Financial Accounting, 9th Edition by Paul D. Kimmel , Donald E. Kieso , Jerry J. Book description Student success is a team effort. The Team for Success is focused on helping millennial students get the most out of their accounting courses in the digital age, and on helping instructors deliver the most effective courses whether face-to-face, hybrid, or online with model course plans designed for easy and effective implementation More students get accounting when using Weygandt Financial Accounting with WileyPLUS , because of the unique Framework of Success created and refined by the authors based on years of teaching and course design experience.
WileyPLUS sold separately from text. Show and hide more. Table of contents Product information. Kimmel, Donald E. Actions Shares. No notes for slide. Solutions manual for financial accounting 9th edition by weygandt 1. Exercises A Problems B Problems 1. Explain what an account is and how it helps in the recording process.
Define debits and credits and explain their use in recording business transactions. Identify the basic steps in the recording process. Explain what a journal is and how it helps in the recording process.
Explain what a ledger is and how it helps in the recording process. Explain what posting is and how it helps in the recording process. Prepare a trial balance and explain its purposes. Simple 20—30 2A Journalize transactions, post, and prepare a trial balance.
Simple 30—40 3A Journalize and post transactions and prepare a trial balance. Moderate 40—50 4A Prepare a correct trial balance. Moderate 30—40 5A Journalize transactions, post, and prepare a trial balance.
Moderate 40—50 1B Journalize a series of transactions. Simple 20—30 2B Journalize transactions, post, and prepare a trial balance. Simple 30—40 3B Journalize transactions, post, and prepare a trial balance. Moderate 40—50 4B Prepare a correct trial balance. Moderate 30—40 5B Journalize transactions, post, and prepare a trial balance.
Moderate 40—50 3. Q E 2. E Q 6. A T account has the following parts: a the title, b the left or debit side, and c the right or credit side. The terms debit and credit mean left and right respectively. Tom is incorrect. The double-entry system merely records the dual effect of a transaction on the accounting equation.
A transaction is not recorded twice; it is recorded once, with a dual effect. Olga is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable. Expenses and dividends are increased by debits and decreased by credits. The basic steps in the recording process are: 1. Analyze each transaction for its effect on the accounts.
Enter the transaction information in a journal. Transfer the journal information to the appropriate accounts in the ledger. Questions Chapter 2 Continued The advantages of using the journal in the recording process are: a It discloses in one place the complete effects of a transaction.
When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account.
It discloses in one place the complete effects of a transaction. It provides a chronological record of all transactions. It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared. The advantage of the last step in the posting process is to indicate that the item has been posted.
The chart of accounts is important, particularly for a company that has a large number of accounts, because it helps organize the accounts and define the level of detail that a company desires in its accounting system. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to prove check that the debits equal the credits after posting. A trial balance also facilitates the discovery of errors in journalizing and posting.
Furthermore, following the qualitative characteristics of faithful representation in the Conceptual Framework, it is important that the economic substance rather than the legal form of the transaction is reported. In a finance lease, legal title to the leased asset still remains with the lessor until the end of the relevant lease term when the lessee has made all lease payments.
However, the lessee has use of and earns economic benefits from the leased asset for this time period i. In summary, an asset does not need to be legally owned by the entity to be recorded as an asset on the balance sheet. A local football club has won the premiership for the past four years.
Accordingly, the club has a very strong supporter base. Rationalise if the players would be regarded as an asset of the business to be recognised on the balance sheet. To be recognised as an asset on the balance sheet, an item must satisfy definition and recognition criteria specified in the Conceptual Framework. An asset is defined in the Framework as a resource controlled by the entity as a result of past events and from which future economic benefits will flow to the entity.
It could be argued that the football club does not have sufficient control over its players. Although the players might have signed a contract with the club, they can still leave the club and play somewhere else.
Since the football club does not have control over its players, there is no past transaction that gives rise to control. It can be argued that future economic benefits as mentioned above are likely to flow to the club as a result of players using their skills.
In this case, there is no reliable system that can be applied to measure how much players are worth. Each player is unique, and hence it is very difficult to assign an objective value to each player. To be recorded on the financial statements, all criteria must be satisfied. From the explanation above, it can be seen that players do not satisfy the definition and recognition criteria of assets.
Subsequently, they cannot be recorded as assets on the balance sheet. It should be noted that it is not necessary to work through the recognition criteria if it is determined that the item does no satisfy the definition criteria.
All aspects of the definition and recognition criteria must be satisfied for the item to be recognised on the balance sheet. AASB Land Under Roads prescribes that an entity may elect to recognise subject to the satisfaction of asset recognition criteria or not to recognise as an asset land under roads acquired before the end of the first reporting period ending on or after 31 December The final decision of whether to recognise or not shall be made effective as at the first day of the next reporting period following the end of the first reporting period ending on or after 31 December Assuming the Council has a reporting period ending 30 June, AASB mandates that the Council is required to choose whether it would recognise or not land under roads acquired on or before 30 June The person is to commence duty on 1 February.
The contract remains unperformed by both parties until the work is completed by the employee. Under the accounting entity assumption, the entity is considered a separate entity distinguishable from its owner and from all other entities. It is assumed that each entity controls its assets and incurs its liabilities. The records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities.
The accounting entity assumption is important since it leads to the derivation of the accounting equation. Hence, financial statements report not only on cash transactions but also on obligations to pay cash in the future and on resources that represent receivables of cash in future. It is argued in the Conceptual Framework that accounting on an accrual basis provides significantly better information about the transactions and other events for the purpose of decision making by users of financial statements than does the cash basis.
When management plans the sale or liquidation of the entity, the going concern assumption is then set aside and the financial statements are prepared on the basis of estimated sales or liquidation values. The statements should identify clearly the basis upon which asset values are determined — going concern? Or liquidation? Hence, the financial performance of the entity can be determined for a given time period, and the financial position of the entity can be determined on the last day of that reporting period.
As a result of this assumption, profit determination involves a process of recognising the income for a period and deducting the expenses incurred for that same period. Together, the period assumption and accrual basis assumption lead to the requirement for making end-of-period adjustments on the last day of the reporting period.
These adjustments will be considered in chapter 4. List and define the fundamental and enhancing characteristics of financial information. For example, the information may help users to predict future events, such as future cash flows, from alternative courses of action under consideration. Also, information is relevant if it is able to help decision makers evaluate past decisions. The information may confirm that a previous decision was correct, or it could show that the results of a previous decision were undesirable and that a new decision is necessary.
Thus, relevant information is said to play a predictive role and a confirmatory or feedback role. In addition, financial information that faithfully represents an economic phenomenon should depict the economic substance of the underlying transaction, event or circumstances, rather than its legal form.
For financial information to be comparable, users need to be able to compare information of an entity over time, and between entities at one time and over time.
If there is undue delay in reporting the information to users, then the information will lose its capacity to influence decisions i. Distinguish between the concepts of consistency and comparability and discuss if the same accounting method should always be applied consistently in financial statements. Consistency refers to use of the same accounting policies and procedures, either from period to period within an entity or in a single period across entities.
The Exposure Draft argues that comparability is the goal, and that consistency of policies and procedures is a means to an end that helps to achieve the goal.
However, it is not satisfactory for policies and procedures to be applied consistently if the information that they produce is no longer relevant or a faithful representation of economic reality. Your doctor knows that you are studying accounting. He has recently received the annual report for a company in which he is a shareholder. The financial report within the annual report is lengthy and your doctor requests your advice as to whether he should contact the company to complain that the financial information is not understandable.
Advise your doctor. According to the Conceptual Framework, understandability is the quality of information which enables users who have a reasonable knowledge of business and economic activities and financial accounting, and who study the information with reasonable diligence, to comprehend its meaning.
It should be clear that, even though it is desirable for financial statements to be expressed in simple language, relevant information should not be excluded merely because it may be too complex or difficult for some untrained users to understand.
Understandability does not mean simplicity. If users cannot understand the information contained in financial statements, they should seek the help of a trained adviser. Therefore, it is advised that the doctor should not contact the company to complain that the financial report is not understandable. Instead, he should seek help from his accountant or financial planner to help him understanding the information in the financial report.
Provide an example of activity in each of these three categories. Discuss the rationale for this change. For example, some focus on verifiability or free from material error to the virtual exclusion of the faithful representation aspect of reliability. On the contrary, to others reliability apparently refers primarily to precision. Because the meaning of reliability was not clear to constituents, the IASB proposed that it should be replaced by the concept of faithful representation.
Accordingly, faithful representation encompasses all of the qualities that the previous frameworks included as aspects of reliability. Faithful representation is the depiction in financial reports of the economic phenomena they purport to represent. Prepare a balance sheet similar to the one in figure 2.
Note that a major item is missing in the list. Reformat the statement to present it in narrative form as in figure 2. Required A. Prepare an income statement for the year for Skilled Services. Skilled Services is a sole proprietor. Compare the liability or a sole proprietor with that of a company shareholder. In other words, the liability of shareholders to contribute to the assets of the company is limited to the amount unpaid on the shares held in the company.
She keeps her accounting records for business activities completely separate from her records for personal activities. Capital Contributions and Drawings are nil for the year.
For those items included in the statement of cash flows, indicate whether the item relates to operating activities, investing activities, or financing activities. The reporting of accounting information should be free from personal bias.
The cost of stationery is not shown separately in the income statement. Services provided by a business entity are recorded before the receipt of cash. Machinery held by the business under a long-term lease arrangement is recorded by the business as its own asset. Assets are not recorded at liquidation prices. Consistent accounting policies and methods are used in the preparation of financial statements from one year to another. Increase an asset and increase a liability 2.
Decrease one asset and increase another asset 3. Decrease an asset and decrease equity 4. Increase an asset and increase equity 5. Decrease a liability and decrease an asset 6. Decrease an equity item and decrease an asset.
Purchase an asset on credit. Purchase an asset for cash. Owner withdraws cash from the business for personal use. Owner contributes cash to the business.
The business pays cash to its creditors. The owners withdraw cash. Students may have many other possible examples in each of 1—6. The information is complete except for the balance in the Capital account. Assuming that Booth made no additional investments and did not withdraw any money from the business during the 3 months, determine the profit for November and for December.
Prepare a balance sheet for the business at the end of December The heading should read: Adam Booth, Lawyer A.
Write a sentence to explain the nature of each transaction. A loan payable was given for the remainder. Darren paid for the supplies purchased in 5 above. Prepare a schedule. Jones, Capital. Show the effects of each of the transactions on the accounts listed. Indicate totals after each transaction and complete the schedule. Prepare an income statement and a statement of changes in equity for the month ended 31 August , and a balance sheet as at 31 August A and B.
The park provides not only camping facilities for caravans and tents but also up-market cabins with kitchenettes and ensuites. Prepare a balance sheet for the business as at 30 June Explain why you have used a particular valuation for the buildings in the balance sheet. This assumes that the business is a going concern and that the owners are not going to sell up and close the business down going concern assumption.
Hence, there is no need to reflect the current selling price in the balance sheet. The revaluation of buildings in the accounts of an entity is discussed in a later chapter.
The clients 7 were invoiced but have not as yet paid. Discuss the expected tasks of Eliza as the manager of Webdesign Service. Effect of each business transaction on balance sheet Sept. The expected tasks of Eliza as the manager of Webdesign Service. As the owner-manager of Webdesign Service, Eliza needs to ensure that her business achieves satisfactory financial performance e.
For example, Eliza might want to expand the business. In order to do that, she would need to plan how this can be done, e. Some of the things Eliza needs to organise would include: purchasing supplies and equipment required, paying bills, hiring and training new employees, and negotiating with clients. If there are significant variations from expected results, then actions need to be taken to improve the efficiency and effectiveness of business operations.
If the evaluation shows that it mostly takes longer for her employees to finish the orders, she would need to investigate causes of the variation and take actions accordingly e. Purchase equipment for cash 2. Provide services to a client, with payment to be received within 40 days 3. Pay a liability 4. Invest additional cash into the business by the owner 5. Collect an account receivable in cash 6. Pay wages to employees 7. Receive the electricity bill in the mail, to be paid within 30 days 8.
Sell a piece of equipment for cash 9. Withdraw cash by the owner for private usage. Borrow money on a long-term basis from a bank 1. In the balance sheet, increase an asset, equipment; decrease an asset, cash. In the statement of cash flows, decrease cash flow from investing activities. In the balance sheet, increase an asset, receivables; increase equity.
In the income statement, increase income. In the statement of changes in equity, increase equity. In the balance sheet, decrease an asset, cash; decrease a liability. In the statement of cash flows, decrease cash probably from operating activities.
In the balance sheet, increase an asset, cash; increase equity. In the statement of cash flows, increase cash from financing activities. In the statement of changes in equity, equity is increased. In the balance sheet, increase an asset, cash; decrease an asset, accounts receivable. In the statement of cash flows, increase cash from operating activities.
In the balance sheet, decrease an asset, cash; decrease equity. In the income statement, increase expenses. In the statement of cash flows, decrease cash from operating activities.
In the statement of changes in equity, decrease equity. In the balance sheet, decrease equity; increase a liability, accounts payable. In the balance sheet, increase an asset, cash; decrease an asset, equipment, increase equity if a profit was made on the sale.
In the income statement, increase income if a profit was made on the sale. In the statement of cash flows, increase cash from investing activities. In the statement of changes in equity, increase equity if a profit was made on the sale. In the balance sheet, decrease equity, decrease an asset, cash.
In the statement of cash flows, decrease cash from financing activities. In the balance sheet, increase an asset, cash; increase a liability, loan payable. Hire equipment Cash at bank 45 Loan payable 50 Mortgage payable Electricity expense 18 Building 85 Telephone expense 7 Required A. Prepare an income statement for the month of June and a balance sheet in account format for Safety Hire as at 30 June Applying this definition, drawings is not an expense as it is a decrease in economic benefits which decreases equity as a result of distribution to equity participants i.
As drawings is not an expense, it should not be recorded in the income statement. Rather, it should be recorded in the statement of changes in equity to determine the closing balance of capital as at 30 June Electricity expense 17 Decorating services Wages expense income Required A. Prepare an income statement for the business for the year ended 30 June Prepare a balance sheet in narrative format as at 30 June
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