List of Check Figures and Solution Hints
to accompany
Phillips/ Libby/Libby: Fundamentals of Financial Accounting, 3e
Chapter 1
Mini-ExercisesM1-1 / (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,
(3) Total assets = $115,500
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, (3) Total assets = $113,850
PA1-2 / (1) Profitable since NI = $23,450
PA1-3 / (1) Net income = $100, (3) Total assets = $2,259, (4) Cash used in financing activities = ($4)
PB1-1 / (1) Net income = $25,150, (3) Total assets = $118,400
PB1-2 / (4) Cash increase of $13,900
PB1-3 / (1) Net income = $81,282, (3) Total assets = $1,039,731, (4) Cash used in financing activities = ($11,681)
Skill Development Cases
S1-1
S1-2 / (4) Cash = $519 (million)
(2) Lowe’s 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, Ashley’s net worth = $1,550. Based on market value, Ashley’s net worth = $2,150
S1-7 / Net income = $51, Total assets = $3,754
Continuing Case
CC1 / (1) Net income = $2,400, (3) Total assets = $73,930
Chapter 2
Mini-ExercisesM2-1 / 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 account for $3,940, Credit (right side) Notes Payable account for $3,940
M2-12 / Ending balance in Cash account = $8,008 debit, Total current assets = $9,080
M2-13 / (a) dr Cash (+A) $55,000 cr Contributed Capital (+SE) $55,000, (e) No transaction
M2-14 / (d) dr Accounts Payable (-L) $1,500 cr Cash (-A) $1,500
M2-15 / (b) No transaction, (e) dr Equipment (+A) $2,200 cr Cash (-A) $1,000 cr Notes Payable (+L) $1,200
M2-16 / (c) dr Cash (+A) $400 cr Accounts Receivable (-A) $400
M2-17 / Total current assets = $3,600, Total assets = $50,500, Total current liabilities = $2,500
M2-18 / (1) Total assets = $2,076,280, Total stockholders’ equity = $44,881,000
M2-19 / 2.0, yes
M2-20 / (a) Decrease, 1.87 vs. 2.0, (c) Increase, 2.13 vs. 2.0
M2-21 / (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, Contributed Capital (+SE) $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 Contributed Capital (+SE) $60,000, (c) No transaction
E2-12 / (1) (e) Not a business transaction, Ending balance of Equipment = $22,000, (3) Ending balance of Cash = $36,000, (4) Total assets = $70,000
E2-13 / (c) Used cash to purchase supplies costing $1,500
E2-14 / (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
(4) Total assets = $679,000
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 Long-term 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 = $218,000, (3) (b) $1,780,000 + $218,000 = $1,998,000, (4) Liabilities
PB2-2 / (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
PB2-3 / (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
Skill Development Cases
S2-1 / (2) Assets = $41,164,000,000
S2-2 / (2) Lowe’s Current Ratio = 1.2
S2-3 / Solutions vary depending on company and/or accounting period selected
S2-4 / (1) Total Assets = $15,000
S2-5 / (3) Conservatism
S2-6 / Inclusion of the owner’s 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-ExercisesM3-1 / 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 expense -$1,500
M3-8 / Net income = $2,775
M3-9 / (e) $125
M3-10 / (h) $800
M3-11 / (d) dr Cash (+A) $2,250 cr Unearned revenue (+L) $2,250
M3-12 / (g) dr Accounts payable (-L) $1,750 cr Cash (-A) $1,750
M3-13 / (b) dr Cash (+A) $25,000 cr Contributed capital (+SE) $25,000
M3-14 / (e) dr Accounts receivable (+A) $180 cr Service revenue (+R, +SE) $180
M3-15 / (e) dr Supplies (+A) $2,500 cr Donations revenue (+R, +SE) $2,500
M3-16 / (b) dr Accounts receivable (+A) $2,000 cr Repair/service revenue (+R, +SE) $2,000
M3-17 / (a) Assets +$15,000, Liabilities = NE, SE (Lesson revenue) +$15,000
M3-18 / (h) Assets = NE, Liabilities +$800, SE (Utilities expense) - $800
M3-19 / Net income = $9,575
M3-20 / Net income = $42,120, Total assets = $151,850
M3-21 / 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
E3-12 / Total debits = $89,150, Total credits = $89,150
E3-13 / (1)(c) Purchased $1,000 of supplies, paying $200 cash and putting the balance on account
(2) Total debits = $111,800
E3-14 / (2) 12/31 Balance of unearned revenue = $253
E3-15 / (f) Assets = NE, Liabilities (Accounts payable) +$1,250, SE (+Utilities expense) -$1,250
E3-16 / (e) dr Supplies (+A) +$1,000 cr Accounts payable (+L) $1,000
E3-17 / Ending Cash balance = $45,500 debit
E3-18 / Total debits =$81,950
E3-19 / (1) (g) Paid $3,000 of the accounts payable balance, (2) Net income = $2,540, Total assets = $15,800
E3-20 / (f) Utilities expense E + Debit, Utilities (or Accounts) payable L + Credit
E3-21 / (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 / (1) and (2) Ending Cash balance = $134,560
(3) Total debits = $303,670, Total credits = $303,670
PB3-1 / (d) Debit: 3, Credit: 11
PB3-2 / (c) dr Equipment (+A) $82,000 cr Long-term notes payable (+L) $82,000
PB3-3 / (1) and (2) Ending Cash balance = $23,500
(3) Total debits = $68,100, Total credits = $68,100
Skill Development Cases
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 / Solutions vary depending on company and/or accounting 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 year’s net income will be lower when those assets are expensed
S3-5 / You should not comply with Mr. Lynch’s 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
(2) Total debits = $136,000, Total credits = $136,000
S3-7 / Ending Cash balance = $9,555 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-ExercisesM4-1 / (4) B, F
M4-2 / (5) B
M4-3 / (3) A
M4-4 / (2) dr Interest receivable (+A) $250 cr Interest revenue (+R +SE) $250
M4-5 / (a) Assets = NE, Liabilities (Unearned rent revenue) -$400, SE (Rent revenue) +$400
M4-6 / (b) dr Insurance expense(+E, -SE) $100 cr Prepaid insurance (-A) $100 ($100 = 1/24 x $2,400)
M4-7 / (c) Assets (Interest receivable) +$100, Liabilities = NE, SE(Interest revenue) +$100
M4-8 / (c) dr Interest receivable (+A) $100 cr Interest revenue (+R +SE) $100 ($100 = 1/12 x $1,200)
M4-9 / (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
M4-10 / (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
M4-11 / Total debits = $6,200, Total credits = $6,200
M4-12 / Net income = $4,910
M4-13 / Ending Retained earnings balance = $5,610
M4-14 / Total assets = $17,930
M4-15 / 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
M4-16 / Ending balance in the Supplies account after adjustment = $1,300 debit
M4-17 / Ending balance in the Accumulated depreciation account after adjustment = $6,000 credit
M4-18 / Ending balance in the Prepaid insurance account after adjustment = $3,600 debit
M4-19 / Ending balance in the Unearned revenue account after adjustment = $2,500 credit
M4-20 / Ending balance in the Wages expense account after adjustment = $21,200 debit
M4-21 / Ending balance in the Interest payable account after adjustment = $500 credit
M4-22 / Ending balance in the Dividends declared account after adjustment = $200 debit