Financial Accounting, 9th Edition Solution Manual

Name: Financial Accounting, 9th Edition Solution Manual
Brand: Academic Documents Platform
Price: 24.99 USD
Availability: InStock
Author: Alexander Wilson

Master complex problems with Financial Accounting, 9th Edition Solution Manual, your go-to guide for step-by-step solutions.

Alexander Wilson

Contributor

4.8

134

7 months ago

Preview (31 of 1024)

Chapter 1 The Financial Statements 1-1
Chapter 1
The Financial Statements
Short Exercises
(5 min.) S 1-1
Computed amounts in boxes
Total Assets = Total Liabilities + Stockholders’ Equity
a. $300,000 = $150,000 + $150,000
b. 280,000 = 110,000 + 170,000
c. 210,000 = 50,000 + 160,000
(5 min.) S 1-2
Ethics is a factor that should be included in every business and
accounting decision, beyond the potential economic and legal
consequences. Ideally, for each decision, honesty and truthfulness
should prevail, considering the rights of others. The decision guidelines
at the end of the chapter spell out the considerations we should take
when making decisions. Simply, we might ask ourselves three
questions: (1) is the action legal? (2) Who will be affected by the
decision? (3) How will the decision make me feel afterward?

Financial Accounting 9/e Solutions Manual1-2
(10 min.) S 1-3
a. Corporation, Limited-liability partnership (LLP) and Limited-liability
company (LLC). If any of these businesses fails and cannot pay its
liabilities, creditors cannot force the owners to pay the business’s
debts from the owners’ personal assets.
b. Proprietorship. There is a single owner of the business, so the owner
is answerable to no other owner.
c. Partnership. If the partnership fails and cannot pay its liabilities,
creditors can force the partners to pay the business’s debts from their
personal assets. A partnership affords more protection for creditors
than a proprietorship because there are two or more owners to share
this liability.
(5 min.) S 1-4
1. The entity assumption applies.
2. Application of the entity assumption will separate Newberry’s
personal assets from the assets of Healthy Food Brands. This will
help Newberry, investors, and lenders know how much assets,
liabilities and equity the business has, and this knowledge will help all
parties evaluate the business realistically.
(5-10 min.) S 1-5
a. Historical cost principle
b. Stable-monetary-unit assumption
c. Entity assumption
d. Historical cost principle

Chapter 1 The Financial Statements 1-3
(5 min.) S 1-6
1. Owners’ Equity = Assets − Liabilities
This way of determining the amount of owners’ equity applies to any
company, your household, or a single IHOP restaurant.
2. Liabilities = Assets − Owners’ Equity
(5 min.) S 1-7
1. Assets are the economic resources of a business that are expected to
produce a benefit in the future.
Owners’ equity represents the insider claims of a business, the
owners’ interest in its assets.
Assets and owners’ equity differ in that assets are resources and
owners’ equity is a claim to assets. Assets must be at least as large
as owners’ equity, so equity can be smaller than assets.
2. Both liabilities and owners’ equity are claims to assets.
Liabilities are the outsider claims to the assets of a business; they are
obligations to pay creditors.
Owners’ equity represents the insider claims to the assets of the
business; they are the owners’ interest in its assets.
(5-10 min.) S 1-8
a. Accounts payable L g. Accounts receivable A
b. Common stock S h. Long-term debt L
c. Supplies A i. Merchandise inventory A
d. Retained earnings S j. Notes payable L
e. Land A k. Accrued expenses payable L
f. Prepaid expenses A l. Equipment A

Financial Accounting 9/e Solutions Manual1-4
(5 min.) S 1-9
1. Revenues and expenses
2. Net income (or net loss)
(5 min.) S 1-10
Split Second Wireless, Inc.
Income Statement
Year Ended December 31, 2012
(millions)
Revenues…………………………………….. $ 97
Expenses…………………………………….. 26
Net income…………………………………... $ 71
(5 min.) S 1-11
CellPhone Corp.
Statement of Retained Earnings
Year Ended December 31, 2012
(millions)
Retained earnings, December 31, 2011……. $290
Add: Net income ($360 − $250)…….………. 110
Less: Dividends………………………............. (44)
Retained earnings, December 31, 2012……. $356

Chapter 1 The Financial Statements 1-5
(10 min.) S 1-12
Landy Products
Balance Sheet
December 31, 2012
ASSETS
Current assets:
Cash ..................................................................... $ 12,000
Receivables .......................................................... 8,000
Inventory .............................................................. 44,000
Total current assets ............................................. 64,000
Equipment………………………………………………. 88,000
Total assets…………………………………………….. $152,000
LIABILITIES
Current liabilities:
Accounts payable…………………………………… $ 13,000
Total current liabilities……………………………... 13,000
Long-term liabilities:
Long-term notes payable………………………….. 80,000
Total liabilities………………………………………... .. 93,000
STOCKHOLDERS’ EQUITY
Common stock…………………………………………. 15,300
Retained earnings……………………………………… 43,700*
Total stockholders’ equity………………………… 59,000
Total liabilities and stockholders’ equity………….. $152,000
_____
*Computation of retained earnings:
Total assets ($152,000) − current liabilities ($13,000) − long-term notes
payable ($80,000) − common stock ($15,300) = $43,700

Loading page 6...

Financial Accounting 9/e Solutions Manual1-6
(10-15 min.) S 1-13
Yidas Medical, Inc.
Statement of Cash Flows
Year Ended December 31, 2012
Cash flows from operating activities:
Net income………………………………………..... $ 80,000
Adjustments to reconcile net income to net cash
provided by operating activities…………. (11,000)
Net cash provided by operating activities 69,000
Cash flows from investing activities:
Purchases of equipment………………. $(32,000)
Net cash used for investing activities …. (32,000)
Cash flows from financing activities:
Payment of dividends………………… $(25,000)
Net cash used for financing activities… .. (25,000)
Net increase in cash………………… .... …………… 12,000
Cash balance, December 31, 2011. .. ……………… 30,000
Cash balance, December 31, 2012………………… $ 42,000

Loading page 7...

Chapter 1 The Financial Statements 1-7
(10 min.) S 1-14
a. Dividends SRE, SCF
b. Salary expense IS
c. Inventory BS
d. Sales revenue IS
e. Retained earnings SRE, BS
f. Net cash provided by operating activities SCF
g. Net income IS, SRE, SCF
h. Cash BS, SCF
i. Net cash used for financing activities SCF
j. Accounts payable BS
k. Common stock BS
l. Interest revenue IS
m. Long-term debt BS
n. Increase or decrease in cash SCF
(15-20 min.) S 1-15
a. Paying large dividends will cause retained earnings to be low.
b. Heavy investing activity and paying off debts can result in a cash
shortage even if net income has been high.
c. The single best source of cash for a business is collections from
customers. This source of cash is best because it results from the core
operations of the business.
d. Borrowing, issuing stock, and selling land, buildings, and equipment
can bring in cash even when the company has experienced losses.
Reducing accounts receivable and inventory can also increase cash
flow.

Loading page 8...

Financial Accounting 9/e Solutions Manual1-8
Exercises
(10-15 min.) E 1-16A
Amounts in billions; (computed amounts in boxes)
Assets = Liabilities + Owners’ Equity
Perfect Cleaners $33 $ 15 $18
Ernie’s Bank 35 13 22
Hudson Gift and
Cards
27 17 10
Ernie’s Bank appears to have the strongest financial position because
its liabilities make up the smallest percentage of company assets
($13/$35 = .37). Stated differently, Ernie’s Bank’s equity is the highest
percentage of company assets ($22/$35 = .63).
(10-15 min.) E 1-17A
Req. 1
(Amounts in millions)
Assets = Liabilities +
Stockholders’
Equity
$280 $170
430 300
170
Total $880 = $470 + $410
Req. 2 Resources
to work with
Req. 3 Amount
owed to
creditors
Req. 4 Actually
owned by company
stockholders

Loading page 9...

Chapter 1 The Financial Statements 1-9
(10-20 min.) E 1-18A
Situation
1 2 3
Millions
Total stockholders’ equity,
January 31, 2012 ($28 − $5)…………… $23 $23 $23
Add: Issuances of stock……………………… 1 -0- 33
Net income……………………………….. 7 12* -0-
Less:Dividends…………………………........... -0- (4) (8)
Net loss…………………………………… -0-* -0- (17)*
Total stockholders’ equity,
January 31, 2013 ($48 − $17)………….. $31 $31 $31
_____
*Must solve for these amounts.
(10-15 min.) E 1-19A
1. Diamond, Inc.
Assets = Liabilities +
Stockholders’
Equity
Beginning amount $130,000 = $95,000 + $35,000
Multiplier for increase × 1.05
Ending amount $136,500
2. NorthWest Airlines, Ltd.
Assets − Liabilities =
Stockholders’
Equity
Beginning amount $100,000 −

Loading page 10...

Financial Accounting 9/e Solutions Manual1-10
(10-15 min.) E 1-20A
a. Balance sheet
b. Balance sheet
c. Statement of retained earnings, Statement of cash flows
d. Income statement
e. Balance sheet, Statement of retained earnings
f. Balance sheet
g. Balance sheet
h. Income statement
i. Statement of cash flows
j. Income statement
k. Statement of cash flows
l. Balance sheet, Statement of cash flows
m. Balance sheet
n. Income statement, Statement of retained earnings, Statement of
cash flows

Loading page 11...

Chapter 1 The Financial Statements 1-11
(10-20 min.) E 1-21A
Mary Burke Banking Company
Balance Sheet (Amounts in millions)
August 31, 2012
ASSETS LIABILITIES
Cash $ 2.8 Current liabilities $155.4
Receivables 0.3 Long-term liabilities 2.6
Investment assets 169.3 Total liabilities 158.0
Property and
equipment, net 1.6 STOCKHOLDERS’
EQUITYOther assets 14.2
Common stock 14.2
Retained earnings 16.0*
Total stockholders’ equity 30.2
Total liabilities and
Total assets $188.2 stockholders’ equity $188.2
_____
*Computation of retained earnings:
Total assets ($188.2) − Total liabilities ($158.0) − Common stock
($14.2) = $16.0

Loading page 12...

Financial Accounting 9/e Solutions Manual1-12
(15-25 min.) E 1-22A
Req. 1
Mary Burke Banking Company
Income Statement (Amounts in millions)
Year Ended August 31, 2012
Total revenue………………………………………… $31.4
Expenses:
Salary and other employee expenses.……….. $ 17.4
Other expenses…………………………………... 6.6
Interest expense..………………………………… 0.1
Total expenses……………………………………. 24.1
Net income……………………………………………. $ 7.3
Req. 2
The statement of retained earnings helps to compute dividends, as
follows:
Mary Burke Banking Company
Statement of Retained Earnings
Year Ended August 3, 2012
(Amounts in millions)
Retained earnings, beginning of year…………………….. $9.3
Add: Net income for the year (Req. 1)…………………….. 7.3
16.6
Less: Dividends…………………………………………......... 0.6
Retained earnings, end of year (from Exercise 1-21A)…. $16.0

Loading page 13...

Chapter 1 The Financial Statements 1-13
(15-20 min.) E 1-23A
Glass, Inc.
Statement of Cash Flows
Year Ended December 31, 2012
Cash flows from operating activities:
Net income………………… ………………………… $430,000
Adjustments to reconcile net income to net
cash provided by operating activities…… ....... 75,000
Net cash provided by operating activities……….. $505,000
Cash flows from investing activities:
Net cash used for investing activities…………… .. (420,000)
Cash flows from financing activities:
Net cash provided by financing activities…… ....... 11,000
Net increase in cash………………………… ...................... 96,000
Beginning cash balance……………………....................... 83,000
Ending cash balance……………………………… .............. $179,000
Items given that do not appear on the statement of cash flows:
Total assets − Balance sheet
Total liabilities − Balance sheet

Loading page 14...

Financial Accounting 9/e Solutions Manual1-14
(15-20 min.) E 1-24A
Dogan Copy Center, Inc.
Income Statement
For the Month Ended July 31, 2012
Revenue:
Service revenue………… ................ $540,200
Expenses:
Salary expense……………………… $160,000
Utilities expense….…………………. 10,500
Rent expense………………………… 2,700
Total expenses………………………. 173,200
Net income………………………………….. $ 367,000
Dogan Copy Center, Inc.
Statement of Retained Earnings
For the Month Ended July 31, 2012
Retained earnings, July 1, 2012……………………. $ -0-
Add: Net income …………………….………………. 367,000
367,000
Less: Dividends………………………….…………… (4,700)
Retained earnings, July 31, 2012…….……………. $362,300

Loading page 15...

Chapter 1 The Financial Statements 1-15
(15-20 min.) E 1-25A
Dogan Copy Center, Inc.
Balance Sheet
July 31, 2012
Assets Liabilities
Cash…………….. $ 10,300 Accounts payable…………… $ 17,400
Office supplies… 14,700
Equipment……… 460,000 Stockholders’ Equity
Common stock………………. 105,300
Retained earnings…………… 362,300
Total stockholders’ equity…. 467,600
Total assets……. $485,000
Total liabilities and
stockholders’ equity……... $485,000

Loading page 16...

Financial Accounting 9/e Solutions Manual1-16
(15-20 min.) E 1-26A
Dogan Copy Center, Inc.
Statement of Cash Flows
For the Month Ended July 31, 2012
Cash flows from operating activities:
Net income…………………………………………… $ 367,000
Adjustments to reconcile net income to net
cash provided by operations……………………
2,700
Net cash provided by operating activities 369,700
Cash flows from investing activities:
Acquisition of equipment ................................ $(460,000)
Net cash used for investing activities ..... (460,000)
Cash flows from financing activities:
Issuance (sale) of stock to owners……… ...... $ 105,300
Payment of dividends……………………… ...... (4,700)
Net cash provided by financing activities 100,600
Net increase in cash……………………… ............. 10,300
Cash balance, July 1, 2012…………………… ...... 0

Loading page 17...

Chapter 1 The Financial Statements 1-17
(10-15 min.) E 1-27A
TO: Owner of Dogan Copy Center, Inc.
FROM: Student Name
SUBJECT: Opinion of net income, dividends, financial position, and
cash flows
Your first month of operations was successful. Revenues totaled
$540,200 and net income was $367,000. These operating results look
very strong.
The company was able to pay a $4,700 dividend, and this should make
you happy with so quick a return on your investment. Your financial
position looks secure, with assets of $485,000 and liabilities of only
$17,400. Your stockholders’ equity is $467,600.
Operating activities generated cash of $369,700, which is respectable.
You ended the month with cash of $10,300. Based on the above facts, I
believe you should stay in business.
Student responses may vary.
(10-15 min.) E 1-28B
Amounts in billions; (computed amounts in boxes)
Assets = Liabilities + Owners’ Equity
Fresh Produce $37 $ 20 $17
Margie’s Bank 30 $18 12
Flowers and Gifts 21 6

Loading page 18...

Loading page 19...

Loading page 20...

Loading page 21...

Loading page 22...

Financial Accounting 9/e Solutions Manual1-22
(15-20 min.) E 1-35B
Groovy, Inc.
Statement of Cash Flows
Year Ended December 31, 2012
Cash flows from operating activities:
Net income ........................................................... $360,000
Adjustments to reconcile net income to net
cash provided by operating activities............ 60,000
Net cash provided by operating activities .............. $420,000

Loading page 23...

Loading page 24...

Loading page 25...

Chapter 1 The Financial Statements 1-25
(10-15 min.) E 1-39B
TO: Owner of CROYDEN Copy Center, Inc.
FROM: Student Name
SUBJECT: Opinion of net income, dividends, financial position,
and cash flows
Your first month of operations was successful. Revenues totaled
$544,600 and net income was $374,600. These operating results look
very strong.
The company was able to pay a $4,800 dividend, and this should make
you happy with so quick a return on your investment. Your financial
position looks secure, with assets of $435,900 and liabilities of only
$17,300. Your stockholders’ equity is $418,600.
Operating activities generated cash of $377,100, which is respectable.
You ended the month with cash of $11,100. Based on the above facts, I
believe you should stay in business.
Student responses may vary.

Loading page 26...

Loading page 27...

Loading page 28...

Financial Accounting 9/e Solutions Manual1-28
(continued) P 1-55A
d. Entity assumption. Each subdivision of the company is a separate
entity, and the company as a whole constitutes an entity for
accounting purposes.
e. Stable-monetary-unit assumption. Accounting in the United States
ignores the effect of inflation.
f. Continuity (going-concern) assumption. There is no evidence that A
Division of Harrold Corporation is going out of business, so it seems
safe to assume that the division is a going concern.

Loading page 29...

Loading page 30...

Loading page 31...

28 more pages available. Scroll down to load them.

Preview Mode

100%

Study Now!

XY-Copilot AI

Unlimited Access

Secure Payment

Instant Access

24/7 Support

Document Chat

Document Details

Subject

Accounting

Financial Accounting, 9th Edition Solution Manual

Study Now!

Document Details

Related Documents

Accounting

Master Managerial Accounting Techniques

Controlling and Reporting of Real Assets

Sarbanes Oxley Act, GAAP and IFRS

Team A Week 5 Problems

Accounting Audit Final Exam MCQs 2015

IFRS or US GAAP Which is the Best Reporting Standard

Government wide statements and Fund statements

Analysis of Relevant Costs in Managerial Decision-Making

Midterm Exam on Governmental and Not-for-Profit Accounting

Company

Explore

Study Tools