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Voorbeeld 3 van de 174 pagina's
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Voorbeeld van de inhoud
7. The heading of each of the four required financial statements should include theChapter 1 following:
(a) Name of the entity
Financial Statements and Business Decisions (b) Name of the statement
(c) Date of the statement, or the period of time
(d) Unit of measure
8. (a) The purpose of the income statement is to present information about the
ANSWERS TO QUESTIONS revenues, expenses, and the income of the entity for a specified period of time.
(b) The purpose of the balance sheet is to report the financial position of an entity at
a given date, that is, to report information about the assets, obligations and
1. Accounting is a system that collects and processes (analyzes, measures, and records) stockholders’ equity of the entity as of a specific date.
financial information about an organization and reports that information to decision (c) The purpose of the statement of cash flows is to present information about the
makers. flow of cash into the entity (sources), the flow of cash out of the entity (uses), and
the net increase or decrease in cash during the period.
2. Financial accounting involves preparation of the four basic financial statements and (d) The statement of retained earnings reports the cumulative amount of earnings for
related disclosures for external decision makers. Managerial accounting involves the a corporation less any dividends declared and paid.
preparation of detailed plans, budgets, forecasts, and performance reports for internal
decision makers. 9. The income statement and the statement of cash flows are dated “For the Year Ended
December 31, 20X,” because they report the inflows and outflows of resources during
3. Financial reports are used by both internal and external groups and individuals. The a period of time. In contrast, the balance sheet is dated “At December 31, 20X”
internal groups are comprised of the various managers of the entity. The external because it represents the resources, obligations and stockholders’ equity at a specific
groups include the owners, investors, creditors, governmental agencies, other date.
interested parties, and the public at large.
10. Assets are important to creditors and investors because assets provide a basis for
4. Investors purchase all or part of a business and hope to gain by receiving part of what judging whether sufficient resources are available to operate the company. Assets are
the company earns and/or selling the company in the future at a higher price than they also important because they could be sold for cash in the event the company goes out
paid. Creditors lend money to a company for a specific length of time and hope to of business. Liabilities are important to creditors and investors because the company
gain by charging interest on the loan. must be able to generate sufficient cash from operations or further borrowing to meet
the payments required by debt agreements. If a business does not pay its creditors,
5. In a society each organization can be defined as a separate accounting entity. An the law may give the creditors the right to force the sale of assets sufficient to meet
accounting entity is the organization for which financial data are to be collected. their claims.
Typical accounting entities are a business, a church, a governmental unit, a university
and other nonprofit organizations such as a hospital and a welfare organization. A 11. Net income is the excess of total revenues over total expenses. Net loss is the excess
business typically is defined and treated as a separate entity because the owners, of total expenses over total revenues. Breakeven is when the total revenues and total
creditors, investors, and other interested parties need to evaluate its performance and expenses are exactly equal.
its potential separately from other entities and from its owners.
12. The accounting equation for the income statement is Revenues - Expenses = Net
6. Name of Statement Alternative Title Income. Thus, the three major items reported on the income statement are (1)
(a) Income Statement (a) Statement of Earnings; Statement of revenues, (2) expenses, and (3) income.
Income; Statement of Operations
(b) Balance Sheet (b) Statement of Financial Position
(c) Audit Report (c) Report of Independent Accountants
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-1 1-2 Solutions Manual
13. The accounting equation for the balance sheet is: Assets = Liabilities + Stockholders’ 18. Management is responsible for preparing the financial statements and other
Equity. Assets are the probable (expected) future economic benefits owned by the information contained in the annual report and for the maintenance of a system of
entity as a result of past transactions. They are the resources owned by the business internal accounting policies, procedures and controls intended to provide reasonable
at a given point in time such as cash, receivables, inventory, machinery, buildings, assurance, at appropriate cost, that transactions are processed in accordance with
land, and patents. Liabilities are probable (expected) debts or obligations of the entity company authorization and are properly recorded and reported in the financial
as a result of past transactions which will be paid with assets or services in the future. statements, and that assets are adequately safeguarded. Independent auditors
They are the obligations of the entity such as accounts payable, notes payable, and examine the financial reports (prepared by management) and the underlying records to
bonds payable. Stockholders’ equity is financing provided by owners of the business assure that the reports represent what they claim and conform with generally accepted
and operations. It is the claim of the owners to the assets of the business after the accounting principles (GAAP).
creditor claims have been satisfied. It may be thought of as the residual interest
because it represents assets minus liabilities. 19. A sole proprietorship is an unincorporated business owned by one individual. A
partnership is an unincorporated association of two or more individuals to carry on a
14. The accounting equation for the statement of cash flows is: Cash flows from operating business. A corporation is a business that is organized under the laws of a particular
activities + Cash flows from investing activities + Cash flows from financing activities = state whereby a charter is granted and the entity is authorized to issue shares of stock
Change in cash for the period. The net cash flows for the period represent the increase as evidence of ownership by the owners (i.e., stockholders).
or decrease in cash that occurred during the period. Cash flows from operating
activities are cash flows directly related to earning income (normal business activity 20. A CPA firm normally renders three services: auditing, management advisory services,
including interest paid and income taxes paid). Cash flows from investing activities and tax services. Auditing involves examination of the records and financial reports to
include cash flows that are related to the acquisition or sale of productive assets used determine whether they “fairly present” the financial position and results of operations
by the company. Cash flows from financing activities are directly related to the of the entity. Management advisory service involves management advice to the
financing of the enterprise itself. individual business enterprises and other entities. It is like a consulting firm. Tax
service involves providing tax planning advice to clients (both individuals and
15. The accounting equation for the statement of retained earnings is: Ending Retained businesses) and preparation of their tax returns.
Earnings = Beginning Retained Earnings + Net Income - Dividends. It begins with
beginning-of-the-year Retained Earnings which is the prior year’s ending retained
earnings reported on the balance sheet. The current year's Net Income reported on
the income statement is added and the current year's Dividends are subtracted from
this amount. The ending Retained Earnings amount is reported on the end-of-period
balance sheet.
16. Marketing managers and credit managers use customers' financial statements to
decide whether to extend them credit for their purchases. Purchasing managers use
potential suppliers' financial statements to judge whether the suppliers have the
resources necessary to meet current and future demand. Human resource managers
use financial statements as a basis for contract negotiations, to determine what pay
rates the company can afford. The net income figure even serves as a basis to pay
bonuses not only to management, but to other employees through profit sharing plans.
17. The Securities and Exchange Commission (SEC) is the U.S. government agency
which determines the financial statements that public companies must provide to
stockholders and the measurement rules used in producing those statements. The
Financial Accounting Standards Board (FASB) is the private sector body given the
primary responsibility to work out the detailed rules which become generally accepted
accounting principles.
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-3 1-4 Solutions Manual
, Authors' Recommended Solution Time MINI-EXERCISES
(Time in minutes)
M1–1.
Alternate Cases and Element Financial Statement
Mini-exercises Exercises Problems Problems Projects B (1) Expenses A. Balance Sheet
No. Time No. Time No. Time No. Time No. Time D (2) Cash Flow from Investing Activities B. Income Statement
A (3) Assets C. Statement of Retained Earnings
1 5 1 12 1 45 1 45 1 20
2 5 2 12 2 45 2 45 2 30 C (4) Dividends D. Statement of Cash Flows
3 5 3 12 3 45 3 30 B (5) Revenues
4 20 4 45 4 60 D (6) Cash Flow from Operating Activities
5 25 5 20 A (7) Liabilities
6 20 6 30 D (8) Cash Flow from Financing Activities
7 15 7 30
8 25 8 20
9 25 9 * M1–2.
10 30 10 *
11 20 11 * SE (1) Retained earnings
12 12 12 * A (2) Accounts receivable
13 30 13 * R (3) Sales revenue
14 30 14 * A (4) Property, plant, and equipment
E (5) Cost of goods sold expense
A (6) Inventories
E (7) Interest expense
L (8) Accounts payable
* Due to the nature of these cases and projects, it is very difficult to estimate the amount of A (9) Land
time students will need to complete the assignment. As with any open-ended project, it is
possible for students to devote a large amount of time to these assignments. While
students often benefit from the extra effort, we find that some become frustrated by the
perceived difficulty of the task. You can reduce student frustration and anxiety by making M1–3.
your expectations clear. For example, when our goal is to sharpen research skills, we
devote class time discussing research strategies. When we want the students to focus on a Abbreviation Full Designation
real accounting issue, we offer suggestions about possible companies or industries. (1) CPA Certified Public Accountant
(2) GAAP Generally Accepted Accounting Principles
(3) CMA Certified Management Accountant
(4) AICPA American Institute of Certified Public Accountants
(5) SEC Securities and Exchange Commission
(6) FASB Financial Accounting Standards Board
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-5 1-6 Solutions Manual
EXERCISES E1–2.
E1–1.
L (1) Accounts payable
Term or Abbreviation Definition A (2) Accounts receivable
K (1) SEC A. A system that collects and processes financial A (3) Cash and cash equivalents
G (2) Audit information about an organization and reports that E (4) Cost of products sold
I (3) Sole proprietorship information to decision makers. A (5) Property, plant and equipment
E (4) Corporation B. Measurement of information about an entity in the E (6) Income taxes
A (5) Accounting monetary unit–dollars or other national currency. E (7) Interest expense
D (6) Separate entity C. An unincorporated business owned by two or more A (8) Inventories
J (7) Audit report persons. A (9) Land
F (8) Cost principle D. The organization for which financial data are to be E (10) Marketing, administrative, and other operating expenses
C (9) Partnership collected (separate and distinct from its owners). L (11) Long-term debt
O (10) AICPA E. An incorporated entity that issues shares of stock as R (12) Net sales
L (11) FASB evidence of ownership. L (13) Notes payable
H (12) CPA F. Initial recording of financial statement elements at SE (14) Retained earnings
B (13) Unit of measure acquisition cost. L (15) Taxes payable
N (14) GAAP G. An examination of the financial reports to assure that they
M (15) Publicly traded represent what they claim and conform with generally
accepted accounting principles.
H. Certified Public Accountant. E1–3.
I. An unincorporated business owned by one person.
J. A report that describes the auditors’ opinion of the L (1) Accounts payable A
(10) Buildings
fairness of the financial statement presentations and the
A (2) Accounts receivable A
(11) Cash and cash equivalents
evidence gathered to support that opinion.
E (3) Cost of goods sold A
(12) Land
K. Securities and Exchange Commission.
E (4) Distribution and warehousing A
(13) Machinery and equipment
L. Financial Accounting Standards Board.
M. A company that can be bought and sold by investors on L (5) Dividends payable E
(14) Marketing, selling and
established stock exchanges . advertising
N. Generally Accepted Accounting Principles. E (6) General and administrative R (15) Net sales
O. American Institute of Certified Public Accountants. L (7) Income taxes payable L (16) Notes payable to banks
A (8) Inventories E (17) Provision for income taxes*
A (9) Investments SE (18) Retained earnings
*Note that “Provision for income taxes” is a common synonym for “Income tax expense.”
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-7 1-8 Solutions Manual
, E1–4. E1–5.
Honda Motor Co., Ltd.
Balance Sheet Req. 1
as of March 31, 20A READ MORE STORE
(in millions of Yen) Balance Sheet
At December 31, 20A
Cash and cash equivalents ¥ 150,554
Trade accounts, notes, and other receivables 817,761 ASSETS LIABILITIES
Inventories 606,689 Cash $48,900 Accounts payable $8,000
Investments 212,294
Accounts receivable 26,000 Note payable 2,000
Net property, plant and equipment 1,008,196
Store and office equipment 48,000 Interest payable 120
Other assets 213,845
Total liabilities $10,120
Total assets ¥3,009,339
STOCKHOLDERS’ EQUITY
Accounts payable and other current liabilities ¥1,308,748
Long-term debt 569,479 Contributed capital $100,000
Other liabilities 94,485 Retained earnings 12,780
Contributed capital 281,208 Total stockholders’ equity 112,780
Retained earnings 755,419 Total liabilities and
Total liabilities and stockholders’ equity ¥3,009,339 Total assets $122,900 stockholders' equity $122,900
Req. 2
Net income for the year was $12,780. This is the first year of operations and no dividends
were declared or paid to stockholders; therefore, retained earnings is $12,780 (which
represents income for one year).
E1–6.
THE COLLEGIATE SHOP
Income Statement
For the Month of January 20A
Revenue from Sales:
Sales: Cash $120,000
On credit 1,000
Total sales revenue $121,000
Expenses:
Cost of goods sold $ 40,000
Salaries, rent, supplies, and other
expenses (paid in cash) 38,000
Utilities 600
Total Expenses 78,600
Net Income $42,400
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-9 1-10 Solutions Manual
E1–7. E1–9.
WAL-MART STORES, INC. A Net Income = $100,000 - $82,000 = $18,000;
Income Statement Stockholders’ Equity = $150,000 - $70,000 = $80,000.
For the Quarter ended October 31, 20A
(in thousands) B Total Revenues = $80,000 + $12,000 = $92,000;
Total Liabilities = $112,000 - $60,000 = $52,000.
Net sales $20,417,717
Rental and other income 235,116 C Net Income = $80,000 - $86,000 = ($6,000);
Total revenues $20,652,833 Stockholders’ Equity = $104,000 - $26,000 = $78,000.
Cost of sales $16,200,873
Operating, selling and general and 3,340,263 D Total Expenses = $50,000 - $13,000 = $37,000;
administrative expenses Total Assets = $22,000 + $77,000 = $99,000.
Interest costs 184,190
Total costs and expenses 19,725,326 E Total Revenues = $81,000 - $6,000 = $75,000;
Pretax income $ 927,507 Total Assets = $73,000 + $28,000 = $101,000.
Provision for income taxes* 339,422
Net income $ 588,085
E1–10.
*Note that “Provision for income taxes” is a common synonym for “Income tax CLAY CORPORATION
expense.” Income Statement
For the Month of January 20A
Total revenues $130,000
E1–8. Less: Total expenses (excluding income tax) 80,000
HOME REALTY, INCORPORATED Pretax income $ 50,000
Income Statement Less: Income tax expense 15,000
For the Year Ended December 31, 20C Net income $ 35,000
Revenue:
Commissions earned ($150,000+$16,000) $166,000 CLAY CORPORATION
Rental service fees 20,000 Balance Sheet
Total revenues $186,000 At January 31, 20A
Expenses: Assets
Salaries expense $ 62,000 Cash $30,000
Commission expense 35,000 Receivables from customers 15,000
Payroll tax expense 2,500 Merchandise inventory 42,000
Rent expense ($2,200+$200)* 2,400 Total assets $87,000
Utilities expense 1,600
Promotion and advertising expense 8,000 Liabilities:
Miscellaneous expenses 500 Payables to suppliers $11,000
Total expenses (excluding income taxes) 112,000 Income taxes payable 15,000
Pretax income $74,000 Total liabilities 26,000
Income tax expense 18,500 Stockholders' equity:
Net Income $55,500 Contributed capital (2,600 shares) $26,000
Retained earnings (from income statement above) 35,000 61,000
*$2,200 has been paid for 11 months ($200 per month) plus $200 owed for December. Total liabilities and stockholders' equity $87,000
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2001
Financial Accounting, 2/e 1-11 1-12 Solutions Manual
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