Check Figures PLL3e Final

List of Check Figures and Solution Hints
to accompany
Phillips/ Libby/Libby: Fundamentals of
Financial Accounting, 3e
Chapter 1
Mini-Exercises
M1-1
(5) IFRS = International Financial
Reporting Standards
M1-2
(2) F, (8) G
M1-3
(2) I, (9) E
M1-4
(7) L
M1-5
(3) A
M1-6
(8) SE
M1-7
(10) A
M1-8
(3) SE
M1-9
(4) A
M1-10
(7) I/S, SRE
M1-11
(4) (O)
M1-12
(1) (I)
M1-13
Retained earnings, 12/31/10 =
$46,000
M1-14
Net income = $645, Total assets
= $16,772
Exercises
E1-1
(c) $3,500 + $1,300 $500 =
$4,300
E1-2
(d) $3,200 + $15,700 $7,200 $5,300 = $6,400
E1-3
(1) Total liabilities = $314,597,
(2) stockholders
E1-4
(1) Total assets = $122,400,
(4) 14,550
E1-5
(f) Dividends, SE
E1-6
(1) Total expenses = $662,000
E1-7
Total expenses = $130,825
E1-8
(A) Net income = $18,000
(C) Stockholders' equity =
$78,000
E1-9
(1) Net income = $40,500,
(2) Total assets = $96,800
E1-10
(1) $18,000
E1-11
(3) F
E1-12
(4) (O)
Coached Problems
CP1-1
(1) Net income = $21,950,
CP1-2
(3) Stockholders
CP1-3
(1) Net income = $58,806,
(3) Total assets = $1,595,925
Group Problems
PA1-1
(1) Net income = $23,450,
Fundamentals of Financial Accounting, 3/e
PA1-2
PA1-3
PB1-1
PB1-2
PB1-3

(1) Profitable since NI = $23,450
(1) Net income = $100, (3) Total
assets = $2,259, (4) Cash used in
financing activities = ($4)
(1) Net income = $25,150,
(4) Cash increase of $13,900
(1) Net income = $81,282,
(3) Total assets = $1,039,731,
(4) Cash used in financing
activities = ($11,681)
Skill Development Cases

S1-1
(4) Cash = $519 (million)
S1-2
(2) Lowes revenue of $48,230
(million) was lower than the
$71,288 (million) reported by
Home Depot
S1-3
Solutions vary depending on
company and/or accounting
period selected
S1-4
(1) Separate entity concept
S1-5
(1) An independent audit is an
absolute must
S1-6
(1) Based on historical cost,
Ashleys net worth = $1,550.
Based on market value, Ashleys
net worth = $2,150
S1-7
Net income = $51, Total assets =
$3,754
Continuing Case
CC1
(1) Net income = $2,400,
Chapter 2
Mini-Exercises
M2-1
Stockholders equity: debits
decrease, credits increase
M2-2
Assets: increased with debits,
decreased with credits
M2-3
(2) C
M2-4
(4) NCA, (11) SE
M2-5
(2) CL, credit, (7) SE credit
M2-6
(1) CL, credit, (6) NCA, debit
M2-7
(2) No, (6) Yes
M2-8
(1)Yes, (3) No, lacks exchange
M2-9
(b) Cash (+A) +$4,630,
Contributed Capital (+SE) +
$4,630
M2-10
(b) dr Cash (+A) $4,630 cr
Contributed Capital (+SE) $4,630
M2-11
(a) Debit (left side) Cash
2010, The McGraw-Hill Companies, Inc.
Page 1
M2-12
M2-13
M2-14
M2-15
M2-16
M2-17
M2-18
M2-19
M2-20
M2-21
account for $3,940, Credit (right

side) Notes Payable account for
$3,940
Ending balance in Cash account
= $8,008 debit, Total current
assets = $9,080
(a) dr Cash (+A) $55,000 cr
Contributed Capital (+SE)
$55,000, (e) No transaction
(d) dr Accounts Payable (-L)
$1,500 cr Cash (-A) $1,500
(b) No transaction, (e) dr
Equipment (+A) $2,200 cr Cash
(-A) $1,000 cr Notes Payable
(+L) $1,200
(c) dr Cash (+A) $400 cr
Accounts Receivable (-A) $400
Total current assets = $3,600,
Total assets = $50,500, Total
current liabilities = $2,500
(1) Total assets = $2,076,280,
Total stockholders equity =
$44,881,000
2.0, yes
(a) Decrease, 1.87 vs. 2.0,
(c) Increase, 2.13 vs. 2.0
(a) Decrease, 1.96 vs. 2.0,
(c) Increase, 2.20 vs. 2.0
Exercises
E2-1
(1) E, (10) D
E2-2
(1) (b) Cash (-A), Equipment
(+A), (2) Equipment = $21,000,
Land = $50,000, Cost principle
E2-3
(4) CA debit, (10) CL credit
E2-4
(a) Cash (+A) $10,000,
$10,000
E2-5
(1) (c) No effect
E2-6
(b) dr Cash (+A) $7,000 cr Notes
Payable (+L) $7,000
E2-7
(1) (a) dr Equipment (+A) $216.3
cr Cash (-A) $211.3 cr Notes
Payable (+L) $5.0
E2-8
(1) Ending cash balance =
$57,000 debit, (2) Liabilities =
$9,000
E2-9
(1) (6) Purchased land by signing
note, (2) Total assets = $77,000
E2-10
(1) (3) Borrowed money by
signing note, (2) Total assets =
$76,000
E2-11
(a) dr Cash (+A) $60,000 cr
$60,000, (c) No transaction
E2-12
E2-13
E2-14
(1) (e) Not a business

transaction, Ending balance of
Equipment = $22,000, (3) Ending
balance of Cash = $36,000, (4)
Total assets = $70,000
(c) Used cash to purchase
supplies costing $1,500
(1) 5.22 at 9/30/08, 6.02 at
12/31/07, (3) 6.87
Coached Problems
CP2-1
(2) Total cash = $28,000, (4) (c)
$120,000 - $80,000 = $40,000,
(5) Liabilities
CP2-2
(1) (b) Cash (+A) $30,000, Notes
Payable (+L) $30,000, (2) (b) dr
Cash (+A) $30,000 cr Notes
Payable (+L) $30,000,
(3) Total Cash = $105,000 debit,
Total Notes Payable = $147,000
credit
CP2-3
(1) (a) Equipment (+A) $21,000,
Cash (-A) $5,000, Notes Payable
(+L) +$16,000, (2) (b) dr Cash
(+A) $20,000 cr Contributed
Capital (+SE) $20,000, (3)
Ending Cash balance = $64,000
debit, (5) Total assets =
$412,000
Group Problems
PA2-1
(1) Ending Cash = $12,000,
Ending Notes Payable =
$149,000, (3) (c) $749,000 $349,000 = $400,000, (4)
Stockholders equity
PA2-2
(1) (e) Supplies (+A ) $30,000,
Accounts Payable (+L) $30,000,
(2)(b) dr Cash (+A) $90,000 cr
Notes Payable (+L) $90,000,
(3) Ending Cash = $234,000
debit, (4) Total assets =
$1,071,000, (5) Stockholders
Equity
PA2-3
(1) (e) No effect, (2) (c) dr
Property, Plant, and Equipment
(+A) $11 cr Cash (-A) $2 cr Longterm Debt (+L) $9, (3) Ending
cash = $79 debit, (4) Event (e) is
not a transaction since it lacks
an exchange, (5) Total assets =
$771
PB2-1
(1) Ending Cash = $87,000,
Ending Notes Payable =
Page 2
PB2-2
PB2-3
$218,000, (3) (b) $1,780,000 +

$218,000 = $1,998,000, (4)
Liabilities
(1) (d) Equipment (+A) $90,000,
Cash (-A) $90,000, (2) (c) dr
Factory Building (+A) $166,000
cr Cash (-A) $66,000 cr Notes
Payable (+L) $100,000, (3)
Ending Cash = $594,000 debit,
(4) Total assets = $2,041,000
(1) (e) no effect, (2) (c) dr
Property, Plant, and Equipment
(+A) $20,700 cr Cash (-A)
$11,200 cr Long-term Debt (+L)
$9,500, (3) Ending Cash =
$259,700 debit, (5) Total assets
= $5,687,200

S2-1
(2) Assets = $41,164,000,000
S2-2
(2) Lowes Current Ratio = 1.2
S2-3
period selected
S2-4
(1) Total Assets = $15,000
S2-5
(3) Conservatism
S2-6
Inclusion of the owners
personal residence as a business
asset
S2-7
Ending Cash = $19,300 debit,
Ending Property and Equipment
= $58,800 debit
Continuing Case
CC2
(1) (b) dr Land (+A) $9,000 cr
Cash (-A) $2,000 cr Notes
Payable (+L) $7,000, (2) Ending
Cash = $59,650 debit, (3) Total
Assets = $87,650, (4) 93.3
Chapter 3
Mini-Exercises
M3-1
Cash income = $6,400, accrual
income = $9,200
M3-2
(b) $250
M3-3
(g) $5,475
M3-4
(b) dr Accounts receivable (+A)
$250, (d) cr Unearned revenue
(+L) $1,500
M3-5
(e) dr Repairs and maintenance
expense (+E, -SE) $1,500
M3-6
(b) Assets +$250, Liabilities = NE,
SE (Service revenue) +$250
M3-7
(e) Assets -$1,500, Liabilities =
NE, SE (Repairs and maintenance
M3-8
M3-9
M3-10
M3-11
M3-12
M3-13
M3-14
M3-15
M3-16
M3-17
M3-18
M3-19
M3-20
M3-21
expense -$1,500
Net income = $2,775
(e) $125
(h) $800
(d) dr Cash (+A) $2,250 cr
Unearned revenue (+L) $2,250
(g) dr Accounts payable (-L)
$1,750 cr Cash (-A) $1,750
(b) dr Cash (+A) $25,000 cr
Contributed capital (+SE) $25,000
(e) dr Accounts receivable (+A)
$180 cr Service revenue (+R, +SE)
$180
(e) dr Supplies (+A) $2,500 cr
Donations revenue (+R, +SE)
$2,500
(b) dr Accounts receivable (+A)
$2,000 cr Repair/service revenue
(+R, +SE) $2,000
(a) Assets +$15,000, Liabilities =
NE, SE (Lesson revenue) +$15,000
(h) Assets = NE, Liabilities +$800,
SE (Utilities expense) - $800
Net income = $9,575
Net income = $42,120, Total
assets = $151,850
Net income = $4,387
Exercises
E3-1
(5) B
E3-2
(d) $100,000 (=1,000 installations
x $100 per installation)
E3-3
(a) No revenue; stock issuance is
a financing activity
E3-4
(c) $1,000
E3-5
(a) No expense in January when
paid. Expense (and liability)
recorded in December. In
January, decrease liability,
decrease cash
E3-6
(b) Assets = +$5,000, Liabilities =
+$5,000, SE = NE
E3-7
(d) Assets increase and decrease
$18,600. Liabilities = NE, SE = NE
E3-8
(a) dr Cash (+A), $80,000 cr Notes
payable (+L) $80,000
E3-9
(b) dr Equipment (+A) $20,000 cr
Cash (-A) $20,000
E3-10
2/2 dr Fuel expense (+E, -SE)
$450 cr Accounts payable (+L)
$450
E3-11
(2) (c) dr Cash (+A) $14,500 cr
Piano rebuilding revenue (+R,
+SE) $14,500
(3) Ending Cash = $14,800
Page 3
E3-12
E3-13
E3-14
E3-15
E3-16
E3-17
E3-18
E3-19
E3-20
E3-21
Total debits = $89,150, Total

credits = $89,150
(1)(c) Purchased $1,000 of
supplies, paying $200 cash and
putting the balance on account
(2) Total debits = $111,800
(2) 12/31 Balance of unearned
revenue = $253
(f) Assets = NE, Liabilities
(Accounts payable) +$1,250, SE
(+Utilities expense) -$1,250
(e) dr Supplies (+A) +$1,000 cr
Accounts payable (+L) $1,000
debit
Total debits =$81,950
(1) (g) Paid $3,000 of the
accounts payable balance, (2)
Net income = $2,540, Total assets
= $15,800
(f) Utilities expense E + Debit,
Utilities (or Accounts) payable L +
Credit
(1) Assets (Cash) +$50,000, Assets
(Accounts receivable) -$50,000,
Liabilities = NE, SE = NE,
(2)(c) dr Equipment (+A) $33,500
cr cash (-A) $10,000 cr Notes
payable (+L) $23,500,
(3) Ending balance of Cash
account = $1,286,500 debit,
(4) Total debits = $4,440,050,
(5) Net income = $(143,350),
(7) Total assets = $4,046,700
Coached Problems
CP3-1
(h) Debit: 13, Credit: 3
CP3-2
(c) 5/1 dr Prepaid Insurance (+A)
$2,400 cr Cash (-A) $2,400
CP3-3
(1) and (2) Ending Cash balance =
$13,910 debit
(3) Total debits = $27,800, Total
credits = $27,800
Group Problems
PA3-1
(d) Debit: 11, Credit: 5
PA3-2
4/8 dr Advertising expense (+E,
-SE) $400 cr cash (-A) $400
PA3-3
$134,560
credits = $303,670
PB3-1
(d) Debit: 3, Credit: 11
PB3-2
(c) dr Equipment (+A) $82,000 cr
Long-term notes payable (+L)
PB3-3
$82,000
$23,500
credits = $68,100

3-1
(1) Revenues decreased by
$6,061,000,000 which is a
decrease of 7.8% ((-6,061 /
77,349) x 100) from the previous
year
3-2
(2) Cost of sales =
$31,729,000,000, which is an
increase over the previous year
of $173,000,000, or 0.5% ((173 /
31,556) x 100)
S3-3
period selected
S3-4
(3) Current year net income will
be higher than it should be since
some expenses were avoided by
recording them as assets. The
following years net income will
be lower when those assets are
expensed
S3-5
You should not comply with Mr.
Lynchs request since to act in
ways that benefit management to
the detriment of stockholders is
inappropriate and could be
considered fraud
S3-6
(1)(d) Purchased land for
$18,000; $14,000 was paid in
cash and a note was signed for
the remainder
credits = $136,000
S3-7
debit, Total debits on unadjusted
trial balance = $11,350
Continuing Case
CC3
May 4, no transaction,
May 19, dr cash (+A) $1,900 cr
Unearned revenue (+L) $1,900
Chapter 4
Mini-Exercises
M4-1
(4) B, F
M4-2
(5) B
M4-3
(3) A
M4-4
(2) dr Interest receivable (+A)
$250 cr Interest revenue (+R +SE)
Page 4
M4-5
M4-6
M4-7
M4-8
M4-9
M4-10
M4-11
M4-12
M4-13
M4-14
M4-15
M4-16
M4-17
M4-18
M4-19
M4-20
$250
(a) Assets = NE, Liabilities
(Unearned rent revenue) -$400,
SE (Rent revenue) +$400
(b) dr Insurance expense(+E, -SE)
$100 cr Prepaid insurance (-A)
$100 ($100 = 1/24 x $2,400)
(c) Assets (Interest receivable) +
$100, Liabilities = NE, SE(Interest
revenue) +$100
(c) dr Interest receivable (+A)
$100 cr Interest revenue (+R +SE)
$100 ($100 = 1/12 x $1,200)
(b) Sept 30 dr Cash (+A) $6,000 cr
Unearned revenue (+L) $6,000,
Oct 31 AJE dr Unearned revenue
(-L) $3,000 cr Admissions revenue
(+R +SE) $3,000
(a) Dec 30 dr Cash (+A) $12,000
cr Unearned revenue (+L)
$12,000, Jan 31 AJE dr Unearned
revenue (-L) $1,000 cr
Subscriptions revenue (+R +SE)
$1,000
Total debits = $6,200, Total
credits = $6,200
Net income = $4,910
Ending Retained earnings balance
= $5,610
After closing, all revenue,
expense, and dividends declared
account balances should be zero.
Retained earnings should have
been credited for $4,910 which
reflects the net income in the
first closing entry. In the second
closing entry, Retained earnings
should have been debited for
$300 which reflects the dividends
declared
Ending balance in the Supplies
account after adjustment =
$1,300 debit
Ending balance in the
Accumulated depreciation
account after adjustment =
$6,000 credit
Ending balance in the Prepaid
insurance account after
adjustment = $3,600 debit
Ending balance in the Unearned
revenue account after
adjustment = $2,500 credit
Ending balance in the Wages
M4-21
M4-22
M4-23
M4-24
expense account after

adjustment = $21,200 debit
Ending balance in the Interest
payable account after adjustment
= $500 credit
Ending balance in the Dividends
declared account after
adjustment = $200 debit
Total debits = $77,600
(e) CJE: 12/31/10 dr Retained
earnings (-SE) $10,000 cr
Insurance expense (-E) $10,000
Exercises
E4-1
(1) Total debits = $3,288,990
E4-2
(2) Five balance sheet accounts
may need adjustment. One
example is Accounts receivable
which corresponds to Sales
revenue on the income statement
E4-3
(c) Sept 1 No journal entry,
Sept 30 dr Accounts receivable
(+A) $2,000 cr Rent revenue (+R
+SE) $2,000
E4-4
(2) Both transactions are accruals
E4-5
(b) 12/31/09 dr Interest
receivable (+A) $3,000 cr Interest
revenue (+R +SE) $3,000
E4-6
(1) Insurance expense on the
income statement = $3,600
((12/24) x $7,200)
E4-7
(b) dr Shipping supplies expense
(+E SE) $5,000 cr Shipping
supplies (-A) $5,000
E4-8
(a) Office supplies $100 on the
balance sheet, Supplies expense
$750 on the income statement
E4-9
(f) Assets (Accounts receivable) +
$750, Liabilities = NE, SE (Repair
shop revenue (+R +SE) +$750
E4-10
(b) Debit = C $600, Credit = Q
$600
E4-11
(1) Income tax payable is
increased with a credit for
accrual of additional income
taxes payable and decreased with
a debit for cash paid on accrued
income taxes payable
E4-12
Correct amounts: net income =
$4,620, Total assets = $82,000,
Total liabilities = $57,380
E4-13
(1) (c) dr Depreciation expense
(+E SE) $23,000 cr Accumulated
depreciation (+xA A) $23,000
E4-14
(2) (d) dr Income tax expense (+E
Page 5
E4-15
E4-16
E4-17
E4-18
SE) $800 cr Income tax payable

(+L) $800
(3) Total debits = $89,700
(1) (b) dr Depreciation expense
(+E SE) $4 cr Accumulated
depreciation (+xA A) $4
(2) Total debits = $189
Net income = $19, Ending
Retained earnings = $23, Total
assets = $124
The closing entry should close
revenue and expense account
balances to Retained earnings
(Retained earnings will get
credited for $19)
(f) (1) Billed customers for
advertising services, (2) Assets
(Accounts receivable) +$10,000,
Liabilities = NE, SE (Advertising
revenue) + $10,000
Coached Problems
CP4-1
(1) Retained earnings = $80,226,
Total debits = $540,627,
(2) Debit revenue accounts,
credit expense accounts, credit
Retained Earnings for $21,709,
(3) Total credits = $228,938
CP4-2
(1)(g) Assets = NE, Liabilities
(Property tax payable) = +$400,
SE (Property tax expense) = $400, (2) (b) dr Unearned rent
revenue (-L) $3,200 cr Rent
revenue (+R +SE) $3,200
CP4-3
(g) Assets = NE, Liabilities
(Property tax payable) +$400, SE
(Property tax expense) $-400
CP4-4
(1) Net income = $13,000, (3)
Interest payable +100 (interest
owed on note payable), (4) dr
Interest expense (+E SE) $100 cr
Interest payable (+L) $100, (5)
Net income = $10,710
CP4-5
(1) Cash ending balance = $43
debit, (2)(j) No entry required as
no revenue was earned in 2009,
(3) Total debits = $279, (4) (p) dr
Income tax expense (+E SE) $8
cr Income tax payable (+L) $8, (5)
Total debits = $306, (6) Net
income = $28, Ending retained
earnings = $19, Total assets =
$145, (7)(1) Credit Retained
earnings (+SE) $28, (8) Total
debits = $157, (9) primarily by
stockholders
Group Problems
PA4-1
(1) Total debits = $9,779,
(2) debit revenue accounts,
credit expense accounts, credit
Retained earnings $494, (3) Total
debits = $3,812
PA4-2
(1) (b) Assets (Supplies) - $700,
Liabilities = NE, SE (Supplies
expense) = $-700, (2)(b) dr
Supplies expense (+E SE) $700 cr
Supplies (-A) $700
PA4-3
(f) Assets = -$2,750, Liabilities =
NE, SE (Depreciation expense) = $2,750, (h) Assets = NE,
Liabilities = +$9,435, SE (Income
tax expense = -$9,435 ($31,450
x .30)
PA4-4
(1) Net income = $9,700, (2)
Wages payable on the balance
sheet and Wages expense on the
income statement, (3) Credit
Wages payable for $150, (4) (c)
dr Wages expense (+E SE) $150
cr Wages payable (+L) $150, (5)
Net income = $2,800
PA4-5
(1)Ending Cash balance = $26
debit, (2) (b) dr Equipment (+A)
$25 cr Cash (-A) $25, (3) Total
debits = $112, (4) (n) dr Interest
expense (+E SE) $1 cr Interest
payable (+L) $1, (5) Total debits
= $124, (6) Net income = $6,
Ending Retained earnings = $6,
Total assets = $66, (7) (1) debit
revenue account, credit expense
accounts, credit Retained
Earnings $6, (8)Total debits =
$71, (9) creditors (liabilities)
PB4-1
(1) Total debits = $5,476,
(2) debit revenue account, credit
expense accounts, credit
Retained earnings $85, (3) Total
debits = $2,822
PB4-2
(1) (a) Assets = +$2,000,
Liabilities = NE, SE (Service
revenue) +$2,000, (2) (a) dr
Accounts receivable (+A) $2,000
cr Service revenue (+R +SE)
$2,000
PB4-3
(c) Assets = NE, Liabilities = +900,
SE (Wages expense) -$900
PB4-4
(1) Net income = $6,600, (2)
Unearned revenue on the balance
Page 6
PB4-5
sheet should be decreased while

Lesson revenue on the income
statement should be increased,
(3) Note payable = No adjustment
required, (4) (b) dr Unearned
revenue (-L) $500 cr Lesson
revenue (+R +SE) $500, (5) Net
income = $4,760
(1) Ending Cash balance = $28
debit, (2) (f) dr Small tools (+A)
$3 cr Cash (-A) $3, (3) Total
debits = $126, (4) (l) dr Operating
expenses (+E SE) $8 cr Supplies
(-A) $8, (5) Total debits = $136,
(6) Net income = $12, Ending
Retained earnings = $6, Total
assets = $71, (7) (2) dr Retained
Earnings (-SE) $10 cr Dividends
declared (-D) $10, (8) Total
debits = $73, (9) Primarily
financed by creditors (liabilities)

S4-1
(1) $18,000,000
S4-2
(1) Home Depot has
$1,000,000,000 in Advertising
expense while Lowes had
$789,000,000
S4-3
period selected
S4-4
(3) 1999 (Q3) debit Bonus
expense (+E SE) for $7.6 M, 1999
(Q4) credit Bonus expense (-E
+SE) for $7.6 M, 2000 (Q1) debit
Bonus expense (+E, -SE) $7.6M
S4-5
The change in estimated
depreciation expense will
increase net income this year but
since some depreciation will now
extend into next year, net
income will be reduced
S4-6
(1)(b) dr Insurance expense (+E
SE) $2,000 cr Prepaid insurance
(-A) $2,000, (2) Corrected net
income = $10,950, Corrected
assets = $67,800, (3) (a) Decrease
net income by $27,050
S4-7
Total debits = $267,301, Net
income = $11,138, Ending
Retained earnings = $38,709,
Continuing Case
CC4
(1) (a) Deferral, (2) (f) dr Cash
(+A) $90 cr Unearned revenue

(+L) $90, (3) (d) dr Insurance
expense (+E SE) $1,750 cr
Prepaid insurance (-A) $1,750
(7/12 x $3,000)
Chapter 5
Mini-Exercises
M5-1
(3) B
M5-2
(5) B
M5-3
Annual Report = 3
M5-4
Net income = $5,250
M5-5
Ending Retained earnings balance
= $48,000
M5-6
(c) Assets = NE, Liabilities = +
$1,000, SE (Advertising expense)
= -$1,000
M5-7
(b) Debt-to-assets = +,
Turnover = -, Margin = NE
M5-8
(b) Assets = +$4,000, Liabilities =
+$4,000, SE = NE
M5-9
(c) Debt-to-assets = +,
Turnover = +, Margin = -
M5-10
(e) 80 (from 12/31/09 balance
sheet)
M5-11
2010 Contributed capital = $480,
Retained earnings = $180
M5-12
Prior year margin = 9.4%, Current
year margin = 10.0%
M5-13
Prior year Debt-to-assets = 20.0%,
Current year = 16.7%
M5-14
Asset turnover = 0.737
M5-15
(a) Asset turnover = 1.14 for
Columbia and 1.53 for Levi
Strauss
Exercises
E5-1
(5) D
E5-2
(2) F
E5-3
(5) A, F
E5-4
(1) D
E5-5
(8) D
E5-6
(1) Comparability
E5-7
(2) Form 8-K
E5-8
2005 Net profit margin = 7.4%
E5-9
(3) The annual report is issued
after the 10-K
E5-10
(1) 2008 Asset turnover = 2.87,
2008 net profit margin = 3.3%
E5-11
(1) 2008 Asset turnover = 1.98,
2008 net profit margin = 4.5%
(3) 2008 Debt-to-assets = 64.2%
E5-12
(a) Assets = -$10, Liabilities = $10, SE = NE
E5-13
(b) Debt-to-assets = NE, Turnover
Page 7
E5-14
E5-15
E5-16
= NE, Margin = NE
(1) 2010 Net income = 41,000,
2010 Ending Retained earnings =
$86,000, 2010 Total assets =
$400,000, (3) 2010 Debt-to-assets
= 25%, 2010 Asset turnover =
1.03, 2010 Net profit margin =
10%
(1) On the balance sheet, longterm assets are listed before
current assets and stockholders
equity is listed before liabilities
(1) B/S, (6) SSE, (8) I/S
Coached Problems
CP5-1
(a) Assets +$7,208, Liabilities =
NE, SE (Marketing revenue) = +
$7,208
CP5-2
(a) Debt-to-assets = -, Turnover
= CD, Margin = +
CP5-3
(2) Best Buy is more efficient in
using its assets to generate sales
since its asset turnover is higher
than GameStops
CP5-4
equity is listed before liabilities
(3) 2008 profit margin = 7.9%
Group Problems
PA5-1
(a) Assets = -$7, Liabilities = -$7,
SE = NE
PA5-2
(a) Debt-to-assets = -, Turnover
= +, Margin = NE
PA5-3
(1) Dillards relies more on debt
as suggested by its higher debtto-assets ratio
PA5-4
equity is listed before liabilities,
(4) 2010 Asset turnover = 3.83
PB5-1
(d) Assets = +$450, Liabilities =
NE, SE (Admissions revenue) = +
$450
PB5-2
(b) Debt-to-assets = +,
Turnover = +, Margin = NE
PB5-3
(3) McDonalds better controls its
expenses as suggested by its
higher net profit margin
PB5-4
equity is listed before liabilities,
(3) 2010 net profit margin =

10.0%
S5-1
(1) 2/1/09 Debt-to-assets =
56.8%, (2) 2008-09 Asset turnover
= 1.67, (3) 2008-09 Net profit
margin = 3.2%
S5-2
(2) Asset turnover = 1.52
S5-3
period selected
S5-4
(1) 1998 Q3 Debt-to-assets =
59.6%, (2) 1998 Q3 Debt-to-assets
= 60.4%, (6) Auditors brought the
fraud to the attention of the
directors, which was the
appropriate level
S5-5
(1) The debt-to-assets ratio and
the asset turnover ratios would
decrease while the net profit
margin would increase
S5-6
(1) Asset turnover = 1.32
S5-7
(3) Debt-to-assets ratios: Hershey
= 90.4%, Tootsie Roll = 21.8%,
Rocky Mountain = 25.0%
Continuing Case
CC5
(1) (a) Assets = +$320, Liabilities
= +$320, SE = NE, Revenues = NE,
Expenses = NE, Net income = NE
(2) (a) Debt-to-assets = +,
Turnover = -, Margin = NE
Chapter 6
Mini-Exercises
M6-1
(4) RM
M6-2
(3) D
M6-3
(4) Document procedures
M6-4
(5) A
M6-5
(d) Establish responsibility so it
will be possible to trace errors
M6-6
(1) C
M6-7
(a) Segregate duties
warehouse manager could divert
goods
M6-8
(b) - on Company books
M6-9
(b) dr Office expenses (+E SE)
$15 cr Cash (-A) $15
M6-10
Perpetual systems provide more
timely information and can
estimate inventory shrinkage
M6-11
Shrinkage = $3,000
M6-12
FOB Destination; Revenue would
be booked earlier under FOB
Page 8
M6-13
M6-14
M6-15
M6-16
M6-17
M6-18
M6-19
M6-20
Shipping point
Gross profit = $460
At time of collection: dr Cash
(+A) $1,960 dr Sales discounts
(+xR SE) $40 cr Accounts
receivable (-A) $2,000 ($40 =
$2,000 x .02)
(b) dr Cash (+A) $686 dr Sales
discounts (+xR SE) $14 cr
Accounts receivable (-A) $700
($14 = $700 x .02)
Net income = $5,452
Gross profit percentage = 40.0%
Zieharts Gross profit
percentage = 67.4%
2007 Income from Operations =
815,000, 2008 Income from
Operations = 725,000
2007 Gross profit percentage =
46.5%, 2008 Gross profit
percentage = 47.4%
Exercises
E6-1
(1) Segregation of duties to
prevent or detect unauthorized
activities
E6-2
Give receipts to all donors and
have volunteers work in pairs
E6-3
(1) (b) Document procedures,
(3) lack of separation of duties
E6-4
(1) (b) Segregate duties,
document procedures,
(2) (1) Step = Request that
goods or services be ordered,
Documentation = Purchase
requisition, Performed by =
Sales manager
E6-5
(1) Up-to-date cash balance =
$6,370
E6-6
$2,680, (2) Entries needed for
EFT, Service charge, and NSF
check
E6-7
(A) Ending inventory = $500,
Shrinkage = $80
E6-8
Shrinkage = $100
E6-9
Net sales = $228
E6-10
Feb. 28 dr Accounts receivable
(+A) $50 cr Sales revenue (+R
+SE) $50, dr Cost of goods sold
(+E SE) $30 cr Inventory (-A)
$30
E6-11
Net sales = $8,850
E6-12
July 12 dr Cash (+A) $1,000 cr
Sales revenue (+R +SE) $1,000,
E6-13
E6-14
E6-15
E6-16
E6-17
E6-18
E6-19
E6-20
dr Cost of goods sold (+E SE)

$600 cr Inventory (-A) $600
Sales discount = $162
Dec 6 dr Cash (+A) $5,238 dr
Sales discounts (+xR SE) $162 cr
Accounts receivable (-A) $5,400
July 12: Gross profit = +$140
(2) dr Cash (+A) $784 dr Sales
discounts (+xR SE) $16 cr
(A) Net sales = $7,850, Gross
profit = $2,100
(1) Gross profit = $110,000, net
income = $33,200
(2) Gross profit = $485, gross
profit percentage = 39.8%
(1) 2005: % sales discounts and
returns = 6.5%, (2) 2005: Gross
Coached Problems
CP6-1
(1) (a) Strength, (2) (d) entry
should be made after ensuring
the register receipt total equals
the total on the count sheet and
deposit slip
CP6-2
$5,875
CP6-3
(1) Deposit in transit of $5,000,
$20,290
CP6-4
(1) Gross profit = $69,000, (2)
Net income = $22,400
CP6-5
(1) Gross profit = $131,130, (4)
Gross profit will increase by
$3,000 but the gross profit
percentage will decrease to
43.8%
CP6-6
(1) (a) Sales = +$230,000,
Returns & Allowances = NE,
Discounts = NE, Net sales = +
$230,000, CGS = +$175,000,
Gross profit = +$55,000
Group Problems
PA6-1
(1) (a) Weakness: document
procedures, (2) (e) Supplies
should be safeguarded by
locking the rear door, for
example
PA6-2
$17,180, (4) Cash = $17,230
PA6-3
(2) Outstanding checks = $3,650,
$96,070
Page 9
PA6-4
PA6-5
PA6-6
PB6-1
PB6-2
PB6-3
PB6-4
PB6-5
PB6-6
(2) Net income = $35,000, (3)

(1) Net sales $60,340, (3) (d) dr
Cash (+A) $4,900 dr Sales
Discounts (+xR SE) $100 cr
Accounts receivable (-A) $5,000
(1) (b) Sales revenues = NE,
Returns & Allowances = +
$10,000, Discounts = NE, Net
sales = -$10,000, CGS = NE,
Gross profit = -$10,000
(1) (d) Weakness: no
documentation
$37,240, (4) Cash = $37,290
(1) Deposit in transit = $21,000,
Up-to-date cash balance =
$122,930
(1) Net income = $79,000, (3)
(1) Net sales +$501,000, Gross
profit +$275,550, (4) Gross
profit percentage will increase
to 54.1%
(1) (c) Sales revenues = NE,
Returns & Allowances = NE,
Discounts = +$2,440, Net sales =
-$2,440, CGS = NE, Gross profit
= -$2,440

S6-1
(2) 2008-09 Gross profit
percentage = 33.7%, (3)
Purchases = $46,240
S6-2
(2) Lowes current year = 34.2%,
The Home Depots current year
= 33.7%, The Home Depot
appears to have lower mark-ups
S6-3
period selected
S6-4
(3) If periodic system used,
Famous Footwear would not be
able to quantify the amount of
shrinkage
S6-5
(1) Net Sales = $90,000, (2)
Selling Expenses = $40,000
S6-6
(1) (a) $50 x 12 months = $600,
(d) Amount stolen = $4,820
S6-7
(1) Gross profit = $97,500, (2)
Net income = $35,100, (3) Gross
Continuing Case
CC6
(2) Gross profit = $874,
Company earns 45.1 cents of

gross profit per dollar of
merchandise sales
Chapter 7
Mini-Exercises
M7-1
(b) Winston owns the inventory
M7-2
Raw materials = manufacturing
M7-3
Purchases = $4,422 million
M7-4
(b) (2) FIFO
M7-5
(b) Rising costs = LIFO
M7-6
FIFO CGS = $2,300
M7-7
(c) Weighted average CGS =
$209,250
M7-8
(b) Ending inventory = $7,050
M7-9
Total inventory = $4,750
M7-10
Entry should reduce Inventory
by $336M
M7-11
Inventory cost = $22,014
M7-12
(d) Entry should include a credit
to Cash of $21,364
M7-13
(b) Gross profit = $15,000
M7-14
(c) NE
M7-15
Inventory turnover = 3.1 times
M7-16
Total FIFO value less adjustment
to LIFO basis
M7-17
Perpetual FIFO ending inventory
= $175,000
M7-18
Perpetual LIFO CGS = $4,650
M7-19
2010 Gross profit is overstated
by $10,000
M7-20
2009 Gross profit is overstated
by $100,000
Exercises
E7-1
E7-2
E7-3
E7-4
E7-5
E7-6
E7-7
E7-8
E7-9
(3) PC Malls balance sheet

(D) Total available = $900
(B) CGS = $750
Purchases = $9,010
(1) Cost of goods available =
$6,580, (3) Weighted average
CGS = $2,256
(1) Cost of goods available =
20,000 units, (3) LIFO CGS =
$114,000, (4) FIFO operating
income = $69,000
(1) Goods available = $164,500,
(3) FIFO CGS = $105,000, (5)
Operating income Case A =
$9,000, Case B = ($4,000), Case
C = $1,200
(1) FIFO CGS = $152,800,
Weighted average CGS =
$153,340
(1) Ending inventory Case A =

Page 10
E7-10
E7-11
E7-12
E7-13
E7-14
E7-15
E7-16
E7-17
E7-18
E7-19
E7-20
E7-21
E7-22
E7-23
$1,950, Case B = $1,800, Case C

= $1,800, Case D = $1,950
(1) LCM Valuation = $7,400
(2) Write-down = $325
(1) dr Cost of goods sold (+E SE)
$18M cr Inventory (-A) $18M
Cost of inventory = $2,426
Jan. 14 dr Accounts payable (-L)
$1,200 cr Inventory (-A) $24 cr
Cash (-A) $1,176
Cost of inventory $3,058
June 3 dr Inventory (+A) $3,200
cr Accounts payable (+L) $3,200
in 2008, Days to sell = 53.7 days
in 2008
(1) FIFO CGS = $2,050, (2) LIFO
inventory turnover = 4.41
(2) Purchases = $125,600, (3)
LIFO inventory turnover = 13.6
times
Perpetual LIFO Ending inventory
= $4,420
Perpetual FIFO Cost of goods
sold = $96,000
(3) Second quarter Operating
income = $4,600
(a) No year-end adjustment
needed, (b) Cost of goods sold =
$1,875
Coached Problems
CP7-1
(1)(c) Cost of goods sold =
$12,400
CP7-2
(1) Net income = $27,300
CP7-3
(1) (c) -$4,500, (2) entry should
include a credit to Cash for
$220,500
CP7-4
in 2009
CP7-5
(2) Cost of goods sold = $12,900
CP7-6
(1) Corrected 2009 Gross profit
= $25,000 since the increase in
ending inventory in 2008 causes
cost of goods sold to be
understated in 2009
CP7-7
Ending inventory = $12,200
Group Problems
PA7-1
(1)(d) Cost of goods sold =
$19,834
PA7-2
(2) Net income decreased
$5,600
PA7-3
(1) (c) -$10,800, (2) (c) entry
should include a credit to Cash
PA7-4
PA7-5
PA7-6
PA7-7
PB7-1
PB7-2
PB7-3
PB7-4
PB7-5
PB7-6
PB7-7
for $529,200
(1) Inventory turnover = 7.1
times in 2008
Cost of goods sold = $22,930
(1) 2009 Gross profit = $750,000
since the decrease in ending
inventory in 2008 causes cost of
goods sold to be overstated in
2009
Dec 31: dr Inventory (+A)
$15,490 cr Cost of goods sold (-E
+SE) $15,490
(1)(c) Cost of goods sold =
$1,130
(2) Net income decreased by
$9,450
(1) (c) -$2,440, (2) (c) entry
should include a credit to
Inventory for $2,440
(1) Days to Sell = 31.7 in 2008
Cost of goods sold = $950
Q3 Cost of goods sold = $2,625
Ending inventory = $920
Comprehensive Problem
C7-1
(1) Dec 1 Assets (Inventory) =
+ $260, Liabilities (Accounts
payable) = +$260, SE = NE,
(2)AJE a: dr Selling Expenses (+E
SE) $200 cr Accounts Payable
(+L) $200, (3) Ending balance in
Accounts payable = $910 credit,
(4) Net income = $1,841, Total
assets = $13,170, (5) Inventory
turnover = 25.6 times
S7-1
(3) Inventory turnover ratio =
4.2 times per year, Days to sell
measure = 86.9 days
S7-2
(3) Lowes inventory turnover
ratio = 4.0 times per year and
Days to sell measure = 91.3 days
S7-3
period selected
S7-4
Look for seven pieces of
evidence: three related to
management action, three
related to the companys books,
and one related to inventory
levels
S7-5
(1) Cost of goods sold =
$147,500, (3) Gross profit =
$52,500
Page 11
S7-6
S7-7
(2) Ending inventory = $330,000

(1) Total LCM = $6,505, (2) LCM
adjustment = $560
Continuing Case
CC7
(2) CGS = $753, (3) Inventory
turnover ratio = 7.3 times
Chapter 8
Mini-Exercises
M8-1
M8-2
National programs only charge
a modest fee to approve, track,
and collect accounts thereby
reducing the companys costs
and speeding up cash
collections
M8-3
(c) Net accounts receivable =
$745,000
M8-4
Make two entries: one to
reinstate the account (Credit
Allowance for doubtful
accounts for $500) and one
entry to collect the account
(Credit Accounts receivable for
$500)
M8-5
(b) dr Bad debts expense (+E
SE) $14,000 cr Allowance for
Doubtful Accounts (+xA A)
$14,000
M8-6
(b) Assets (Allowance for
doubtful accounts) -$10,000,
Liabilities = NE, SE (Bad debt
expense) = -$10,000
M8-7
Bad debt expense = $1,250
M8-8
Required adjustment = $1,350
credit
M8-9
(a) dr Bad debts expense (+E
Doubtful Accounts (+xA A)
$1,250
M8-10
(a) Interest earned = $5,000
M8-11
June 30 Interest revenue =
$700
M8-12
April 30 Interest revenue =
$160
M8-13
Total current assets = $31,633
M8-14
(a) Turnover ratio = -, Days
to collect = +
M8-15
Factoring fee = $15,000 and
reported as Other expense
M8-16
(a) Accounts receivable =
$800,000, (b) Debit Bad debt
expense for $5,000
Exercises
E8-1
(b) Debit Allowance for
doubtful accounts $1,000
E8-2
(a) Assets (Allowance for
doubtful accounts) = -$9,750,
Liabilities = NE, SE (Bad debt
expense) = -$9,750
E8-3
(3) 2% rate is too low given the
Allowance account began 2009
with a $800 balance but $1,500
was written off during the year
E8-4
(a) dr Allowance for doubtful
accounts (-xA +A) $300 cr
E8-5
(a) Assets (Allowance for
doubtful accounts = +$300,
Accounts receivable = -$300),
Liabilities = NE, SE = NE
E8-6
(2) Desired balance = $145,000
credit
E8-7
(3) Adjustment = $2,610 credit
E8-8
(2) Desired balance in the
Allowance account = $3,850
credit
E8-9
(d) Income from operations =
$500
E8-10
July 1, 2010 entry should have
a credit to Interest revenue of
$3,500
E8-11
Dec. 31 dr Cash (+A) $3,500 cr
Interest receivable (-A) $1,750
cr Interest revenue (+R +SE)
$1,750
E8-12
April 30, 2011 entry should
contain a credit to Interest
revenue of $2,000
E8-13
(2) Receivables turnover ratio =
4.8 times
E8-14
(d) Bad debt expense = $18
E8-15
(b) Net credit sales = NE,
Average net accounts
receivable = -, Receivables
turnover = +
E8-16
(1) Days to collect = 40.1
E8-17
13.1
E8-18
(2) 2010 Net income = $1,000
Coached Problems
CP8-1
(3) Entry should include a
credit to Allowance for
doubtful accounts for
$1,017,050
CP8-2
(3) Net receivables is not
affected when accounts are
Page 12
CP8-3
CP8-4
CP8-5
written off
(2) Dec. 31, 2009 dr Interest
receivable (+A) $1,667 cr
Interest revenue (+R +SE)
$1,667
(1) (j) Desired ending balance
in the Allowance account =
$8,390 credit, thus requiring a
$2,390 credit as part of the
adjusting entry
Hasbro 2008 Receivables
turnover = 6.3 times, Days to
collect = 57.5
Group Problems
PA8-1
(3) dr Bad debt expense (+E
SE) $253 cr Allowance for
doubtful accounts (+xA A) $253
PA8-2
(4) Write-offs = $155
PA8-3
(2) Dec 31, 2009 dr Interest
receivable (+A) $2,000 cr
Interest revenue (+R +SE)
$2,000
PA8-4
(1) (i) Adjustment needed to
the allowance account = $478
credit
PA8-5
(1) Coca-cola 2008 receivable
turnover = 10.0, Days to collect
= 36.5
PB8-1
(4) Debit Allowance for
doubtful accounts $15
PB8-2
(1) Ending balance in the
accounts = $131 credit
PB8-3
(2) May 31, 2011 entry should
have a credit to Interest
receivable of $2,000
PB8-4
(1) Desired ending balance in
accounts = $11,240 credit
PB8-5
(2) Wal-Mart appears quicker
than Target at converting
receivables to cash
C8-1
(2) Estimated uncollectible
accounts = $1,600, (3) Income
from operations = $12,400
S8-1
63.9 times
S8-2
(1) No; since Lowes sold its
receivables to GE Finance in
2005, it did not report any
S8-3
S8-4
S8-5
S8-6
S8-7
receivables
period selected
(3) Net accounts receivable =
$700,000
(3) Net income = $13,110
(c) Receivables turnover ratio =
7.8 times
(2) dr Bad debt expense (+E
doubtful accounts (+xA A)
$10,060
Continuing Case
CC8
(2) Desired balance in the
allowance account = $318
credit, (4) Receivable turnover
= 9.8 times
Chapter 9
Mini-Exercises
M9-1
(9) E, D
M9-2
(6) E
M9-3
(7) E
M9-4
Book value at the end of the
second year = $120,000
M9-5
M9-6
M9-7
(b) Year 1 depreciation =
$13,200
M9-8
Impairment losses of $2.5
billion are significant since they
represent 12.5% of GMs 2008
operating loss
M9-9
(a) dr Accumulated
depreciation (-xA, +A) $4,800
cr Computers (-A) $4,800
M9-10
Gain on sale of store fixtures =
$600
M9-11
Expense in the current year
M9-12
Market value of Taste-Ts
assets less liabilities on the
date of the offer = $5,600,000
M9-13
Fixed asset turnover ratio = 0.5
M9-14
Entry should contain a debit to
Timber inventory of $60,000
M9-15
Book value at end of fifth year
= $29,000, New depreciation
expense = $3,250 per year
Exercises
E9-1
(1) Total Property, plant, and
Page 13
E9-2
E9-3
E9-4
E9-5
E9-6
E9-7
E9-8
E9-9
E9-10
E9-11
E9-12
E9-13
E9-14
E9-15
E9-16
E9-17
equipment = $212
(4) Book value = $192,000
(2) Cost = $31,750, (4) Book
value at end of year 2 =
$25,950
(1) Assets (Accumulated
Depreciation) = $10,000,
Liabilities = NE, SE
(Depreciation expense)
$10,000
(1) Credit Accumulated
Depreciation (+xA, -A) $10,000
(1) (a) Straight-line book value
after Year 4 = $4,000,
(b) Units-of-production book
value after year 4 = $3,000,
(c) Double-declining-balance
book value after year 3 =
$2,000
(a) Straight-line book value
after Year 2 = $10,000
(b) Units-of-production book
value after year 2 = $6,855
(c) Double-declining-balance
book value after year 2 =
$3,000
Straight-line depreciation is
preferred because it results in
higher net income, particularly
in the early years of an assets
life
Depreciation expense per year
= $2,000
Impairment loss = $3,200
(1) (b) Loss on sale = $2,000,
(4) (c) Entry should include a
credit to Gain on disposal for
$3,000
(2)Trademark is not amortized
due to indefinite life, (3)
Amortization expense = $15,376
(1) Patent book value at end of
year = $900,000
2006 Fixed asset turnover ratio
= 18.4 times
(1) Depreciation expense Year 2
Straight-line = $12,000, Unitsof-production = $18,000,
Double-declining balance =
$15,600
Book value of oil reserves at
the end of year 1 = $2,400,000
(1) Depreciable cost = $71,000
Coached Problems
CP9-1
CP9-2
CP9-3
(1) Machine A total cost =

$8,400, (2) Machine C doubledeclining-balance depreciation
= $3,040
(1) Machine As loss on disposal
= $10,400
(2) Vehicle partial year
depreciation = $4,000,
Equipment partial year
depreciation = $400, Building
partial year depreciation =
$1,750
Group Problems
PA9-1
(1) Total cost of Machine C=
$24,400, (2) Machine B
depreciation = $7,000
PA9-2
(1) Machine As loss on disposal
= $650
PA9-3
(2) Equipment depreciation =
$22,000, Licensing rights
amortization = $100
PA9-4
2009 Building depreciation =
$20,000, truck depreciation =
$4,500, and Patent
amortization = $2,000
PB9-1
(1) Total cost of Machine B =
$10,900, (2) Machine C
depreciation = $5,300
PB9-2
(1) Machine As gain on disposal
= $1,500
PB9-3
(2) Equipment depreciation =
$400, Franchise rights
amortization = $190
PB9-4
2010 Building depreciation =
$7,500, Delivery van
depreciation = $3,200, and
Franchise rights amortization =
$1,000
C9-1
(1) (g) Depreciation expense =
$6,000, (i) Bad debt expense =
$150, (2) Net income = $350,
S9-1
(2) Accumulated depreciation =
$10,243M which is 28.1% of the
total cost of property and
equipment
S9-2
(2) Accumulated depreciation is
27.8% of the total cost of
property reported, (5) Fixed
asset turnover = 2.19 times
Page 14
S9-3
S9-4
S9-5
S9-6
S9-7

period selected
(1) Q1 Year 1 with the entries:
Property & equipment, net =
$38,614; Sales revenues =
$8,825; Operating expenses =
$7,628; Operating income =
$1,197
(2) Fixed asset turnover ratio in
Q2 Year 1 = 0.24
(1) Straight-line depreciation
expense = $7,000; Book value =
$28,000, Units of production
depreciation = $4,000, Double
declining-balance book value =
$17,500
The two companies financial
results differ in terms of
depreciation expense and other
gains (losses). Provide possible
explanations for these two
differences
Straight line method:
Depreciation formula for Year 1
in cell D8 is =($C$3-$C$4)/
$C$5, Formula for Year 7 EOYAD in cell E14 is
=SUM($D$8:D14),
Double declining-balance
method: Depreciation formula
for Year 1 in cell D8 is =IF((C8+
(($C$3 C8)*2/$C$5))>$C$3$C$4,F7-$C$4,($C$3C8)*2/$C$5), Formula for Year
7 EOY-AD in cell E14 is
=C14+D14
Continuing Case
CC9
(1) (a) Book value at end of
Year 4 = $1,400, (b) Book value
at end of Year 4 = $1,460, (c)
Book value at end of Year 4 =
$648, (2) Straight line method =
loss of $200, Units-ofproduction method = gain of
$100, double declining-balance
method = gain of $1,020, (3)
Income before taxes = $3,100
(straight line), $3,280 (units-ofproduction), and $4,500
(double declining-balance)
Chapter 10
Mini-Exercises
M10-1
M10-2
M10-3
M10-4
M10-5
M10-6
M10-7
M10-8
M10-9
M10-10
M10-11
M10-12
M10-13
M10-14
M10-15
M10-16
M10-17
M10-18
(b) Performance revenue (+R, +SE)

$75,000
To record the expense: dr Cost of goods
sold (+E -SE) $3,000 cr Inventory (-A)
$3,000
Net pay = $80,750
Credit FICA Payable (+L) $5,250
Current portion of long-term debt as of
December 31, 2010 = $2,000
(b) Debit Interest expense (+E -SE)
$10,000
Long-term debt = $800,000
The bonds are selling at a discount since
the bond quote is less than 100
Bonds payable would be shown as
$400,000 (the face amount of $500,000
less the discount on bonds payable of
$10,000)
Bonds payable would be shown as
$515,000 (the face amount of $500,000
plus the premium on bonds payable of
$15,000)
(b) December 31, 2010 debit Interest
expense (+E -SE) $150,000
To retire the bonds, the company was
required to pay more than their carrying
value
2009: do not record or disclose the
liability because the probability of the
liability occurring is remote
Numerator for quick ratio: $100,000 $40,000 - $10,000 = $50,000, Income tax
expense for the Times interest earned
ratio = $1,960
(a) Decreases to 1.15
(a) Debit Discount on bonds payable
(+xL, -L) $20,000
(a) Debit Discount on bonds payable
(+xL, -L) $59,000
(a) Debit Interest expense (+E, -SE)
$5,700
Exercises
E10-1
(1) (b) Assets = NE, Liabilities (Interest
payable) = +$75,000, SE (Interest
Expense) = -$75,000
E10-2
(1) Nov. 1, 2010 dr Cash (+A) +
$6,000,000 cr Note payable (+L) +
$6,000,000
E10-3
(2) Credit Withheld income taxes
payable employees (+L) $50,200
E10-4
(1) (b) Procedure 2 Total labor cost =
$850
E10-5
(2) Cash paid = $41,600
E10-6
(2) (b) dr Unearned revenue (-L)
Page 15
E10-7
E10-8
E10-9
E10-10
E10-11
E10-12
E10-13
E10-14
E10-15
E10-16
$190,000,000 cr Subscription revenue (+R

+SE) $190,000,000
(3) Debit Interest expense (+E, -SE)
$60,000
(3) Debit Loss on bond retirement (+E
-SE) $4,000
(1) Bond issuance increases Cash, Bonds
payable, and Premium on bonds payable
(1) Quick ratio for 2008 = 0.54, Times
interest earned ratio for 2008 = 3.93
(1) Credit Premium on bonds payable
(+L) $50,328
(1) Debit Cash (+A) $300,328
(2) Debit Interest expense (+E -SE)
$24,026
(2) Credit Discount on Bonds Payable (xL, +L) $1,284
$16,845
$16,845
Coached Problems
CP10-1 (1) Dec. 20: Assets (Cash) = +$100,
Liabilities (Customer deposit)= +$100,
SE = NE
CP10-2 (3) Total current liabilities = $49,400
CP10-3 (1) Payroll tax expense = $11,300, (2) (a)
Credit Unearned rent revenue (+L)
$3,600
CP10-4 (1) (b) Case B at 96 Unamortized
discount = $8,000
CP10-5 (2) Credit Cash (-A) $1,173.5 million
CP10-6 The lawsuit is considered a contingent
liability
CP10-7 (2) January 1, 2009 Credit Premium on
bonds payable (+L) $24,000
CP10-8 (2) January 1, 2009 Credit Premium on
bonds payable (+L) $24,000
CP10-9 (2) January 1, 2009 Credit Bonds
payable, net (+L) $624,000
CP10-10 (1) End of year 2011 balance = $6,026
CP10-11 (1) End of year 2011 balance = $6,028
Group Problems
PA10-1 (1) April 30, 2010: Assets (Cash) = +
$550,000, Liabilities (Note payable) = +
$550,000, SE + NE
PA10-2 (1) April 30, 2010 dr Cash (+A) $550,000
cr Note payable (+L) $550,000, (3) Total
current liabilities = $616,000
PA10-3 (2) (a) Credit Unearned rent revenue
(+L) $3,000
PA10-4 (1) (c) Carrying value of bonds payable
for Case B at 97 = $194,000
PA10-5
PA10-6
PA10-7
PA10-8
PA10-9
PB10-1
PB10-2
PB10-3
PB10-4
PB10-5
PB10-6
PB10-7
PB10-8
The fair value is the price at which the

bonds sell today
Contingent liabilities are to be recorded
only when they are probable and the
amount can be reasonably estimated
(5) January 1, 2011: dr Bonds Payable (L) $600,000 cr Discount on bonds payable
(-xL +L) $5,350 cr Cash (-A) $588,000 cr
Gain on bond retirement (+R +SE) $6,650
(5) January 1, 2011: dr Bonds Payable (L) $600,000 dr Loss on bond retirement
(+E -SE) $11,767 cr Cash (-A) $606,000 cr
Discount on bonds payable (-xL +L)
$5,767
(+E -SE) $11,767 cr Cash (-A) $606,000
(1) January 3: Assets (Inventory) +
$24,000, Liabilities (Accounts payable) =
+$24,000, SE = NE
(2) January 3 effect decreased
(1) August 1: dr Cash (+A) $8,000 cr
Unearned rent revenue (+L) $8,000, (3)
Total current liabilities = $98,000,(4)
January 3 effect = decreased, Numerator
= No change, Denominator = Increased
(1) Payroll tax expense (+E -SE) =
$22,000
(1) (c) The carrying value of Case C at
102 = $510,000
(2) Loss would be reported on the
income statement between operating
income and income before income taxes
(5) January 1, 2011: dr Bonds Payable (L) $100,000 dr Premium on bonds
payable (-L) $690 dr Loss on bond
retirement (+E -SE) $1,310 cr Cash (-A)
$102,000
(5) January 1, 2011: dr Bonds Payable (L) $100,000 dr Premium on bonds
payable (-L) $718 dr Loss on bond
retirement (+E -SE) $282 cr Cash (-A)
$101,000
(+E -SE) $282 cr Cash (-A) $101,000

S10-1
(1) 2009 Quick ratio = 0.13
S10-2
(2) Lowes' times interest earned ratio =
13.52
S10-3
Solutions vary depending on company
and/or accounting period selected
S10-4
Most people conclude that the use of the
call option is ethical but that
Page 16
S10-5
S10-6
S10-7
S10-8
S10-9
corporations have an obligation to

provide understandable information to M11-16
investors
The manager has been hired to protect
the interests of the investors. Therefore,
the manager must place investors first
regardless of his or her own personal
social conscience
M11-17
(1) Quick ratio = 1.21
M11-18
The formula for cell D12: =$G$11/$D$8
The formula for cell B12:

=If(A12<$C$8,ROUND(G11*$C$7*12/12,0),F11+C12)
Exercises
The formula for cell C11:
E11-1
=If(A11<$D$8,ROUND(B11*$D$7*12/12,0),D10+
$D$4-F10)
E11-2
Continuing Case
CC10
(1) Dec. 31, 2011: dr Interest
expense (+E -SE) $750 cr Interest payable
(+L) $750
E11-3
Chapter 11
Mini-Exercises
M11-1
(4) E
M11-2
One right: Stockholders may
vote in stockholders
meeting
M11-3
33,000 additional shares may
be issued
M11-4
Credit Additional Paid-in
Capital (+SE) $7,400,000
M11-5
Debit Cash (+A) $7,500,000
M11-6
It is advisable to invest in
the common stock
M11-7
(3) Total assets = decreased
by $900,000, Total liabilities
= no change, Total
stockholders equity =
decreased by $900,000, net
income = no change
M11-8
Dividend amount to be paid
= $85,000
M11-9
June 14: dr Debit Dividends
payable (+L) $200,000 cr
Cash (-A) $200,000
M11-10
(1) Stock Dividend: No
change in total assets
M11-11
(4) No change in total
stockholders equity
M11-12
Credit Common stock (+SE)
$100,000
M11-13
Total to preferred
stockholders $400,000
M11-14
EPS = $2.00
M11-15
(e) Assets(Cash) +$60,000,
Liabilities = NE, SE (Common
E11-4
E11-5
E11-6
E11-7
E11-8
E11-9
E11-10
E11-11
E11-12
E11-13
E11-14
stock) = +$60,000
(c) EPS = NE (because
preferred stock is excluded
from the denominator and
preferred dividends are
excluded from the
numerator), ROE = NE
2009 P/E ratio = 25
(b) Capital, end of year =
$27,000
Treasury Stock at end of
2008 = 85 million (81+5-1)
(2) (a) Credit Additional
paid-in capital (+SE)
$96,000, (3) Total
contributed capital =
$166,000
Additional paid-in capital,
common = $181,000
Additional paid-in capital,
preferred stock $255,000
Retained earnings $38,000
(1) (a) dr Cash (+A) $800,000
cr Common stock, no-par
(+SE) $800,000, (2) Total
stockholders' equity =
$1,236,000
(2) Number of preferred
shares outstanding: 4,700
(2) Feb. 1, 2010: dr Treasury
stock (+xSE -SE) $8,800 cr
Cash (-A) $8,800, (3)
Dividends are not paid on
treasury stock
(1) (b) Assets = "-",
Liabilities = "+" and "-", SE =
"-"
(1) (b) Preferred shares
cumulative: $14,400 total,
$2.40 per share
(1) (a) Debit Dividends
declared (-SE) $119,900,000,
(2) Ending Retained earnings
= $1,600.3 million
(1) Additional paid-in capital
after stock dividend =
$36,000, (3) Large stock
dividends are recorded at
par value
April 30, 2009: Credit
Dividends payable (+L)
$7,200,000
Total stockholders equity =

Page 17
E11-15
E11-16
E11-17
E11-18
E11-19
E11-20
E11-21
E11-22
$410,000 in all cases

Dividends in arrears
indicates some financial
difficulty
Effect of cash dividend
(preferred): Assets No
effect on declaration date.
On payment date, assets are
decreased by the amount of
the dividend
Stock dividend effect on
common no effect on
assets through December 31,
2010 or on February 15,
2011
(1) Total contributed capital
= $705,000, Total
stockholders' equity =
$781,000
(1) Stockholders equity
decreases $60,000,000, (3)
Dividends are not paid on
treasury stock
(1) EPS = $0.10, ROE = 5.0%
(1) Jan 15: Assets (Cash) +
$50,000, Liabilities = NE, SE
(Common stock) +$5,000
(Additional paid-in capital,
common stock) + $45,000
(1) Case A: Credit Proprietor
A, Capital (+OE) $20,000,
Case B: Debit Individual
revenue accounts (-R)
$150,000, Case C: Credit
Retained earnings (+SE)
$20,000,
(2) Case A: A, Capital,
December 31, 2010 =
$62,000, Case B: Partners
Equity for B on December
31, 2010 is $39,000, Case C:
Retained earnings = $85,000
Coached Problems
CP11-1
(3) Total Stockholders
Equity = $746,200
CP11-2
(1) 100% stock dividend was
result in moving $600 from
Retained earnings to
common stock, thus leaving
total stockholders' equity
unchanged
CP11-3
= $875,000
CP11-4
(2) Assets: Cash Dividend
CP11-5
Case C: $66,000 decrease,

Stock dividends: No assets
were disbursed
(1) ROE Aaron = 12.6%
Group Problems
PA11-1
= $37,800,000,Total
$36,979,000
PA11-2
(1) March 5, 2010: Credit
Dividends payable (+L)
$1,000,000
PA11-3
(3) EPS on net income =
$3.43
PA11-4
Case A Preferred dividend =
$16,800
PA11-5
(2) BusinessWorld P/E ratio
= 17.0
PB11-1
= $4,600,000, Total
$4,538,000
PB11-2
(1) May 31, 2009: Debit
Retained earnings (-SE)
$19,000
PB11-3
= $14,250,000
PB11-4
(1) Case A: Common
dividend = $8,800; Case C:
Common dividend = $21,400
PB11-5
(2) Sound Jonx PE ratio =
17.0
C11-1
(1) Assets(Cash) = +$50,000,
Liabilities = NE, SE(Common
stock) +$5,000, (Additional
paid-in capital-common +
$45,000, (2) August 15: dr
Cash (+A) $4,600 dr
Additional paid-in capitalTreasury stock (-SE) $2,000
cr Treasury stock (-xSE +SE)
$6,600, (3) Retained
earnings = $125,400
S11-1
(1) Shares outstanding =
1,707,000,000
S11-2
(3) Lowe's net earnings
declined throughout the
three-year period
S11-3
Page 18
S11-4
S11-5
S11-6
S11-7
period selected
(4) Yes, this would be a
concern because it suggests
that management might be
acting opportunistically buying when the stock price
is low and selling when the
price is high
Whether you believe that
employees are more
important than investors or
vice versa, ultimately, most
people agree that a
balanced perspective is
warranted, for short-term
returns and long-term
payoffs
Every investor must consider
his or her own financial
requirements, stage of life,
and acceptable level of risk.
For most retired people
living on a fixed income,
option 2 is the most
appropriate choice
Responses will vary
depending on the company
selected and depending on
how "surprising" the
information in the earnings
or dividend announcement is
to the investor
Continuing Case
CC11
(2) Common stockholders
would prefer issuance of
additional preferred shares
to avoid diluting ownership
and voting rights in the
company (4) (a) ROE = "+"
Chapter 12
Mini-Exercises
M12-1
(3) E
M12-2
(5) O
M12-3
(2) +
M12-4
Case A: Cash provided by
operating activities = $140,000
M12-5
Case A: Net cash provided by
M12-6
Net cash provided by (used in)
investing activities = $(50)
M12-7
Net cash provided by financing
activities = $1,200
M12-8
Net cash provided by investing
M12-9
M12-10
M12-11
M12-12
M12-13
M12-14
M12-15
activities $250
(1) No
Company reports a net cash
outflow for both years even
though they borrowed
significant amounts and issued
stock. There is very little cash
available for the coming year's
operations. Thus, they appear
to be in big trouble
Capital acquisition ratio for
2008-2010 = 1.2
Quality of income ratio = 75%
(5) O
Case A: Cash collected from
customers = $71,000, Net cash
provided by operating activities
= $30,000
Case B: Cash payments to
suppliers= $(12,040), Net cash
provided by operating activities
= $3,760
Exercises
E12-1
(1) F
E12-2
(4) Net cash provided by
operating activities = $100
E12-3
(2) The $200 increase in cash
should be reported as net cash
outflow from operating
activities
E12-4
operating activities = $100
E12-5
(5) When converting net income
to cash flow here is how to
handle changes in current
account balances: subtract
increases in noncash current
assets and decreases in noncash
current liabilities, add back
decreases in noncash current
assets and increases in current
liabilities
E12-6
Net cash flow from operating
activities = $170
E12-7
operating activities = $170, Net
cash used in investing activities
= $(60), Net cash provided by
financing activities = $60
E12-8
Net cash provided by operating
activities = $15,500
E12-9
E12-10
Net cash flow provided by
Page 19
E12-11
E12-12
E12-13
E12-14
E12-15
E12-16
E12-17
E12-18
E12-19
E12-20
E12-21
E12-22
E12-23
E12-24
E12-25
E12-26

Accounts receivable increased
during the period
Unearned revenue increased
during the period
Net cash used for investing
activities $(16,000)
(2) Quality of income ratio = 1.4
(1) Aztec Cost of goods sold =
$175, (2) Aztec Total cash paid
= $200, (4) Aztec Inventory
increase = $25, Aztec Accounts
payable increase = $0
Net cash provided by financing
activities = $1,105
Net cash provided by investing
activities $7,074
(1) Capital acquisitions ratio =
0.81
(2) The average capital
acquisitions ratio is 282%. This
means that Disney generated
nearly three times the financing
required to purchase parks,
resorts, and other property
2008 Quality of income ratio =
1.2
(13) Both direct and indirect
methods
Book value = $2,000
Cash received from the sale =
$1,000
Net cash flow provided by
operating activity = $13,700,
Net cash flow used in investing
activities = $(9,000), Net cash
flow used in financing activities
= $(6,000)
Coached Problems
CP12-1
(2) Activity = "O", Cash flow = "-"
CP12-2
Total adjustments = $243
CP12-3
CP12-4
CP12-5
activities = $263
CP12-6
(1) Cash flows from operating
activities = $3,000
CP12-7
Cash flows from financing
activities = $2,000
Group Problems
PA12-1
(1) Activity ="I", Cash Flow = "-"
PA12-2
activities = $8,813
PA12-3
operating activities $16,000
PA12-4
financing activities = $1,000
PA12-5
activities = $8,813
PA12-6
(1) Net cash used for investing
activities $(500)
PA12-7
activities $2,000
PB12-1
(1) Activity = "O", Cash Flow ="+"
PB12-2
activities $25,980
PB12-3
PB12-4
financing activities = $200
PB12-5
PB12-6
(1) Net cash used in operating
activities = $(1,000)
S12-1
(2) Income taxes paid in cash =
$1,265 million
S12-2
(1) Lowe's used the indirect
method to report cash flows
from operating activities
S12-3
period selected
S12-4
(2) Since transaction recorded
as a regular sale, the company
will report the cash as a cash
flow from operating activities.
Had the transaction been
recorded as a loan, the cash
received would have been
reported as a financing activity
S12-5
(2) If cash is spent on long-lived
assets, it is typically classified
as an investing activity. If cash
is spent on expenses, it is
classified as an operating
activity
S12-6
The idea will not work. If
depreciation expense is
increased, net income will
decrease by exactly the same
Page 20
S12-7
S12-8
S12-9
amount
Net cash flow used in operating
activities = $(4,000)
The amount of Net cash flow
from operating activities is not
affected by the method (direct
or indirect) in which it is
computed
(2) Net cash flows from
operating activities would
decrease by $2,000
E13-4
E13-5
E13-6
E13-7
E13-8
E13-9
Continuing Case
CC12
operating activities = $3,269, (2)
Capital acquisitions ratio = 0.43
Chapter 13
Mini-Exercises
M13-1
Horizontal analysis: Percentage
change in net income = 37.9%
M13-2
Vertical analysis: 2010 net
income = 21% of net sales
M13-3
The two most significant
changes, in terms of dollar
amounts, are revenues and cost
of goods sold
M13-4
The increase in net profit
margin ratio (20.3% to 21.0%) is
an improvement
M13-5
Gross profit percentage = 60%
M13-6
Gross profit percentage = 40%
M13-7
Return on equity = 16.0%
M13-8
If inventory decreases, the
inventory turnover ratio will
increase
M13-9
Current liabilities = $6,480,000
M13-10
2010 Market price per share =
$55
M13-11
(d) Days to collect
M13-12
(e) Good
M13-13
Current ratio will increase
M13-14
(1) (a) straight-line yields lower
depreciation which yields higher
net income and net profit
margin
Exercises
E13-1
(1) Total revenues increased $52
billion from 2007 to 2008, a
23.5% increase
E13-2
(1) 2008 Gross profit percentage
= 37.4%
E13-3
(2) 2008 net income as a
percentage of Sales = 1.2%
E13-10
E13-11
E13-12
E13-13
E13-14
E13-15
(2) 2008 net profit margin =

1.1%
(2) 2008 times interest earned =
4.8
(6) = J
(1) Accounts receivable turnover
= 6.0
Inventory Turnover: Cintas
turned its inventory over (i.e.,
bought and sold) 6.8 times
during the year
(1) Inventory turnover ratio =
5.3
(1) Gross profit percentage of
29.3% means that the company
generates 29.3 cents of gross
profit on each dollar of sales
Current ratio after transaction 1
= 1.67
(1) Current assets = Increase,
Current liabilities = no change,
Current ratio = Increase
= 1.63
= 1.81
LIFO higher inventory higher
current ratio Company B
Coached Problems
CP13-1
(1) Sales revenue increased by
$15,000, a 9.1% increase
CP13-2
= 38.9%, (8) 2010 P/E Ratio =
18.0
CP13-3
(1) (c) 8%
CP13-4
(1) (b) 32%
CP13-5
(3) Kohls appears more solvent,
with debt providing financing
for 23% of its assets compared
to 45% for J. C. Penney
CP13-6
(1) (6) Armstrong EPS = $3.00,
Blair EPS = $4.50
CP13-7
Consider liquidity, level of debt,
and growth opportunity
Group Problems
PA13-1
(1) Change in cash = $31,500, a
175.0% increase
PA13-2
= 52.7%, (6) 2010 Debt-to-assets
ratio = 0.40
PA13-3
(3) Simultechs assets are
financed more by liabilities
(60%) than by equity (40%)
Page 21
PA13-4
PA13-5
PA13-6
PA13-7
PB13-1
PB13-2
PB13-3
PB13-4
PB13-5
PB13-6
PB13-7
(1) (e) 4%
(2) Pepsi appears more liquid
(1) (9) Receivables turnover:
Royale = 7.84, Cavalier = 8.75
Company A appears to be a
better choice
(2) 2010 appears to have been a
successful year for Tiger Audio.
The percentage increase in sales
(20%) was greater than that for
cost of goods sold (15%) and
operating expenses (17.4%). The
combined result of these
changes was a significant
increase in net income (37.2%)
= 42.5%
(1) (c) 35%
(1) (f) 7%
(4) Analyses suggest Hasbro and
Mattel are fairly evenly matched
with respect to profitability,
liquidity, and solvency
(1) (1) Net profit margin: Thor =
10.0%, Gunnar = 12.5%
Company As ratios suggest that
it has a high level of debt, low
level of liquidity and a low
price/earnings ratio

S13-1
Return on Equity = 12.7% in
2008, Inventory turnover ratio =
4.22 in 2008
S13-2
(1) Lumber Liquidators does not
control its non-product costs as
well as Lowes
S13-3
period selected
S13-4
Inaccurate audit reports (either
failing to report problems that
exist or reporting problems that
dont exist) have negative
consequences for parties
internal and external to the firm
S13-5
Current ratio after the
transaction = 2.26
S13-6
(2) It is impossible to determine
which company will report the
higher ratios without knowledge
of the average life of the
companys depreciable assets
S13-7
(2) The formula to calculate the
percent of total assets
represented by Cash is found in

Cell I7: =H7/$H$15*100
Continuing Case
CC13
(1) 2011 Quality of income =
1.19, 2011 Asset turnover =
0.99, (2) 2011 Quick ratio =
0.84, (3) 2011 Times interest
earned = 1.94
Appendix C
Mini-Exercises
MC-1
$231,600
MC-2
$92,169
MC-3
$487,133
MC-4
It is much better to save $15,000
for 20 years
Exercises
EC-1
(1) $15,562
EC-2
(1) $58,800
EC-3
(3) $10,386
EC-4
(2) $1,311
EC-5
$83,805
Coached Problems
CPC-1
Option 1 = $8,513,600
Group Problems
PAC-1
Option 2 = $589,086
PBC-1
Option 3 = $55,308
Appendix D
Mini-Exercises
MD-1
January 2: dr Investments (+A)
$100,000 cr Cash (-A) $100,000
MD-2
January 2: Assets +/- $100,000
MD-3
December 15: dr Cash (+A)
$16,000 cr Investment income (+R
+SE) $16,000
MD-4
July 2: Assets +/- $224,000
MD-5
July 2: dr Securities available for
sale (+A) $224,000 cr Cash (-A)
$224,000
MD-6
December 31: Assets +8,000,
Stockholders equity +8,000
MD-7
June 23: dr Cash (+A) $19,800 cr
Trading securities (-A) $17,400 cr
Gain on sale of investments (+R
+SE) $2,400
Exercises
ED-1
(1) Equity method since the
company owns 35% of the total
Page 22
ED-2
ED-3
ED-4
ED-5
ED-6
ED-7
shares outstanding of Nueces

Corporation
December 31, 2009: dr Market
valuation allowance (+A) $40,000
cr Unrealized gains and losses on
investments (+SE) $40,000
December 31, 2010: dr Market
valuation allowance (+A) $70,000
cr Unrealized gains and losses on
investments (+SE) $70,000
(1) 2009 Investments = $240,000
December 31, 2009: dr
Unrealized gains and losses on
investments (-SE) $25,000 cr
Market valuation allowance (-A)
$25,000
December 31, 2010: dr
Unrealized loss on trading
securities (+E SE) $15,000 cr
Market valuation allowance (-A)
$15,000
(2) Current assets on the balance
sheet: Trading securities,
$210,000 in 2010
Statement, Equity in Investee

Earnings, $120,000
Check Figures prepared by:
Dr. J. Lowell Mooney, CPA, CMA, CFM
Professor of Accounting
Georgia Southern University
Statesboro, GA 30460
Coached Problems
CPD-1
(1) Dec. 31, 2008: Credit
Unrealized gains and losses in
equity (+SE) $7,000,
(2) Dec. 31, 2008: Credit
Unrealized gain on trading
securities (+R, +SE) $7,000,
(3) Dec. 31, 2008: Credit Equity
in Investee Earnings (+R, +SE)
$15,000
CPD-2
(1) Case A: The market value
method must be used because it
only owns 12% of the total
outstanding shares of Bart
Company
Group Problems
PAD-1
(1) Dec. 31, 2008 Credit
Unrealized gains and losses on
investments (+SE) $3,000,
(2) Dec. 31, 2008 Debit Market
valuation allowance (+A) $3,000,
(3) Dec. 31, 2008 Debit
Investment in Affiliates (+A)
$15,000
PAD-2
(2) Case A: (b) no entry, (c)
Credit Investment income (+R
+SE) $6,000, (d) Debit Unrealized
loss on investments (-SE)
$20,000, (3) Case B: Income

Page 23

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List of Check Figures and Solution Hints

(3) Total assets = $113,850

Skill Development Cases

account for $3,940, Credit (right

(1) (e) Not a business

$218,000, (3) (b) $1,780,000 +

Skill Development Cases

Total debits = $89,150, Total

Skill Development Cases

Fundamentals of Financial Accounting, 3/e

expense account after

SE) $800 cr Income tax payable

sheet should be decreased while

Skill Development Cases

(+A) $90 cr Unearned revenue

(3) 2010 net profit margin =

dr Cost of goods sold (+E SE)

(2) Net income = $35,000, (3)

Skill Development Cases

Company earns 45.1 cents of

(3) PC Malls balance sheet

2010, The McGraw-Hill Companies, Inc.

$1,950, Case B = $1,800, Case C

(2) Ending inventory = $330,000

Fundamentals of Financial Accounting, 3/e

(1) Machine A total cost =

Solutions vary depending on

(b) Performance revenue (+R, +SE)

$190,000,000 cr Subscription revenue (+R

The fair value is the price at which the

Skill Development Cases

corporations have an obligation to

The formula for cell B12:

2010, The McGraw-Hill Companies, Inc.

$410,000 in all cases

Case C: $66,000 decrease,

operating activities = $22,492

(2) 2008 net profit margin =

Skill Development Cases

represented by Cash is found in

shares outstanding of Nueces

Statement, Equity in Investee

2010, The McGraw-Hill Companies, Inc.

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