Solution Manual Financial Accounting 3rd Edition Chapter 1, Study Guides, Projects, Research of Accounting

Download Solution Manual Financial Accounting 3rd Edition Chapter 1 and more Study Guides, Projects, Research Accounting in PDF only on Docsity! Weygandt Financial Accounting IFRS 3e Solutions Manual 3-1 Financial Accounting IFRS 3rd Edition Solutions Manual Weygandt Kimmel Kieso Completed download Instructor Manual, Solutions Manual Answer all chapters, matcha creations problem, Solutions for appendix chapter: https://testbankarea.com/download/financial-accounting-ifrs-3rd-edition-solutions- manual-weygandt-kimmel-kieso/ TEST BANK for Financial Accounting IFRS 3rd Edition by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso Completed download: https://testbankarea.com/download/financial-accounting-ifrs-3rd-edition-test-bank- weygandt-kimmel-kieso/ CHAPTER 3 Adjusting the Accounts ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Explain the time period assumption. 1 1 1 *2. Explain the accrual basis of accounting. 2, 3, 4, 5 1 2, 3, 10,16 *3. Explain the reasons for adjusting entries. 6, 7 1 *4. Identify the major types of adjusting entries. 8, 18 2, 8 4, 6, 11 *5. Prepare adjusting entries for deferrals. 8, 9, 10, 11, 12, 13, 18, 19, 20 2, 3, 4, 5, 6, 8 2 5, 6, 7, 8, 9, 10, 11, 12, 13, 15 1A, 2A, 3A, 4A, 5A, 6A 1B, 2B, 3B, 4B, 5B *6. Prepare adjusting entries for accruals. 8, 14, 15, 16, 17, 18, 19, 20 2, 7, 8 3 5, 6, 7, 8, 9, 10, 11, 12, 13, 15 1A, 2A, 3A, 4A, 5A, 6A 1B, 2B, 3B, 4B, 5B *7. Describe the nature and 21 9, 10 4 10, 11, 12, 1A, 2A, 3A, 1B, 2B, 3B, Weygandt Financial Accounting IFRS 3e Solutions Manual 3-2 purpose of an adjusted trial balance. 13, 14 5A, 6A 5B *8. Prepare adjusting entries for the alternative treatment of deferrals. 22 11 17, 18 6A *9. Discuss financial reporting concepts. 23, 24, 25, 26, 27, 28 12, 13 14, 15 19, 20, 21, 22, 23 *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix to the chapter. Weygandt Financial Accounting IFRS 3e Solutions Manual 3-5 ADJUSTING THE ACCOUNTS (Continued) Number LO BT Difficulty Time (min.) EX13 5–7 AN Simple 8–10 EX14 7 AP Simple 12–15 EX15 5, 6 AN, S Moderate 8–10 EX16 2 AN Moderate 8–10 EX17* 8 AN Moderate 6–8 EX18* 8 AN Moderate 10–12 EX19* 9 K Simple 3–5 EX20* 9 C Simple 3–5 EX21* 9 K Simple 6–8 EX22* 9 E Simple 10–20 EX23* 9 E Simple 10–20 P1A 5–7 AN Simple 40–50 P2A 5–7 AN Simple 50–60 P3A 5–7 AN Moderate 40–50 P4A 5, 6 AN Moderate 30–40 P5A 5–7 AN Moderate 60–70 P6A 5–8 AN Moderate 40–50 P1B 5–7 AN Simple 40–50 P2B 5–7 AN Simple 50–60 P3B 5–7 AN Moderate 40–50 P4B 5, 6 AN Moderate 30–40 P5B 5–7 AN Moderate 60–70 BYP1 5, 6 AN Simple 10–15 BYP2 — AN Simple 10–15 BYP3 2–7 S Moderate 15–20 BYP4 3–6 C Simple 10–15 BYP5 3–6 E Moderate 10–15 B L O O M ’S T A X O N O M Y T A B L E Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation *1. Explain the time period assumption. DI3-1 Q3-1 E3-1 *2. Explain the accrual basis of accounting. DI3-1 Q3-2 Q3-3 Q3-4 Q3-5 E3-3 E3-10 E3-16 E3-2 *3. Explain the reasons for adjusting entries. Q3-6 Q3-7 BE3-1 *4. Identify the major types of adjusting entries. Q3-8 Q3-18 BE3-2 BE3-8 E3-4 E3-6 E3-11 *5. Prepare adjusting entries for deferrals. Q3-8 Q3-9 Q3-10 Q3-11 Q3-12 Q3-13 Q3-19 Q3-20 Q3-18 BE3-2 BE3-3 BE3-4 BE3-5 BE3-6 BE3-8 DI3-2 E3-5 E3-6 E3-7 E3-8 E3-9 E3-10 E3-11 E3-12 E3-13 E3-15 P3-1A P3-2A P3-3A P3-4A P3-5A P3-6A P3-1B P3-2B P3-3B P3-4B P3-5B E3-15 *6. Prepare adjusting entries for accruals. Q3-8 Q3-14 Q3-15 Q3-19 Q3-20 Q3-17 Q3-16 Q3-18 BE3-2 BE3-7 BE3-8 DI3-3 E3-5 E3-6 E3-7 E3-8 E3-9 E3-10 E3-11 E3-12 E3-13 E3-15 P3-1A P3-2A P3-3A P3-4A P3-5A P3-6A P3-1B P3-2B P3-3B P3-4B P3-5B E3-15 *7. Describe the nature and purpose of an adjusted trial balance. Q3-21 BE3-9 BE3-10 E3-14 DI3-4 E3-10 E3-11 E3-12 E3-13 P3-1A P3-2A P3-3A P3-5A P3-6A P3-1B P3-2B P3-3B P3-5B *8. Prepare adjusting entries for the alternative treatment of deferrals. Q3-22 BE3-11 E3-17 E3-18 P3-6A *9. Discuss financial reporting concepts Q3-23 BE3-12 BE3-13 BE3-14 BE3-15 E3-19 E3-21 Q3-24 Q3-25 Q3-26 Q3-27 Q3-28 E3-20 E3-22 E3-23 Broadening Your Perspective Communication Financial Reporting Comparative Analysis Decision-Making Across the Organization Ethics Case Weygandt Financial Accounting IFRS 3e Solutions Manual 3-7 ANSWERS TO QUESTIONS 1. (a) Under the time period assumption, an accountant is required to determine the relevance of each business transaction to specific accounting periods. (b) An accounting time period of one year in length is referred to as a fiscal year. A fiscal year that extends from January 1 to December 31 is referred to as a calendar year. Accounting periods of less than one year are called interim periods. LO: 3.1 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking 2. The two principles that relate to adjusting the accounts are: The revenue recognition principle, which states that revenue should be recognized in the accounting period in which the performance obligation is satisfied. The expense recognition principle, which states that efforts (expenses) should be matched with accomplishments (revenues). LO: 3.2 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking 3. The law firm should recognize the revenue in April. When a company agrees to perform a service for a customer it has a performance obligation. The revenue recognition principle states that revenue should be recognized in the accounting period in which the performance obligation is satisfied which is April in this case. LO: 3.2 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking 4. Information presented on an accrual basis is more useful than on a cash basis because it reveals relationships that are likely to be important in predicting future results. To illustrate, under accrual accounting, revenues are recognized when earned so they can be related to the economic environment in which they occur. Trends in revenues are thus more meaningful. LO: 3.2 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking 5. Expenses of £4,700 should be deducted from the revenues in April. Under the expense recognition principle efforts (expenses) should be matched with accomplishments (revenues). LO: 3.1 Difficulty: Easy BLOOMCODE: Application AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-10 LO: 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic *19. (a) Salaries and Wages Payable. (d) Supplies Expense. (b) Accumulated Depreciation. (e) Service Revenue. (c) Interest Expense. (f) Service Revenue. LO: 3.5, 3.6 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *20. Disagree. An adjusting entry affects only one statement of financial position account and one income statement account. LO: 3.5, 3.6 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *21. Financial statements can be prepared from an adjusted trial balance because the balances of all accounts have been adjusted to show the effects of all financial events that have occurred during the accounting period. LO: 3.7 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *22. For Supplies Expense (prepaid expense): expenses are overstated and assets are understated. The adjusting entry is: Assets (Supplies) ...................................................................................... XX Expenses (Supplies Expense) ............................................................ XX For Rent Revenue (unearned revenues): revenues are overstated and liabilities are understated. The adjusting entry is: Revenues (Rent Revenue) ....................................................................... XX Liabilities (Unearned Rent Revenue) .................................................. XX LO: 3.8 Difficulty: Medium BLOOMCODE: Application AACSB: Reflective thinking *23. (a) The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions about providing capital. (b) The fundamental qualitative characteristics are relevance and faithful representation. The enhancing qualities are comparabiIity, verifiability, timeliness, and understandability. LO: 3.9 Difficulty: Easy BLOOMCODE: Knowledge Weygandt Financial Accounting IFRS 3e Solutions Manual 3-11 AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-12 Questions Chapter 3 (Continued) *24. Gross is correct. Consistency means using the same accounting principles and accounting methods from period to period within a company. Without consistency in the application of accounting principles, it is difficult to determine whether a company is better off, worse off, or the same from period to period. LO: 3.9 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *25. Comparability results when different companies use the same accounting principles. Consistency means using the same accounting principles and methods from year to year within the same company. LO: 3.9 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *26. The constraint is the cost constraint. The cost constraint allows accounting standard setters to weigh the cost that companies will incur to provide information against the benefit that financial statement users will gain from having the information available. LO: 3.9 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *27. Accounting relies primarily on two measurement principles. Fair value is sometimes used when market price information is readily available. However, in many situations reliable market price information is not available. In these instances, accounting relies on cost as its basis. LO: 3.9 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking *28. The economic entity assumption states that every economic entity can be separately identified and accounted for. This assumption requires that the activities of the entity be kept separate and distinct from (1) the activities of its owners (the shareholders) and (2) all other economic entities. A shareholder of a company charging personal living costs as expenses of the company is an example of a violation of the economic entity assumption. LO: 3.9 Difficulty: Easy BLOOMCODE: Comprehension AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-15 BRIEF EXERCISE 3-4 Dec. 31 Depreciation Expense ......................................... 6,000 Accumulated Depreciation— Equipment ............................................... 6,000 Depreciation Expense Accum. Depreciation—Equipment 12/31 6,000 12/31 6,000 Statement of Financial Position: Equipment ............................................................ €32,000 Less: Accumulated Depreciation— Equipment ................................................. 6,000 €26,000 LO: 3.5 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic BRIEF EXERCISE 3-5 July 1 Prepaid Insurance ............................................ 13,200 Cash .......................................................... 13,200 Dec. 31 Insurance Expense [(£13,200 ÷ 3) X 1/2] ......... 2,200 Prepaid Insurance .................................... 2,200 Prepaid Insurance Insurance Expense 7/1 13,200 12/31 2,200 12/31 2,200 12/31 Bal. 11,000 LO: 3.5 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic BRIEF EXERCISE 3-6 July 1 Cash .................................................................. 13,200 Unearned Service Revenue ..................... 13,200 Dec. 31 Unearned Service Revenue ............................. 2,200 Service Revenue ...................................... 2,200 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-16 Unearned Service Revenue Service Revenue 12/31 2,200 7/1 13,200 12/31 2,200 12/31 Bal. 11,000 LO: 3.5 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic Weygandt Financial Accounting IFRS 3e Solutions Manual 3-17 BRIEF EXERCISE 3-7 1. Dec. 31 Interest Expense .......................................... 320 Interest Payable .................................... 320 2. 31 Accounts Receivable ................................... 1,750 Service Revenue ................................... 1,750 3. 31 Salaries and Wages Expense ...................... 900 Salaries and Wages Payable ................ 900 LO: 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic BRIEF EXERCISE 3-8 Account (a) Type of Adjustment (b) Related Account Accounts Receivable Accrued Revenues Service Revenue Prepaid Insurance Prepaid Expenses Insurance Expense Accum. Depr.—Equipment Prepaid Expenses Depreciation Expense Interest Payable Accrued Expenses Interest Expense Unearned Service Revenue Unearned Revenues Service Revenue LO: 3.4, 3.5, 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic BRIEF EXERCISE 3-9 KWUN COMPANY Income Statement For the Year Ended December 31, 2017 (in thousands) Revenues Service revenue .................................................... W38,400 Expenses Salaries and wages expense ............................... W16,000 Rent expense ........................................................ 4,400 Insurance expense ............................................... 2,000 Supplies expense ................................................. 1,500 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-20 *BRIEF EXERCISE 3-13 (a) Relevant. (b) Faithful representation. (c) Consistency. LO: 3.9 Difficulty: Easy BLOOMCODE: Knowledge AACSB: Reflective thinking *BRIEF EXERCISE 3-14 (a) 3. Verifiable. (b) 4. Timely. (c) 1. Predictive value. (d) 2. Neutral. LO: 3.9 Difficulty: Easy BLOOMCODE: Knowledge AACSB: Reflective thinking *BRIEF EXERCISE 3-15 (c) LO: 3.9 Difficulty: Easy BLOOMCODE: Knowledge AACSB: Reflective thinking SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 3-1 1. (d) 2. (e) 3. (h) 4. (c) LO: 3.1, 3.2 Difficulty: Easy BLOOMCODE: Knowledge AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-21 DO IT! 3-2 1. Insurance Expense ...................................................... 300 Prepaid Insurance ................................................. 300 (To record insurance expired) 2. Supplies Expense (CHF2,500 – CHF1,400) ................. 1,100 Supplies ................................................................. 1,100 (To record supplies used) 3. Depreciation Expense .................................................. 200 Accumulated Depreciation—Equipment ............. 200 (To record monthly depreciation) 4. Unearned Service Revenue (CHF9,000 x 2/5) ............. 3,600 Service Revenue .................................................... 3,600 (To record revenue for services performed) LO: 3.5 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic DO IT! 3-3 1. Salaries and Wages Expense ...................................... 1,300 Salaries and Wages Payable ................................ 1,300 (To record accrued salaries) 2. Interest Expense (€18,000 x .07 x 1/12) ....................... 105 Interest Payable ..................................................... 105 (To record accrued interest) 3. Accounts Receivable ................................................... 2,400 Service Revenue .................................................... 2,400 (To record revenue for service performed) LO: 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic DO IT! 3-4 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-22 (a) The net income is determined by adding revenues and subtracting expenses. The net income is computed as follows: Revenues Service revenue ................................................ R$11,360 Rent revenue .................................................... 900 Total revenues .......................................... 12,260 Expenses Salaries and wages expense ........................... R$7,400 Rent expense .................................................... 1,200 Depreciation expense ...................................... 700 Utilities expense ............................................... 380 Supplies expense ............................................. 160 Interest expense ............................................... 40 Total expenses .......................................... 9,880 Net income ............................................................... R$ 2,380 DO IT! 3-4 (Continued) (b) Total assets and liabilities are computed as follows: Assets Cash .................................................................. R$ 5,190 Accounts receivable ........................................ 480 Prepaid rent ...................................................... 720 Supplies ............................................................ 920 Equipment ......................................................... R$12,000 Less: Accumulated depreciation— equipment .............................................. 700 11,300 Total assets ............................................... R$18,610 Liabilities Notes payable ................................................... R$ 4,000 Accounts payable ............................................. 790 Unearned rent revenue .................................... 400 Salaries and wages payable ............................ 300 Interest payable ................................................ 40 Total liabilities ........................................... R$ 5,530 (c) Retained Earnings, April 1 ...................................... R$ –0– Add: Net income .................................................... 2,380 2,380 Less: Dividends ...................................................... 500 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-25 worse. This is not what politicians would like to see and be held responsible for. EXERCISE 3-2 (Continued) (c) Dear Official, It is my understanding, after having taken a beginning course in account- ing principles, that the government uses a cash-basis system rather than an accrual-basis accounting system. I am shocked at such a practice! There must be billions of dollars of liabilities hidden in many contracts that have not been recorded yet for the mere reason that they haven’t been paid yet. I realize that the deficit would dramatically increase if we were to implement an accrual system, but in all fairness, we citizens should be given a more accurate picture of what our government is up to. Sincerely, CONCERNED STUDENT LO: 3.2 Difficulty: Medium BLOOMCODE: Evaluation AACSB: Reflective thinking/Communication EXERCISE 3-3 (a) Cash received from revenue .......................................... £112,000 Cash paid for expenses .................................................. (72,000) Cash-basis net income .......................................... £ 40,000 (b) Revenues [(£112,000 – £30,000) + £44,000] ................... £126,000 Expenses [(£72,000 – £27,000) + £37,000] ..................... (82,000) Accrual-basis net income ...................................... £ 44,000 LO: 3.2 Difficulty: Medium BLOOMCODE: Application AACSB: Analytic EXERCISE 3-4 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-26 1. Unearned revenue. 2. Accrued expense. 3. Accrued expense. 4. Accrued revenue. 5. Prepaid expense. 6. Unearned revenue. 7. Accrued revenue. 8. Prepaid expense. 9. Prepaid expense. 10. Prepaid expense. 11. Accrued expense. LO: 3.4 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic Weygandt Financial Accounting IFRS 3e Solutions Manual 3-27 EXERCISE 3-5 1. Interest Expense .................................................... 3,600 Interest Payable (NT$240,000 X 6% X 3/12) ............................ 3,600 2. Supplies Expense .................................................. 50,100 Supplies (NT$73,500 – NT$23,400) ................. 50,100 3. Depreciation Expense ............................................ 30,000 Accumulated Depreciation—Equipment ....... 30,000 4. Insurance Expense ................................................ 36,750 Prepaid Insurance (NT$63,000 X 7/12) ....................................... 36,750 5. Unearned Service Revenue ................................... 225,000 Service Revenue (NT$900,000 X 1/4) ....................................... 225,000 6. Accounts Receivable ............................................. 117,000 Service Revenue .............................................. 117,000 7. Salaries and Wages Expense ................................ 162,000 Salaries and Wages Payable (NT$270,000 X 3/5) ....................................... 162,000 LO: 3.5, 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic Weygandt Financial Accounting IFRS 3e Solutions Manual 3-30 5. 31 Accounts Receivable .................................... 320 Service Revenue ................................... 320 EXERCISE 3-9 (Continued) 6. Oct. 31 Interest Expense ..................................... 70 Interest Payable............................... 70 7. 31 Salaries and Wages Expense ................ 1,200 Salaries and Wages Payable .......... 1,200 LO: 3.5, 3.6 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic EXERCISE 3-10 BJORN ASA Income Statement For the Month Ended July 31, 2017 Revenues Service revenue (€5,500 + €920) ............................. €6,420 Expenses Salaries and wages expense (€2,300 + €280) ......... €2,580 Supplies expense (€1,200 – €300) ........................... 900 Utilities expense ...................................................... 500 Insurance expense ................................................... 400 Depreciation expense .............................................. 150 Total expenses ................................................. 4,530 Net income ....................................................................... €1,890 LO: 3.2, 3.5, 3.6, 3.7 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic EXERCISE 3-11 Answer Computation (a) Supplies balance = £1,090 Supplies expense £ 950 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-31 Add: Error! Reference source not found.Supplies (1/31) 850 Less: Supplies purchased 710 Supplies (1/1) £ 1,090 (b) Total premium = £4,800 Total premium = Monthly premium X 12; £400 X 12 = £4,800 Purchase date = Aug. 1, 2016 Purchase date: On Jan. 31, there are 6 months’ coverage remaining (£400 X 6). Thus, the purchase date was 6 months earlier on Aug. 1, 2016. EXERCISE 3-11 (Continued) (c) Salaries and wages payable = £1,400 Cash paid £3,100 Salaries and wages payable (1/31/17) 800 3,900 Less: Salaries and wages expense 2,500 Salaries and wages payable (12/31/16) £1,400 LO: 3.4, 3.5, 3.6, 3.7 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic EXERCISE 3-12 (a) July 10 Supplies ........................................................ 200 Cash ....................................................... 200 14 Cash .............................................................. 2,000 Service Revenue ................................... 2,000 15 Salaries and Wages Expense ...................... 1,200 Cash ....................................................... 1,200 20 Cash .............................................................. 750 Unearned Service Revenue .................. 750 (b) July 31 Supplies Expense ......................................... 800 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-32 Supplies ................................................. 800 31 Accounts Receivable .................................... 620 Service Revenue ................................... 620 31 Salaries and Wages Expense ...................... 1,200 Salaries and Wages Payable ................ 1,200 31 Unearned Service Revenue .......................... 900 Service Revenue ................................... 900 LO: 3.5, 3.6, 3.7 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic Weygandt Financial Accounting IFRS 3e Solutions Manual 3-35 Accounts Receivable ................................ 10,000 (2) Unearned Service Revenue .............................. 20,000 Service Revenue........................................ 20,000 (3) (a) Cash ........................................................... 35,000 Unearned Service Revenue ............... 35,000 (b) Unearned Service Revenue (£35,000 – £14,000) ................................ 21,000 Service Revenue ................................ 21,000 (4) Accounts Receivable ........................................ 112,000 Service Revenue (£153,000 – £20,000 – £21,000) ............. 112,000 (5) Cash ................................................................... 100,000 Accounts Receivable (£112,000 – £12,000) .............................. 100,000 (b) Cash received by the club = £10,000 + £103,000 + £35,000 = £145,000 LO: 3.5, 3.6 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic EXERCISE 3-16 (a) Cash received from services provided .................. Rs25,200 Cash paid for expenses .......................................... (12,000) Cash paid for prepaid insurance ............................ (2,600) Cash flow from operations ...................................... Rs10,600 (b) Service revenue ....................................................... Rs30,000 Operating expenses ................................................. 17,000 Net income ............................................................... Rs13,000 (c) Under the accrual basis, companies record transactions that change a company and financial statements in the period in which the events occur. Cash basis accounting fails to record revenue that a company Weygandt Financial Accounting IFRS 3e Solutions Manual 3-36 has earned but has not collected the cash. Also it does not match expenses with earned revenue. LO: 3.2 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic *EXERCISE 3-17 1. Prepaid Insurance .................................................. 720 Insurance Expense (€2,880 X 3/12) .............................................. 720 2. Service Revenue .................................................... 30,525 Unearned Service Revenue (€40,700 X 3/4) .............................................. 30,525 3. Supplies .................................................................. 420 Supplies Expense ........................................... 420 LO: 3.8 Difficulty: Medium BLOOMCODE: Analysis AACSB: Analytic *EXERCISE 3-18 (a) Jan. 2 Insurance Expense ...................................... 2,640 Cash ...................................................... 2,640 10 Supplies Expense ........................................ 1,700 Cash ...................................................... 1,700 15 Cash .............................................................. 6,400 Service Revenue .................................. 6,400 Cash Service Revenue 1/15 6,400 1/2 2,640 1/10 1,700 1/15 6,400 Insurance Expense Supplies Expense 1/2 2,640 1/10 1,700 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-37 (b) Jan. 31 Prepaid Insurance (€220 X 11 months) ...... 2,420 Insurance Expense .............................. 2,420 31 Supplies ....................................................... 650 Supplies Expense ................................ 650 31 Service Revenue .......................................... 3,900 Unearned Service Revenue ................. 3,900 *EXERCISE 3-18 (Continued) Prepaid Insurance Supplies Unearned Service Revenue 1/31 2,420 1/31 650 1/31 3,900 Insurance Expense Supplies Expense Service Revenue 1/2 2,640 1/31 2,420 1/10 1,700 1/31 650 1/31 3,900 1/15 6,400 Bal. 220 Bal. 1,050 Bal. 2,500 (c) Prepaid insurance ...................................................................... €2,420 Supplies ..................................................................................... 650 Unearned service revenue ........................................................ 3,900 Service revenue ......................................................................... 2,500 Insurance expense .................................................................... 220 Supplies expense ...................................................................... 1,050 LO: 3.8 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic *EXERCISE 3-19 (a) 2 Going concern assumption (b) 6 Economic entity assumption (c) 3 Monetary unit assumption (d) 4 Time period assumption (e) 5 Historical cost principle (f) 1 Full disclosure principle LO: 3.9 Difficulty: Easy BLOOMCODE: Knowledge AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-40 (b) The investors must feel as if the company will show earnings in the future. They must recognize that information relevant to their investment choice is indicated by more than Net Nanny’s net income. (c) The change from Canadian dollars to U.S. dollars for reporting purposes should make Net Nanny more comparable with companies traded on U.S. stock exchanges. LO: 3.9 Difficulty: Medium BLOOMCODE: Evaluation AACSB: Reflective thinking *EXERCISE 3-23 (a) Accounting information is the compilation and presentation of financial information for a company. It provides information in the form of financial statements and additional disclosures that is useful for decision making. The accounting rules and practices that have substantial authoritative support and are recognized as a general guide for financial reporting purposes are referred to as international financial reporting standards (IFRS). The biotechnology company that employs Ana will follow IFRS to report its assets, liabilities, equity, revenues, and expenses as it prepares financial statements. (b) Ana is correct in her understanding that the low success rate for new biotech products will be a cause of concern for investors. Her suggestion that detailed scientific findings be reported to prospective investors might offset some of their concerns but it probably won’t conform to the qualitative characteristics of accounting information. These characteristics consist of relevance, faithful representation, comparability, and consistency, verifiability, timeliness, and understandability. They apply to accounting information rather than the scientific findings that Ana wants to include. LO: 3.9 Difficulty: Medium BLOOMCODE: Evaluation AACSB: Reflective thinking Weygandt Financial Accounting IFRS 3e Solutions Manual 3-41 SOLUTIONS TO PROBLEMS PROBLEM 3-1A (a) J3 Date Account Titles and Explanation Ref. Debit Credit 2017 June 30 Supplies Expense ............................ Supplies (€1,600 – €340) .................... 631 126 1,260 1,260 30 Utilities Expense .............................. Accounts Payable ................... 732 201 185 185 30 Insurance Expense .......................... Prepaid Insurance (€3,000 ÷ 12 months) ........... 722 130 250 250 30 Unearned Service Revenue ............. Service Revenue ..................... 209 400 2,500 2,500 30 Salaries and Wages Expense ......... Salaries and Wages Payable ................................. 726 212 1,600 1,600 30 Depreciation Expense ..................... Accumulated Depreciation— Equipment ........................... 711 158 300 300 30 Accounts Receivable ....................... Service Revenue ..................... 112 400 2,400 2,400 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-42 PROBLEM 3-1A (Continued) (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance 2017 June 30 Balance  6,200 Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance 2017 June 30 30 Balance Adjusting  J3 2,400 6,000 8,400 Supplies No. 126 Date Explanation Ref. Debit Credit Balance 2017 June 30 30 Balance Adjusting  J3 1,260 1,600 340 Prepaid Insurance No. 130 Date Explanation Ref. Debit Credit Balance 2017 June 30 30 Balance Adjusting  J3 250 3,000 2,750 Equipment No. 157 Date Explanation Ref. Debit Credit Balance 2017 June 30 Balance  14,400 Accumulated Depreciation—Equipment No. 158 Date Explanation Ref. Debit Credit Balance 2017 June 30 Adjusting J3 300 300 PROBLEM 3-1A (Continued) Weygandt Financial Accounting IFRS 3e Solutions Manual 3-45 PROBLEM 3-1A (Continued) (c) CUONO COMPANY SpA Adjusted Trial Balance June 30, 2017 Debit Credit Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Equipment ........................................................... Accumulated Depreciation— Equipment ....................................................... Accounts Payable .............................................. Unearned Service Revenue ............................... Salaries and Wages Payable ............................. Share Capital—Ordinary .................................... Service Revenue ................................................. Supplies Expense ............................................... Depreciation Expense ........................................ Insurance Expense ............................................. Salaries and Wages Expense ............................ Rent Expense ..................................................... Utilities Expense ................................................. € 6,200 8,400 340 2,750 14,400 1,260 300 250 6,000 1,000 185 €41,085 € 300 4,885 1,500 1,600 20,000 12,800 €41,085 LO: 3.5, 3.6, 3.7 Difficulty: Hard BLOOMCODE: Analysis AACSB: Analytic Weygandt Financial Accounting IFRS 3e Solutions Manual 3-46 PROBLEM 3-2A (a) J1 Date Account Titles and Explanation Ref. Debit Credit Aug. 31 Insurance Expense (€400 X 3) ........... Prepaid Insurance ...................... 722 130 1,200 1,200 31 Supplies Expense (€3,300 – €900) ........ Supplies ..................................... 631 126 2,400 2,400 31 Depreciation Expense (€4,500 X 1/4) + (€2,400 X 1/4) ........ Accumulated Depreciation— Buildings ................................ 711 144 1,725 1,125 Accumulated Depreciation— Equipment .............................. 158 600 31 Unearned Rent Revenue .................... Rent Revenue ............................. 208 429 4,100 4,100 31 Salaries and Wages Expense ............ Salaries and Wages Payable ..... 726 212 400 400 31 Accounts Receivable ......................... Rent Revenue ............................. 112 429 3,700 3,700 31 Interest Expense ................................. Interest Payable [(€80,000 X 9%) X 1/12] .......... 718 230 600 600 (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance Aug. 31 Balance  19,600 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-47 PROBLEM 3-2A (Continued) Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance Aug. 31 Adjusting J1 3,700 3,700 Supplies No. 126 Date Explanation Ref. Debit Credit Balance Aug. 31 31 Balance Adjusting  J1 2,400 3,300 900 Prepaid Insurance No. 130 Date Explanation Ref. Debit Credit Balance Aug. 31 31 Balance Adjusting  J1 1,200 6,000 4,800 Land No. 140 Date Explanation Ref. Debit Credit Balance Aug. 31 Balance  25,000 Buildings No. 143 Date Explanation Ref. Debit Credit Balance Aug. 31 Balance  125,000 Accumulated Depreciation—Buildings No. 144 Date Explanation Ref. Debit Credit Balance Aug. 31 Adjusting J1 1,125 1,125 Equipment No. 157 Date Explanation Ref. Debit Credit Balance Aug. 31 Balance  26,000 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-50 Salaries and Wages Expense No. 726 Date Explanation Ref. Debit Credit Balance Aug. 31 31 Balance Adjusting  J1 400 51,000 51,400 Utilities Expense No. 732 Date Explanation Ref. Debit Credit Balance Aug. 31 Balance  9,400 (c) LAZY RIVER RESORT, LTD. Adjusted Trial Balance August 31, 2017 Debit Credit Cash .................................................................... Accounts Receivable ......................................... Supplies .............................................................. Prepaid Insurance .............................................. Land ..................................................................... Buildings ............................................................. Accumulated Depreciation—Buildings ............. Equipment ........................................................... Accumulated Depreciation—Equipment ........... Accounts Payable ............................................... Unearned Rent Revenue .................................... Salaries and Wages Payable.............................. Interest Payable .................................................. Mortgage Payable ............................................... Share Capital—Ordinary .................................... Dividends ............................................................ Rent Revenue ..................................................... Maintenance and Repairs Expense ................... Supplies Expense ............................................... Depreciation Expense ........................................ Interest Expense ................................................. Insurance Expense ............................................. Salaries and Wages Expense ............................ Utilities Expense ................................................. € 19,600 3,700 900 4,800 25,000 125,000 26,000 5,000 3,600 2,400 1,725 600 1,200 51,400 9,400 €280,325 € 1,125 600 6,500 3,300 400 600 80,000 100,000 87,800 €280,325 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-51 PROBLEM 3-2A (Continued) (d) LAZY RIVER RESORT, LTD. Income Statement For the Three Months Ended August 31, 2017 Revenues Rent revenue ................................................. €87,800 Expenses Salaries and wages expense ........................ €51,400 Utilities expense ............................................ 9,400 Maintenance and repairs expense ............... 3,600 Supplies expense .......................................... 2,400 Depreciation expense ................................... 1,725 Insurance expense ........................................ 1,200 Interest expense ............................................ 600 Total expenses....................................... 70,325 Net income ............................................................ €17,475 LAZY RIVER RESORT, LTD. Retained Earnings Statement For the Three Months Ended August 31, 2017 Retained Earnings, June 1 .................................................... € 0 Add: Net income .................................................................. 17,475 17,475 Less: Dividends .................................................................... 5,000 Retained Earnings, August 31 .............................................. €12,475 Weygandt Financial Accounting IFRS 3e Solutions Manual 3-52 For full file download at: financial accounting ifrs 3e solution financial accounting ifrs 3e test bank financial accounting ifrs edition pdf financial accounting ifrs edition solution financial accounting ifrs 3rd edition pdf download financial accounting ifrs edition 3e financial accounting ifrs 2nd edition solution financial accounting ifrs 3e edition solution financial accounting ifrs 3rd edition solution chapter 1