Textbook Notes (369,102)
Canada (162,381)
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ADM1340 (150)
Chapter 4

Chapter 4 review

20 Pages
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Department
Administration
Course Code
ADM1340
Professor
Breid Mc Ilkenny

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Posted with permission from John Wiley & Sons Canada, Ltd Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 CHAPTER 4 BRIEF EXERCISE 4-4 (a) Jan. 2 Vehicles...............................................40,000..................... Cash.......................................................40,000............ (b) The journal entry for the years 2012 and 2013 will be the same: Dec. 31 Depreciation Expense....................................8,000.......... Accumulated Depreciation—Vehicles...................... 8,000 ($40,000 ÷ 5 = $8,000 per year) (c) CRETIEN CORPORATION Statement of Financial Position (partial) December 31 2013 2012 Property, plant, and equipment Vehicles $40,000 $40,000 Less: Accumulated depreciation 16,000 8,000 Carrying amount 24,000 32,000 (d) CRETIEN CORPORATION Income Statement (partial) Year Ended December 31 2013 2012 Operating expenses Depreciation expense $8,000 $8,000 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Posted with permission from John Wiley & Sons Canada, Ltd Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 BRIEF EXERCISE 4-5 (a) (1) Bere Ltd. June 1 Prepaid Insurance..................................................6,000..... Cash....................................................................6,000 (2) Marla Insurance Corp. June 1 Cash...............................................................6,000............. Unearned Revenue................................................. 6,000 (b) Expired in 2012 = $6,000 × 7/12 = $3,500 Unexpired at December 31, 2012 = $6,000 × 5/12 = $2,500 (c) (1) Bere Ltd. Dec. 31 Insurance Expense................................................. 3,500... Prepaid Insurance...................................................  3,500 (2) Marla Insurance Corp. Solutions Manual 4-2 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. PKimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 Dec. 31 Unearned Revenue............................................... 3,500..... Insurance Revenue.................................................  3,500 (d) Bere Ltd. Prepaid Insurance Insurance Expense June 1 6,000 Dec. 31Adj. 3,500 Dec. 31 Adj. 3,500 Dec. 31 Bal. 2,500 Marla Insurance Corp. Unearned Revenue Insurance Revenue June 1 6,000 Dec. 31 Adj. 3,500 Dec. 31 Adj. 3,500 Dec. 31 Bal. 2,500 BRIEF EXERCISE 4-10 (a) $5,000 = Supplies used per item 5 ($4,000) + Adjusted balance in supplies ($1,000) (b) $2,000 = Balance per Dividends on Adjusted Trial Balance (c) $21,000 = Balance per Retained Earnings on Adjusted Trial Balance (d) $28,000 = $26,000 + Revenue earned but not yet billed ($2,000) per item 1. Solutions Manual 4-3 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 (e) $2,500 = Prepaid insurance per trial balance ($6,000) less insurance expired per item 4 of $3,500. (f) $10,000 = Salary expense ($7,000) + salaries incurred but not yet paid ($3,000 per item 2.) (g) $4,400 = Per item 3. (h) $5,400 = Accumulated Depreciation per trial balance ($1,000) + Depreciation expense ($4,400 per item 3.) (i) $300 = Per item 6. EXERCISE 4-1 (a) Since the performance by WestJet is not complete until the flight actually occurs, revenue should not be recognized until December. WestJet should recognize the revenue in December when the customer has been provided with the flight. (b) If Leon’s Furniture is reasonably certain of collection, revenue should be recognized at the time of sale since Leon’s has completed its obligation of providing the furniture. If the company has concerns regarding the collectibility of the accounts receivable, revenue should not be recognized until the time that collection is reasonably assured. (c) Revenue should be recognized on a per game basis over the season from April to October, since that is when the product (games) are provided to the fans. (d) Interest revenue should be accrued and recognized by RBC Financial Group evenly over the term of the loan. (e) Revenue should be recognized when the sweater is shipped to the customer in September, provided there is reasonable assurance of collectability. EXERCISE 4-2 (a) (b) Cash Basis Accrual Basis Solutions Manual 4-4 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 Service revenue $44,000 $52,000 Expenses Operating expenses 27,500 31,000 Insurance expense 2,000 1,000 29,500 32,000 Profit before income tax 14,500 20,000 Income tax expense – 4,200 Profit $14,500 $ 15,800 (c) The accrual basis of accounting provides more useful information for decision makers because it recognizes revenue when earned and expenses when incurred. This provides a better measurement of performance because it records what has happened regardless of the movement of cash. This also enhances the predictive ability of the income statement. EXERCISE 4-8 2012 Aug. 31 Accounts Receivable............................................ 3,725........... Service Revenue..................................................  3,725. 31 Unearned Revenue..............................................  1,000.......... Service Revenue....................................................1,000. 31 Supplies Expense................................................1,750............. Supplies...........................................................1,750........ Solutions Manual 4-5 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Posted with permission from John Wiley & Sons Canada, Ltd Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Fifth Canadian Edition 2012 31 Insurance Expense....................................................1,100....... Prepaid Insurance.......................................................1,100 31 Depreciation Expense.................................................2,275..... Accumulated Depreciation—Equipment...................... 2,275 31 Salaries Expense.....................................................2,200........ Salaries Payable........................................................2,200 31 Interest Expense.....................................................1,500......... Interest Payable........................................................1,500 31 Rent Expense.........................................................1,250.......... Rent Payable............................................................1,250 31 Income Tax Expense.....................................................900..... Income Tax Payable..................................................... 900 (a) and (b) Solutions Manual 4-6 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Cash Accumulated Depreciation— Aug. 31 Bal. 38,820 Buildings Aug. 31Bal. 87,000 Aug. 31 Adj. 5,800 Supplies Aug. 31 Bal. 92,800 Aug. 31 Bal. 6,990 Aug. 31 Adj. 5,610 Aug. 31 Bal. 1,380 Furniture Aug. 31 Bal. 57,200 Prepaid Insurance Aug. 31 Bal. 12,720 Aug. 31 Adj. 3,180 Accumulated Depreciation— Aug. 31 Bal. 9,540 Furniture Aug. 31Bal. 22,880 Aug. 31 Adj. 5,720 Aug. 31 Bal. 28,600 Land Aug. 31 Bal. 70,000 Accounts Payable Aug. 31 Bal. 13,000 Buildings Aug. 31 Adj. 3,120 Aug.31 Bal. 290,000 Solutions Manual 4-7 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Aug. 31 Bal. 16,120 Mortgage Payable Aug. 31 Bal 120,000 Unearned Revenue Aug. 31 Bal. 71,000 Aug. 31 Adj. 62,000 Aug. 31 Adj. 6,000 Common Shares Aug. 31 Bal. 15,000 Aug. 31 Bal. 40,000 Salaries Payable Retained Earnings Aug. 31 Adj. 1,680 Aug. 31 Bal. 72,000 Aug. 31 Bal. 1,680 Interest Payable PROBLEM 4-12B (Continued) Aug. 31 Adj.  700 Aug. 31 Bal.  700 (a) and (b) (Continued) Income Tax Payable Aug. 31 Adj. 2,000 Dividends Aug. 31 Bal. 2,000 Aug. 31 Bal. 10,000 Aug. 31 Bal. 10,000 Solutions Manual 4-8 Copyright © 2012 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Rent Revenue Aug. 31 Adj.  6,000 Aug.31 Bal. 497,000 Aug. 31 Adj. 62,000 Aug. 31 Bal. 553,000 Salaries Expense Aug. 31 Bal. 306,000 Aug. 31 Adj. 1,680 Aug. 31 Bal. 307,680 Insurance Expense Aug. 31 Adj. 3,180 Utilities Expense Aug. 31 Bal. 3,180 Aug. 31 Bal. 75,200 Aug. 31 Adj. 3,120 Aug. 31 Bal. 78,320 Supplies Expense
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