(Solution Manual) Financial Accounting Canadian Edition

Waybright, Kemp, Elbarrad, 2

Business

Solution Manual

2nd Edition

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Solution Manual for Financial Accounting Canadian Edition, The downloadable file consists of 807 pages, and the total size of the file is 5.02 MB. Purchase now only for highly discounted price.

Author(s): Waybright, Kemp, Elbarrad

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Copyright © 201 6 Pearson Canada Inc. i SOLUTIONS MANUAL (All Chapters) Jeffrey Waybrig ht Robert Kemp Sherif Elbarra d Financial Accounting Second Canadian Edition Jeffrey Waybright / Robert Kemp / Sherif Elbarrad Copyright © 201 6 Pearson Canada Inc. ii Table of Contents Chapter 1: Business , Accounting, an d You ................................................................................. 1-1 Chapter 2: Analyzing and Recording Business Transactions ...................................................... 2-1 Chapter 3: Adjusting and Closing Entries ................................................................................... 3-1 Chapte r 4: Ethics, Internal Control, and Cash ............................................................................. 4-1 Chapter 5: Accounting for a Merchandising Business ................................................................ 5-1 Chapter 6: Inventory .................................................................................................................... 6-1 Chapter 7: Sales and Receivables ................................................................................................ 7-1 Chapter 8: Long -Term Assets ...................................................................................................... 8-1 Chapter 9: Current Liabilities and Long -Term Debt ................................................................... 9-1 Chapter 10: Corporations: Share Capital and Retained Earnings .............................................. 10-1 Chapter 1 1: The Statement of Cash Flows ................................................................................ 11-1 Chapter 1 2: Financial Statement Analysis ................................................................................. 12-1 Appendix B : Time Value of Money – Future and Pr esent Value Concepts ................................B -1 Appendix C : Accounting for Investments ...................................................................................C -1 Copyright © 2016 Pearson Canada Inc. 1- 1 Chapter 1: Business, Accounting, and You ACCOUNTING PRACTICE Discussion Questions: Key Points 1. The economic events that affect a business are communicated through the accounting function. Language helps us to make sense of the world around us. If we don’t know the language, we will be limited in our ability to operate effectively in the business environment. 2. Valid arguments can be made on both sides of this question. Without technical knowledge an accountant will not be able to provide much value. Without e thics, however, an accountant can be dangerous. Accounting exists because of a need for an objective account of the economic events that affect an entity. Accounting is primarily an ethical discipline. 3. Careers in accounting can be grouped into four categor ies—financial accounting, management accounting, taxation, and banking and financial services. Financial accountants prepare and analyze financial statements, and they can also perform audit or review compliance. The information gathered is mainly for exte rnal use. Management accountants gather cost information, prepare budget, and help companies set performance measures, and the information gathered is mainly for internal use. 4. Reasons why —reliability, objectivity. Disadvantages —relevance, decision -usefulne ss. 5. Financial statement uses discussed in the text: allow investors and creditors to make investment decisions, enable suppliers and customers to determine the financial condition of a business, report to regulatory agencies. 6. A corporation is a separate le gal entity from its owners. Factors —liability of owners for business activities, taxation, distribution of income. 7. A = L + SE. Assets —things of value a company has. Liabilities —amount a business owes to third parties. Shareholders’ equity —the amount of ass ets that is owned by the shareholders. 8. The transactions would have the following effects: a. A+, SE+ b. A+, L+ c. A+, SE+ d. A+, A - 9. Income Statement, Statement of Retained Earnings, Statement of Financial Position, Statement of Cash Flows. The financial statements articulate (join together). The income statement needs to be prepared to produce the net income amount that is reported on the statement of retained earnings. The ending balance in retained earnings is needed to prepare the statement of financial position. Th e ending balance in cash and other information is needed for the statement of cash flows. 10. The financial statements are a. Statement of financial position b. Statement of retained earnings c. Statement of cash flows d. Income statement 1-2 Copyright © 2016 Pearson Canada Inc. Short Exercises (5–10 min.) S1 -1 1. d 2. a 3. c 4. b (5–10 min.) S1 -2 Answer: a. Accrual basis accounting (5–10 min.) S1 -3 1. b 2. a 3. a 4. b 5. d 6. a 7. c (5–10 min.) S1 -4 1. e 2. b 3. a 4. e 5. c (10–15 min.) S1 -5 1. e 2. f 3. d 4. g 5. b 6. c 7. a (5–10 min.) S1 -6 a. $43,000 ($75,000 − $32,000) b. $80,000 ($43,000 + $37,000) Copyright © 2016 Pearson Canada Inc. 1- 3 c. $32,000 ($92,000 − $60,000) (5–10 min.) S1 -7 Assets = Liabilities + Shareholders’ Equity Accounts Payable + Shareholders’ Cash + Equipment = Notes Payable + Equity $3,000 + $12,000 = $6,000 + $5,000 + $4,000 Based on the accounting equation, Ming has $4,000 of equity in the business. Assets of $15,000 ($3,000 + $12,000) − liabilities of $11,000 ($6,000 + $5,000) = shareholders’ equity of $4,000. (5–10 min.) S1 -8 Assets = Liabilities + Shareholders’ Equity Cash + Supplies = + Shareho lders’ Equity $2,000 + $800 = $1,500 + $1,300 Based on the accounting equation, Apex Financial Services has $1,500 of liabilities. Assets of $2,800 ($2,000 + $800) − shareholders’ equity of $1,300 = liabilities of $1,500 (5–10 min.) S1 -9 Assets = Liabilities + Shareholders’ Equity Cash = Notes Payable + Shareholders’ Equity Investment + $8,000 = + $8,000 Borrowing + 5,000 = + $5,000 + ______ Bal. $13,000 = $5,000 + $8,000 (5–10 min.) S1 -10 Assets = Liabilities + Shareholders’ Equity Cash + Accounts Receivable Accounts Payable Common Shares + Retained Earnings Service Revenue – Salary - Dividends Expense a. +$14,000 + $14,000 b. ($8,000) + $8,000 1-4 Copyright © 2016 Pearson Canada Inc. (5–10 min.) S1 -11 1. e 2. a 3. c 4. a 5. e 6. e 7. a 8. e 9. d 10. b 11. a (5–10 min.) S1 -12 1. SFP 2. SFP 3. IS 4. IS 5. SFP, SCE 6. SFP 7. SFP, SCE 8. SFP 9. IS 10. SCE (5–10 min.) S1 -13 1. d 2. e 3. b 4. a 5. c (5–10 min.) S1 -14 1. Increased assets (Cash) 2. No effect on total assets. The increase in L and offset the decrease in Cash. Copyright © 2016 Pearson Canada Inc. 1- 5 3. Decreased assets (Cash) 4. Increased assets (Machinery and Equipment) 5. Increased assets (Accounts Receivable) 6. Decreased assets (Cash) 7. No effect on total assets. The increase in Cash offsets the decrease in Accoun ts Receivable. 8. No effect on total assets. The increase in Cash offsets the decrease in Land. 9. Increased assets (Cash) (5–10 min.) S1 -15 1. True 2. False (Increase Supplies, decrease Cash) 3. True 4. True 5. True 6. False (Decrease Cash, decrease Accounts Payable) 7. True 8. True 9. False (Decrease Cash, increase Expense/decrease Shareholders’ Equity) (5–10 min.) S1 -16 Req. 1 1. f Sold shares to start the painting service business. 2. e Paid cash to purchase painting equipment. 3. g Borrowed money from the bank to purchase painti ng equipment 4. a Earned revenue for painting services provided, but customer will pay later. 5. d Paid cash for expenses incurred to operate the business. 6. c Received cash for revenue earned by providing painting services. 7. b Customers paid cash for painting services completed earlier in the month. Req. 2 Revenues (Transactions a and c) $2,200 Less: Expenses (Transaction d).. 750 Net income... $1,450 1-6 Copyright © 2016 Pearson Canada Inc. Exercises (10–15 min.) E1 -1A Fresh Produce, Corp. $51,600 + $12,200 = $63,800 Hudson Gift a nd Cards, Inc. $97,000 – $35,000 = $62,000 Nice Cuts, Inc. $115,700 – $95,900 = $19,800 (10–15 min.) E1 -2A Req. 1 Total Total Total Assets − Shareholders’ Equity = Liabilities Beginning $87,000 − $52,000 = $35,000 Ending $153,000 − $81,000 = $72,000 Increase during the year = $ 37,000 Req. 2 Possible reasons for the increase in Liabilities may include: • Purchases were made on account • A note payable was signed in exchange for cash or equipment (10–15 min.) E1 -3A Req. 1 Total Total Total Assets − Liabilities = Shareholders’ Equity Beginning $32,000 − $14,000 = $18,000 Ending $42,000 − $18,500 = $23,500 Increase during the year = $ 5,500 Req. 2 Possible reasons for the increase in Shareholders’ Equity may include: • Changes in common shares —issuing new shares • Net income Copyright © 2016 Pearson Canada Inc. 1- 7 (15–20 min.) E1- 4A Aug. 31, 2015 Sept. 30, 2015 Total assets $130,000 $165,000 - Total liabilities $(87,000) $(131,000) = Shareholders’ equity $43,000 $34,000 Assumption A : No dividends were paid $34,000 ending balance = $43,000 Beg bal + Net income – Dividends $34,000 = $43,000 + Net income – 0 $(9,000) = Net loss Assumption B : $8,000 of dividends were paid $34,000 ending balance = $43,000 Beg bal + Net income – Dividends $34,000 = $43,000 + Net income – $8,000 $(1,000) = Net loss Assumption C : $14,000 of dividends were paid $34,000 ending balance = $43,000 Beg bal + Net income – Dividends $34,000 = $43,000 + Net income – $14,000 $5,000 = Net income 1-8 Copyright © 2016 Pearson Canada Inc. (15–20 min.) E1 -5A Assets = Liabilities + Shareholders’ Equity Cash + Supplies + Land Accounts Payable Common Shares + Retained Earnings March Service Revenue – Rent Expense 2 + 65,000 + 65,000 6 –55,000 + 55,000 11 + 1,000 + 1,000 15 No entry required 17 + 7,000 + 7,000 19 – 1,800 + 1,800 22 + 250 –250 30 – 500 –500 Bal. $14,950 + $750 + $55,000 = $500 + $65,000 + $7,000 – $1,800 (10–15 min.) E1 -6A Req. 1 The business is a corporation, as shown by the fact that it has a common share account. Req. 2 Hair Today Salon Statement of Financial Position July 31, 2015 Assets Liabilities Cash $ 3,500 Accounts Payable $2,500 Accounts Receivable 1,200 Note Payable 4,000 Supplies 700 Total Liabilities 6,500 Office Equipment 6,300 Shareholders’ Equity Common Shares 3,000 Retained Earnings 2,200 Total Shareholders’ Equity 5,200 Total Liabilities & Total Asset s $11,700 Shareholders’ Equity $11,700 Req. 3 The balance sheet reports financial position of a company at a given point in time and that Assets = Liabilities + Shareholders’ Equity. Copyright © 2016 Pearson Canada Inc. 1- 9 (10–15 min.) E1 -7A 1 Common Shares Retained Earnings Total Balance, Jan. 1, 2015 $12,000 $6,000 $18,000 Issued Common Shares $8,000 $8,000 Net Income $19,000 $19,000 Dividends $(3,000) $(3,000) Balance, Dec. 31, 2015 $20,000 $22,000 $42,000 2. Revenue – Expenses = Net Income $45,000 – X = $19,000 Expenses = $26,000 (15–20 min.) E1 -8A Req. 1 Account Type of Account Account Type of Account Office Furniture Asset Rent Expense Expense Utilities Expense Expense Cash Asset Accounts Payable Liability Office Supplies Asset Notes Payable Liability Salary Expense Expe nse Service Revenue Revenue Salary Payable Liability Accounts Receivable Asset Property Tax Expense Expense Supplies Expense Expense Equipment Asset Req. 2 Armstrong Consulting , Inc. Income Statement For the Year Ended December 31, 2015 Revenue $141,500 Expenses Salary Expense $43,000 Rent Expense 36,000 Utilities Expense 12,600 Supplies Expense 4,200 Property Tax Expense 2,300 Total Expenses 98,100 Net income $ 43,400 Results of operations for 2015: Net income of $43,400 1-10 Copyright © 2016 Pearson Canada Inc. Req. 3 Armstrong Consulting , Inc. Statement of Retained Earnings For the Year Ended December 31, 2015 Retained Earnings, Jan. 1, 2015 $0 Add: Net Income 43,400 Subtotal 43,400 Less: Dividends 25,000 Retained Earnings, Dec. 31, 2015 $18,4 00 The dividends for the year were $25,000. ($0 + $43,400 – $18,400) (15–20 min.) E1 -9A Req. 1 Telco, Inc. Beginning: Assets $ 66,000 − Liabilities (15,000 ) = Shareholders’ Equity $ 51,000 Req. 2 Ending: Assets $ 94,000 − Liabilities (28,000 ) = Shareholders’ Equity $ 66,000 Req. 3 Ending Shareholders’ Equity $66,000 – Beginning Shareholders’ Equity (51,000) = Change in Shareholders’ Equity 15,000 – Sale of shares (7,000) = Change in retained earnings 8,000 + Dividends 20,000 = Net income $28,000 Note: The change in retained earnings equals net income minus dividends. So, dividends are added back to the change in retained earnings to arrive at net income. Copyright © 2016 Pearson Canada Inc. 1- 11 (10–15 min.) E1 -1B Corner Grocery, Corp. $45,000 + $27,900 = $72,900 Sampson Hardware, Inc. $104,000 – $44,000 = $60,000 Perfect Cleaners, Inc. $108,800 – $92,600 = $16,200 (10–15 min.) E1 -2B Req. 1 Total Total Total Assets − Shareholders’ Equity = Liabilities Beginning $93,000 − $31,000 = $62,000 Ending $147,000 − $87,000 = $60,000 Decrease during the year = $ 2,000 Req. 2 Possible reasons for the decrease in Liabilities may include: • Made payments on Accounts Payable • Made payments on Notes Payable (10–15 min.) E1 -3B Req. 1 Total Total Total Assets − Liabilities = Shareholders’ Equity Beginning $35,000 − $32,000 = $3,000 Ending $65,000 − $20,000 = $45,000 Increase during the year = $ 42,000 Req. 2 Possible reasons for the increase in Shareholders’ Equity may include: • Changes in Common Shares —issuing new shares • Net Income 1-12 Copyright © 2016 Pearson Canada Inc. (15–20 min.) E1 -4B Oct. 31, 2015 Nov. 30, 2015 Total assets $140,000 $175, 000 - Total liabilities $(75,000) $(117,000) = Shareholders’ equity $65,000 $58,000 Assumption A : No dividends were paid. $58,000 ending balance = $65,000 Beg bal + Net income – Dividends $58,000 = $65,000 + Net income – 0 $(7,000) = Net loss Assumption B : $17,000 of dividends were paid. $58,000 ending balance = $65,000 Beg bal + Net income – Dividends $58,000 = $65,000 + Net income —$17,000 $10,000 = Net income Assumption C : $25,000 of dividends were paid. $58,000 ending balance = $65,000 Beg bal + Net income – Dividends $58,000 = $65,000 + Net income – $25,000 $18,000 = Net income (15–20 min.) E1 -5B Req. 1 Assets = Liabilities + Shareholders’ Equity Cash + Medical Supplies + Land Accounts Payable Common Shares + Retained Ear nings January Service Revenue – Rent Expense 2 + 80,000 + 80,000 6 – 30,000 + 30,000 11 + 600 + 600 15 No entry required 17 + 13,000 + 13,000 19 – 1,100 + 1,100 22 + 400 - 400 30 – 150 – 150 Bal. $62,150 + $200 + $30,000 = $450 + $80,000 + $13,000 – $1,100 Copyright © 2016 Pearson Canada Inc. 1- 13 (10–15 min.) E1 -6B Req. 1 The business is a corporation, as shown by the fact that it has a common share account . Req. 2 Kite Runner, Inc. Statement of Financial Position August 31, 2015 ASSETS LIABILITIES Cash $ 24,000 Accounts Payable $5,000 Accounts Receivable 600 Note Payable 1,000 Supplies 700 Total Liabilities 6,000 Office Equipment 4,100 SHAREHOLDE RS’ EQUITY Common Shares 5,000 Retained Earnings 18,400 Total Shareholders’ Equity 23,400 Total Liabilities & Total Assets $29,400 Shareholders’ Equity $29,400 Req. 3 The statement of financial position reports financial position of a c ompany at a given point in time and that Assets = Liabilities + Shareholders’ Equity. (10–15 min.) E1 -7B Req. 1 Common Shares Retained Earnings Total Balance, Jan. 1, 2015 $10,000 $28,000 $38,000 Issued Common Shares $24,000 $24,000 Net Income $(9,0 00) $(9,000) Dividends $(5,000) $(5,000) Balance, Dec. 31, 2015 $34,000 $14,000 $48,000 Req. 2 Revenue – Expenses = Net Income $26,000 – X = $9,000 Expenses = $35,000 (15–20 min.) E1 -8B Req. 1 Account Type of Account Account Type of Account Office Furniture Asset Rent Expense Expense Utilities Expense Expense Cash Asset Accounts Payable Liability Office Supplies Asset Notes Payable Liability Salary Expense Expense Service Revenue Revenue Salary Payable Liability 1-14 Copyright © 2016 Pearson Canada Inc. Accounts Receivable Asset Prope rty Tax Expense Expense Supplies Expense Expense Equipment Asset Req. 2 Albright Consulting , Inc. Income Statement For the Year Ended January 31, 2015 Revenue $155,000 Expenses Salary Expense $43,000 Rent Expense 36,000 Utilities E xpense 13,500 Supplies Expense 3,700 Property Tax Expense 3,000 Total Expenses 99,200 Net Income $ 55,800 Results of operations for 2015: Net income of $55,800. Req. 3 Albright Consulting, Inc. Statement of Retained Earnings For the Year E nded January 31, 2015 Retained Earnings, Jan. 31, 2012 $0 Add: Net Income 55,800 Subtotal 55,800 Less: Dividends 50,000 Retained Earnings, Jan. 31, 2015 $5,800 The dividends for the year were $50,000 ($0 + $55,800 – $5,800). (15–20 min.) E1 -9B Req. 1 Edo, Inc. Beginning: Assets $ 99,000 − Liabilities (15,000 ) = Shareholders’ Equity $ 84,000 Copyright © 2016 Pearson Canada Inc. 1- 15 Req. 2 Ending: Assets $ 164,000 − Liabilities (70,000 ) = Shareholders’ Equity $ 94,000 Req. 3 Ending Shareholders’ Equity $94,000 – Beginning Shareholders’ Equity (84,000) = Change in Shareholders’ Equity 10,000 – Sale of Shares (17,000) = Change in Retained Earnings (7,000) + Dividends 55,000 = Net Income $48,000 Note: The change in Retained Earnings equals Net Income minus Dividends. So, Dividends are added back to the change in Retained Earnings to arrive at Net Income. 1-16 Problems (20–25 min.) P1 -1A Req. 1 Assets = Liabilities + Shareholders’ Equity Cash + Accounts Receivable + Supplies + Office Furniture Accounts Payable Common Shares + Retained Earnings June Service Revenue – Rent Expense – Dividends 3 * 5 + 60,000 + 60,000 Bal. $60,000 + $0 + $0 + $0 = $0 + $60,000 + $0 – $0 – $0 7 –450 + 450 Bal. $59,550 + $0 + $450 + $0 = $0 + $60,000 + $0 – $0 – $0 9 +3,800 +3,800 Bal. $59,550 + $0 + $450 + $3,800 = $3,800 + $60,000 + $0 – $0 – $0 10 * 14 ** 20 +3,800 +3,800 Bal. $59,550 + $3,800 + $450 + $3,800 = $3,800 + $60,000 + $3,800 – $0 – $0 27 –1,600 +1,600 Bal. $57,950 + $3,800 + $450 + $3,800 = $3,800 + $60,000 + $3,800 – $1,600 – $0 30 –1,000 +1,000 Bal. $56,950 + $3,800 + $450 + $3,800 = $3,800 + $60,000 + $3,800 – $1,600 – $1,000 * Represe nts a personal, not a business transaction ** Not a transaction as there was no financial impact Copyright © 2016 Pearson Canada Inc. 1- 17 Req. 2 a. Total assets = $65,000 ($56,950 + $3,800 + $450 + $3,800) b. Total liabilities = $3,800 c. Total shareholder s’ equity = $61,200 ($60,000 + $3,800 – $1,600 – $1,000) d. Net income for June = $2,200 ($3,8 00 − $1,600) 1-18 (25–30 min.) P1 -2A Req. 1 Assets = Liabilities + Shareholders’ Equity Cash + Accounts Receivable + Supplies + Equipment Accounts Payable Common Shares + Retained Earnings June Service Revenue – Salaries Expense – Dividends Beg. bal. $1,540 + $3,680 + $0 + $24,000 = $5,100 + $21,000 + $5,100 – $1,980 – $0 a. + 10,000 + 10,000 Bal. $11,540 + $3,680 + $0 + $24,000 = $5,100 + $31,000 + $5,100 – $1,980 – $0 b. –5,100 –5,100 Bal. $6,440 + $3,680 + $0 + $24,000 = $0 + $31,000 + $5,100 – $1,980 – $0 c. + 2,500 + 2,500 Bal. $8,940 + $3,680 + $0 + $24,000 = $0 + $31,000 + $7,600 – $1,980 – $0 d. + 850 – 850 Bal. $9,790 + $2,830 + $0 + $24,000 = $0 + $31,000 + $7,600 – $1,980 – $0 e. + 600 + 600 Bal. $9,790 + $2,830 + $600 + $24,000 = $600 + $31,000 + $7,600 – $1,980 – $0 f. + 5,000 + 5,000 Bal. $9,790 + $7,830 + $600 + $24,000 = $600 + $31,000 + $12,600 – $1,980 – $0 g. +2,500 + 2,500 Bal. $12,290 + $7,830 + $600 + $24,000 = $600 + $33,500 + $12,600 – $1,980 – $0 h. – 2,400 + 2,400 Bal. $9,890 + $7,830 + $600 + $24,000 = $600 + $33,500 + $12,600 – $4,380 – $0 i. +110 – 110 Bal. $10,000 + $7,83 0 + $490 + $24,000 = $600 + $33,500 + $12,600 – $4,380 – $0 j. –1,500 +1,500 Bal. $8,500 + $7,830 + $490 + $24,000 = $600 + $33,500 + $12,600 – $4,380 – $1,500 Copyright © 2016 Pearson Canada Inc. 1- 19 Req. 2 Interiors by Donna, Inc. Income Stat ement Month Ended September 30, 2015 Revenues Service Revenue $12,600 Expenses Salaries Expense 4,380 Net Income $8,220 Req. 3 Interiors by Donna, Inc. Statement of Changes in Equity Month Ended September 30, 2015 Common Shares Retained Earnings Total Balance, September 1, 2015 $21,000 $0 $24,120 Issued common shares 12,500 12,500 Net income 8,220 5,100 Dividends (1,500) (1,500) Balance, September 30, 2015 $33,500 $6,720 $40,220 Req. 4 Interiors by Donna, Inc. Balance Sheet Septe mber 30, 2015 ASSETS LIABILITIES Cash $ 8,500 Accounts Payable $ 600 Accounts Receivable 7,830 Supplies 490 SHAREHOLDERS’ EQUITY Equipment 24,000 Common Shares 33,500 Retained Earnings 6,720 Total Shareholders’ Equity 40,220 Total Liabilities & Total Assets $40,820 Shareholders’ Equity $40,820 1-20 Copyright © 2016 Pearson Canada Inc. (20–25 min.) P1- 3A Req. 1a. Gear Heads, Inc. Income Statement Year Ended December 31, 2015 Service Revenue $72,000 Expenses Salary Expense $14,000 Insurance Expense 4,000 Advertising Expense 3,000 Total Expenses 21,000 Net Income $51,000 Req. 1b. Gear Heads, Inc. Statement of Changes in Equity Year Ended December 31, 2015 Common Shares Retained Earnings Total Balance, December 31, 2014 $20,000 $32,000 $52,000 Net income 51,000 51,000 Dividends (40,000) (40,000) Balance, December 31, 2015 $20,000 $43,000 $63,000 Req. 1c. Gear Heads, Inc. Statement of Financial Position December 31, 2015 ASSETS LIABILITIES Cash $7,000 Accounts Payable $ 2,000 Acco unts Receivable 5,000 Notes Payable 25,000 Equipment 78,000 Total Liabilities 27,000 SHAREHOLDERS’ EQUITY Common Shares 20,000 Retained Earnings 43,000 Total Shareholders’ Equity 63,000 Total Liabilities & Total Assets $90,000 Shareholders’ Equity $90,000 Copyright © 2016 Pearson Canada Inc. 1- 21 (25–30 min.) P1- 4A Req. 1 Account Type of Account Account Type of Account Accounts Payable Liability Interest Expense Shareholders’ Equity Accounts Receivable Asset Land Asset Advertising Expense Shareholders’ Equity Note Payable Liability Building Asset Property Tax Expense Shareholders’ Equity Cash Asset Rent Expense Shareholders’ Equity Common Shares Shareholders’ Equity Salary Expense Shareholders’ Equity Dividends Shareholders’ Equity Salary Payable Liability Equipment Asset Service Revenue Shareholders’ Equity Insurance Expense Shareholders’ Equity Supplies Asset Req. 2 The Better Body, Inc. Income Statement Year Ended December 31, 2015 Service Revenue $185,000 Expenses Salary Expense $71,000 Rent Expense 24,000 Advertising Expense 13,000 Interest Expense 9,000 Property Tax Expense 3,000 Insurance Expense 1,000 Total Expenses 121,000 Net Income $ 64,000 The Better Body Inc. Statement of Changes in Equity Year Ended Dece mber 31, 2015 Common Shares Retained Earnings Total Balance, December 31, 2014 $40,000 $97,000 $137,000 Net income 64,000 64,000 Dividends (36,000) (36,000) Balance, December 31, 2015 $40,000 $125,000 $165,000 1-22 Copyright © 2016 Pearson Canada Inc. Req. 3 The Better Body, Inc. State ment of Financial Position December 31, 2015 ASSETS LIABILITIES Cash $16,000 Accounts Payable $ 15,000 Accounts Receivable 14,000 Salaries Payable 2,000 Supplies 2,000 Notes Payable 65,000 Land 40,000 Total Liabilities 82,000 Equipment 45,000 Building 130,000 SHAREHOLDERS’ EQUITY Common Shares 40,000 Retained Earnings 125,000 Total Shareholders’ Equity 165,000 Total Liabilities & Total Assets $247,000 Shareholders’ Equity $247,000 Req. 4 a. 64,000 (Net Profit = Net Income). b. Increa se of $28,000 ($64,000 Net Income minus $36,000 Dividends). c. $247,000 (Total economic resources = total assets). d. $ 82,000 (Total owed = total liabilities). Copyright © 2016 Pearson Canada Inc. 1- 23 (20–25 min.) P1- 5A Req. 1 Aztec Realty, Inc. Statement of Financial Position June 30, 2015 ASSETS LIABILITIES Cash $9,000 Accounts Payable $ 200 Accounts Receivable 1,400 Salaries Payable 1,750 Supplies 800 Notes Payable 5,700 Equipment 7,500 Total Liabilities 7,650 SHAREHOLDERS’ EQUITY Common Shares 8,000 Retained Earnings 3,050 Total Shareholders’ Equity 11,050 Total Liabilities & Total Assets $18,700 Shareholders’ Equity $18,700