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SOLUTIONS MANUAL
For Financial Accounting Seventh Canadian Edition
- William (Bill) Thomas
Wendy M. Tietz Walter T. Harrison, Jr.Greg Berberich Catherine Seguin 1 / 4
. ii Contents
Chapter 1: The Financial Statements 1
Chapter 2: Recording Business Transactions 48
Chapter 3: Accrual Accounting and Income 114
Chapter 4: Cash and Receivables 192
Chapter 5: Inventory and Cost of Goods Sold 237
Chapter 6: Property, Plant, and Equipment, and Intangible Assets 295
Chapter 7: Liabilities 361
Chapter 8: Shareholders’ Equity 417
Chapter 9: The Statement of Cash Flows 466
Chapter 10: Financial Statement Analysis 532
Appendix B: Investments and the Time Value of Money 588 2 / 4
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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 the 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.
2.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 a)$300,000 = $150,000 + $150,000 b)290,000 = 90,000 + 200,000 c)220,000 = 100,000 + 120,000 3 / 4
Financial Accounting Seventh Canadian Edition Instructor’s Solutions Manual
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(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 1.Shareholders’ Equity = Assets – Liabilities It would not change in analyzing a household or a neighbourhood 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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