College Accounting A Contemporary Approach 3e David Haddock John Ellis Price Michael Farina by Testbanks solutions(Study guides)

College Accounting A Contemporary Approach 3e David Haddock John Ellis Price Michael Farina (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file.

CHAPTER 1 ACCOUNTING: THE LANGUAGE OF BUSINESS Chapter Opener: Thinking Critically Stockholders, the IRS, SEC, banks, lenders and creditors are all examples of organizations that would be interested in how Google is performing.

Fast Facts • Google’s mission is to organize the world’s information and make it universally accessible and useful. • “Googol” is the mathematical term for a 1 followed by 100 zeros. Google’s play on the term reflects the company’s mission to organize the immense amount of information available on the web. • Google’s interface can be customized into more than 100 languages. • Google’s culture is unlike any in corporate America—lava lamps and large rubber balls dot company headquarters and the company’s chef used to cook for the Grateful Dead. Google Inc. puts employees first when it comes to daily life in all of their offices. Managerial Implications: Thinking Critically Managers use financial information to make decisions about adding new products and services, offering current products and services, and choosing vendors. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Public, managerial, and governmental. 2. Auditing, tax, and management advisory services. 3. Advice on how to structure financial affairs in order to reduce taxes without violating tax laws. 4. Establish accounting policies, direct the accounting system, prepare and interpret financial statements, provide financial advice, prepare tax forms. 5. Sole proprietorship (owned by one person). Partnership (owned by two or more people). Corporation (can be owned by one person or many). 6. Measure business performance; separate entity. 7. Owners and managers: evaluate operations. Suppliers: assess ability of a firm to pay debts. Banks: ability to repay loans. Tax authorities: determine a tax base. Governmental agencies: legal compliance. Employees: wage levels and profit-sharing plans. 8. Statements of Financial Accounting Standards. 9. SEC, AICPA, AAA. 10. Regulation of financial reporting by publicly owned corporations. 11. The Public Company Accounting Reform and Investor Protection Act of 2002 was passed in response to the wave of corporate accounting scandals starting with the demise of Enron Corporation in 2001, the arrest of top executives at WorldCom and Adelphia Communications Corporations, and ultimately, the demise of Arthur Andersen, an international public accounting firm. 12. The purpose of the Public Company Accounting Oversight Board is to oversee the accounting profession through its investigative and enforcement powers and to discipline corrupt accountants and auditors. © 2015 McGraw-Hill Education. This is proprietary material soley for instructor use. Not authorized for sale or distribution in any manner.

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CRITICAL THINKING PROBLEM 1.1 Student answers will vary. The student’s reasons for choosing one form of ownership over another are more important than the specific choice made. Generate a discussion on the proposed name of the business. Ask the students if they think the name is creative. Sole proprietorship: Advantage—Heidi would be her own boss and could direct the business as she wants. Disadvantages—Heidi would be responsible for the debts and taxes of the business and may be limited in the amount of capital she could borrow to finance the business. Partnership: Advantage—Heidi would have one or more partners to assist with business operations and to contribute capital. Disadvantages—Heidi would have to share control of the business, as well as its profits. Heidi could be liable for the debts of the partnership. Corporation: Advantages—The business would be a separate entity. Capital would be easier to raise and liability would be limited to the assets of the business. Disadvantages—A corporation is a more complicated form of ownership and is usually more expensive to form. There is also more government regulation and, consequently, more paperwork with a corporation.

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SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Questions asked might include: What is the profit or loss?, How much cash does the business have?, How much money do customers owe the business?.How much money is owed to suppliers?, What is the change in sales volume?, and what is the cost of merchandise sold? 2. 3. 4. 5.

6. 7. 8.

Financial information is used to evaluate performance and make decisions about a business or a nonprofit Keep your employees, creditors, and investors happy. Yes, financial information is a tool for making business decisions that will yield the above results. Inaccurate accounting records and poor business decisions. Every business needs an efficient accounting system which accumulates financial data, classifies and summarizes the information. Without an accounting system, suppliers, lenders, investors, and governmental tax authorities would not be able to accurately make decisions based on the financial information of the company. The manager makes financial decisions based upon the financial information provided by the accountant. Yes. The firm’s financial records need to be separate from the owner’s personal financial records in order to evaluate and measure the performance of the business. These standards are important to management because they enhance comparability of reporting practices.

Ethical Dilemma: Yes. Ethics and accounting are intertwined. Financial Statement Analysis: Analyze Online: 1. Clothing, accessories, outerwear and footwear. 2. Investors, suppliers, and banks. To assist the users when making financial decisions. 3. 15 to 25 year-olds. 4. Economic entity because it is a business for profit. Teamwork: The bank will ask for information to assess the firm's finanacial position. Questions such as how much property does the firm own?; how much debt does the firm owe?; how much cash does the firm have? Anticipated cost of expansion and future income projections may also be requested. Banks might also require a list of your customers and vendors. There is no requirement to indicate to the bank problems you are having with certain customers and vendors. Internet Connection: The number of Accounting Standards Update used will vary from year to year. Accounting Standards Update are cited as “ASU2016-1 (year) (standard number in chronological order).

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SOLUTIONS TO PRACTICE TEST Part A True-False 1. TRUE 2. TRUE 3. FALSE 3. FALSE 4. TRUE 5. FALSE 6. FALSE 7. FALSE 8. TRUE 9. TRUE 10. TRUE 11. FALSE 12. FALSE Part B Completion 1. language of business 2. international accounting 3. FBI 4. governmental accounting 5. AAA 6. AICPA 7. generally accepted accounting principles 8. SEC 9. IRS 10. stockholders or shareholders 11. shares of stock 12. partnerships 13. social entity 14. recording, classifying 15. financial statements

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CHAPTER 2 ANALYZING BUSINESS TRANSACTIONS Chapter Opener: Thinking Critically The individuals in charge of keeping track of these transactions at Southwest as well as in other companies, are known as accountants. When recording the transactions, accountants are required to follow a set of rules and regulations known as GAAP. For every financial transaction that Southwest has, their accountants determine the accounts that were affected and then they record, report and then analyze these transactions. By doing so they can, at a specific point in time and over a stipulated period, be able to assess the company’s financial performance including profitability of the airline, assets owned by the company and of course the amount owed to creditors and owners.

Fast Facts • Southwest Airlines opened in 1971 with three planes flying between Houston, Dallas, and San Antonio. Southwest Airlines currently flies over 100 million passengers a year to 97 cities all across the country. • For the fiscal year 2012, the company’s net income was $421 million while its total operating revenue was $17.09 billion. • In 2012 Southwest served 63.3 million cans of soda, juices, and water; 14.1 million alcoholic beverages; 37.2 million bags of pretzels; 88.3 million bags of peanuts; 22.9 million Select-ASnacks; and 45.5million other snacks. Managerial Implications: Thinking Critically Answers will vary. Students should mention total assets and the type of assets, the liabilities the business would be responsible for, and whether the business is making a profit. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Assets = Liabilities + Owner’s Equity 2. Assets: property owned. Liabilities: debts. Owners’ equity: owner’s financial interest. 3. Assets, liabilities, and owner’s equity. 4. Revenue and expenses; net income or loss 5. Beginning-of-period capital balance, additional investments, net income/loss for period, less withdrawals ending capital balance. 6. Firm name, title of statement, date of statement or the period of time covered 7. Balance sheet shows position at particular date; increase of operations for a period of time 8. Inflow of money/assets resulting from sales or use of property. 9. Outflow of money/assets for costs used to produce revenue.

Discussion Questions (continued) 10. Subtract total expenses from revenue 11. Increases owner's equity 12. a. assets increase, owner’s equity increase b. one asset increase and another decrease; no change in total assets c. assets decrease, liabilities decrease d. assets increase, owner’s equity increase e. assets decrease, owner’s equity decrease f. assets decrease, owner’s equity decrease EXERCISE 2.1 Assets: Liabilities: Owners’ Equity

$125,900 $26,225 $99,675

EXERCISE 2.2 1. 2. 3. 4. 5.

$22,240 $19,020 $5,675 $36,725 $8,875

EXERCISE 2.3 Transaction 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Assets I I I/D I/D I D I I/D D D

Liabilities

Owners’ Equity I

I = Increase (-) D = Decrease (+)

I D I D D

EXERCISE 2.4

1. 2. 3. 4. 5.

Assets Cash $13,500 Dental Supplies 3,650 Dental Equipment 26,550 Office Furniture 8,000 Total $51,700

= = = = =

Liabilities Accounts Payable $23,180

$23,180

+ Owner’s Equity + David Malone, Capital $28,520 + + + + $28,520

EXERCISE 2.5 Assets Cash 1.

= +

Accounts Receivable

Liabilities

Equipment

Accounts = Payable

Owner’s Equity John Amos Capital + Revenue

+$60,000

+22,000

+3,100

-4,600

+22,000 +3,100

+5,050 -4,450

+3,200

8. Totals

-13,000 $44,250

+5,050 4,450

-3,200 +

$,1,850

$26,600

-13,000 $9,000

$60,000

$8,150

EXERCISE 2.6 Net income of $23,000 Revenue Repair Fees ………………………………………….. $51,150 Expenses Advertising Expense ………………………………………….. $6,300 Salaries Expense ………………………………………….. 19,100 Telephone Expense ………………………………………….. 1,150 Utilities Expense ………………………………………….. 1,600 Total Expenses ………………………………………….. $28,150 Net Income ………………………………………….. $23,000 EXERCISE 2.7 1. 2. 3. 4. 5. 6. 7.

Expenses

+4,600

5. 6.

+$60,000

Services were performed for cash. Equipment was purchased for cash. A payment was made on the amount owed to a creditor. An expense was paid in cash. Cash was received from charge customer. Services were performed on credit. An expense was paid in cash.

$4,450