explanations Ref. Debit Credit
a. Dec. 31 Interest Expense 800
Interest Payable 800
Accrued interest expense at year end.
($32,000 × 0.06 × 5/12)
20X3
b. Jul. 31 Note Payable, Short-Term 32,000
Interest Payable 800
Interest Expense 1,120
Cash 33,920
Paid note and interest at maturity.
($32,000 × 0.06 × 7/12)
Copyright © 2026 Pearson Canada Inc. 11-3
MANUAL
Horngren’s Accounting
Thirteenth Canadian Edition
Volume 2
Miller-Nobles/Mattison/ Mowbray/Meissner
Copyright © 2026 Pearson Canada Inc., Toronto, Ontario.
All rights reserved. This work is protected by Canadian copyright laws and is provided solely for the use of instructors in
teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the Internet)
will destroy the integrity of the work and is not permitted. The copyright holder grants permission to instructors who have
adopted Horngren’s Accounting Volume 2, Thirteenth Canadian Edition, by Miller-Nobles, Mattison, Mowbray, and Meissner.
to post this material online only if the use of the website is restricted by access codes to students in the instructor’s class that is
using the textbook and provided the reproduced material bears this copyright notice.
, Chapter 11
Current Liabilities and Payroll
Questions
1. A current liability is one that is payable within the coming year or within the
company’s normal operating cycle if longer than a year. All other liabilities
are long term.
2. Retailers act as collecting agents for the federal government. Stores charge
their customers GST, but the GST belongs to the federal government. The
store has a liability to pay the federal government (Receiver General) the
amount of tax collected less applicable input tax credits.
3. GST Recoverable or Input Tax Credit
4. The company reports current liabilities for the short-term note payable of
$50,000 and for interest payable of $1,000 ($50,000 × 0.04 × 6/12).
5. The balance sheet would show a current liability of $1,000 in an account
called Current Portion of Long-Term Note Payable. The long-term liabilities
section would report $4,000 as the balance of the Note Payable.
6. If current were not separated from long-term debt, two ratios would be
distorted—the current ratio and the acid-test ratio. The understated current
liability would make both of the results more positive than they are in reality,
and users of the financial information would be misled.
7. An accrued expense is an expense that has been incurred but has not been
paid. Because the expense has been incurred but not paid, it must be accrued,
thus it is a liability.
8. Accounts payable and short-term notes payable are both current liabilities—
that is, both are due and payable within one year or within the company’s
operating cycle.
Differences:
• Accounts payable are amounts owed for products or services that are
purchased on open account.
• Accounts payable have no interest obligation (however, if paid late,
interest or late payment charges could be incurred); short-term notes
payable have a defined rate of interest due over the term of the note.
Copyright © 2026 Pearson Canada Inc. 11-1
,Horngren’s Accounting, 13Ce Chapter 11 Instructor’s Solutions Manual
9. At the beginning of the school term, tuition collected in advance is recorded
as a liability of the school because it is an unearned revenue. At the end of the
term, the tuition is moved to a revenue account because the tuition has been
earned.
10. A customer deposit is a liability because the company has not provided
service for the deposit and must refund that cash to its customers under certain
conditions. The security deposit collected by telephone and other utility
companies is an example.
11. The company’s warranty expense for the year is $50,000, the estimate based
on the current year’s sales. The matching objective demands that this expense
be matched against the period’s revenues.
12. A contingent liability is a potential liability that depends on a future event
arising out of past events. The future event will determine the amount and
existence of the liability. A contingent liability may or may not become an
actual obligation.
13. Accounting conservatism (and the CPA Canada Handbook) tell us that
contingent losses must be accrued or disclosed but that gains are not reported
until realized.
14. Service businesses sell their employees’ services, so employment
compensation is their major expense of doing business, just as cost of goods
sold is the largest expense in merchandising.
15. The amount of income tax withheld from employee paycheques depends on
the employee’s gross pay, the amount of non-refundable tax credits claimed
on the Personal Tax Credit Form (TD1), and the tax rate set by CRA.
16. Required deductions: income tax, Canada (or Quebec) Pension Plan, and
Employment Insurance.
17. Employers pay: Canada (or Quebec) Pension, Employment Insurance,
Workers’ Compensation, and, where applicable, provincial payroll taxes
regarding health and education.
18. Employment insurance premiums are determined annually by the federal
government. This answer is appropriate for 2024. Assuming a rate of 1.66
percent on earnings up to $63,200, the maximum employment insurance
premium this employee can pay is $1,049.12. The employer will contribute
1.4 times this amount, or $1,468.77.
19. Some companies use a special payroll bank account to keep the payroll
cheques separate from the day-to-day business cheques. It may be easier to
complete two bank reconciliations that are less complicated than one large
bank reconciliation. Any payroll issues may also be highlighted in a separate
payroll bank-account reconciliation.
20. A contingent liability is reported when it is probable that it will occur. The
IFRS standard is lower than for ASPE.
Copyright © 2026 Pearson Canada Inc. 11-2
, Horngren’s Accounting, 13Ce Chapter 11 Instructor’s Solutions Manual
Starters
(10 min.) S11-1
General Journal
Date Post.
20X2 Account Titles and Explanations Ref. Debit Credit
a. Dec. 31 Interest Expense 800
Interest Payable 800
Accrued interest expense at year end.
($32,000 × 0.06 × 5/12)
20X3
b. Jul. 31 Note Payable, Short-Term 32,000
Interest Payable 800
Interest Expense 1,120
Cash 33,920
Paid note and interest at maturity.
($32,000 × 0.06 × 7/12)
Copyright © 2026 Pearson Canada Inc. 11-3
