INSTRUCTORS SOLUTIONS

INSTRUCTOR’S SOLUTIONS

MANUAL

Financial Accounting Eighth Canadian Edition

• William (Bill) Thomas

Wendy M. Tietz Greg Berberich Catherine Seguin 1 / 4

Contents Chapter 1: The Financial Statements .............................................................................................. 1 Chapter 2: Recording Business Transactions .................................................................................. 50 Chapter 3: Accrual Accounting and Income ................................................................................... 119 Chapter 4: Cash and Receivables .................................................................................................... 193 Chapter 5: Inventory and Cost of Goods Sold ................................................................................ 240 Chapter 6: Property, Plant, and Equipment, and Intangible Assets ................................................ 311 Chapter 7: Liabilities ....................................................................................................................... 384 Chapter 8: Shareholders’ Equity ..................................................................................................... 439 Chapter 9: The Statement of Cash Flows ........................................................................................ 486 Chapter 10: Financial Statement Analysis ...................................................................................... 551 Appendix: Investments and the Time Value of Money .................................................................. 611 2 / 4

1 Chapter 1 The Financial Statements Short Exercises (5 min.) S 1-1 1.Assets are resources controlled by the company as a result of past events and from which t he company expects to receive future economic benefits.Shareholders’ equity represents the insider claims of a business, the claims to the assets held by the owners of the business.Assets and shareholders’ equity differ in that shareholders’ equity is a claim to assets.Assets must be at least as large as shareholders’ equity. Equity can be smaller than assets.

• Both liabilities and shareholders’ equity are claims to assets.

Liabilities are the outsider claims to the assets of a business. Shareholders’ equity represents the insider claims to the assets of the business.(5 min.) S 1-2 Total assets = Total liabilities + Shareholders’ equity

• $300,000 = $150,000 + $150,000
• 290,000 = 90,000 + 200,000
• 220,000 = 100,000 + 120,000

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Financial Accounting Eighth Canadian Edition Instructor’s Solutions Manual 2 (continued) S 1-2

A different presentation should be:

a) Total assets = Total liabilities + Shareholders’ equity

= $150,000 + $150,000 = $300,000

b) Shareholders’ equity = Total assets – Total liabilities

= $290,000 – $90,000 = $200,000

c) Total liabilities = Total assets – Shareholders’ equity

= $220,000 – $120,000 = $100,000

(5 min.) S 1-3

• Shareholders’ Equity = Assets – Liabilities

It would not change in analyzing a household or a single Dairy Queen restaurant’s information.

2.Liabilities = Assets – Shareholders’ Equity (5-10 min.) S 1-4 a.Accounts payable L g.Accounts receivable A b.Common shares E h.Long-term debt L c.Cash Ai.Merchandise inventories A d.Retained earnings E j.Notes payable L e.Land Ak.Accrued expenses payable L f.Prepaid expenses A l.Equipment A (5 min.) S 1-5 1.Income and expenses 2.Net income, or net earnings (or net loss, if negative) .

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