.png){kind=logo}
Copyright © 2014 Pearson Canada Inc. i
SOLUTIONS MANUAL
Jo-Ann L. Johnston Carol A. Meissner Peter R. Norwood
ACCOUNTING
Ninth Canadian Edition Volu me 2 Charles T. Horngren / Walter T. Harrison / Jo-An n L. Jo hnston Carol A. Meissner / Peter R. Norwood 1 / 4
Copyright © 2014 Pearson Canada Inc. ii Table of Contents Chapter 11: Current Liabilities and Payroll .....................................................................................1 Chapter 12: Partnerships ................................................................................................................73 Chapter 13: Corporations: Share Capital and the Balance Sheet .................................................148 Chapter 14: Corporations: Retained Earnings and the Income Statement ...................................209 Chapter 15: Long-Term Liabilities ..............................................................................................272 Chapter 16: Investments and International Operations ...............................................................357 Chapter 17: The Cash Flow Statement ........................................................................................424 Chapter 18: Financial Statement Analysis ...................................................................................498 2 / 4
Copyright © 2014 Pearson Canada Inc. 1 Chapter 11 Current Liabilities and Payroll Questions 1.A current liability is one that is payable within the coming year or within the company’s normal operating cycle if longer than a year. All other liabilities are long-term.A c liability is a potential liability that depends on a future event arising out of past events. The future event will determine the amount and existence of the liability. A contingent liability may or may not become an actual obligation.
2.The company reports current liabilities for the short-term note payable of $50,000 and for interest payable of $1,000 ($50,000 × 0.04 × 6/12).
3.Retailers act as collecting agents for the federal government. Stores charge their customers GST, but the GST belongs to the federal government. The store has a liability to pay the federal government (Receiver General) the amount of tax collected less applicable input tax credits.
4.Current portion of long-term debt is the amount of the principal of long- term debt due within one year. Because this amount is due within one year, it is reported as a current liability on the balance sheet.
5.An accrued expense is an expense that has been incurred, but has not been paid. Because the expense has been incurred but not paid, it must be accrued, thus it is a liability.
6.Accounts payable and short-term notes payable are both current liabilities, that is, both are due and payable within one year or within the company’s operating cycle.D Accounts payable are amounts owed for products or services that are purchased on open account.Short-term notes payable are a form of financing.Accounts payable have no interest obligation (however, if paid late, interest or late payment charges could be incurred); short-term notes payable have a defined rate of interest due over the term of the note.
7.At the beginning of the school term, tuition collected in advance is a liability of the school because it is an unearned revenue. At the end of the term, the tuition is a revenue because the tuition has been earned. 3 / 4
- Copyright © 2014 Pearson Canada Inc.
8.A customer deposit is a liability because the company has not provided service for the deposit and must refund that cash to its customers under certain conditions. The security deposit collected by telephone and other utility companies is an example.
9.The company’s warranty expense for the year is $50,000, the estimate based on the current year’s sales. The matching objective demands that this expense be matched against the period’s revenues.
10.A contingent liability of a definite amount arises from guaranteeing the note payable or loan of another business. A contingent liability of indefinite amount arises from pending lawsuits in which the business is the defendant and for which a loss is either unlikely or not estimable.
11.The two basic categories of current liabilities are:
–culiabilities of known amount Accounts payable Accrued expenses S Payroll liabilities GST payable Salary, commission and bonus S Cterm Unearned revenues debt –culities that must be estimated E E I 12.Service businesses sell their employees’ services, so employment compensation is their major expense of doing business, just as cost of goods sold is the largest expense in merchandising.
13.The compensation of the factory supervisor is the company’s payroll expense. The company would debit the salary to Salary Expense. The compensation of the outside consultant would be debited to Consulting Expense.
14.Two elements of an employer’s payroll expense in addition to salaries, wages, commissions, and overtime pay are employee government benefits expense and fringe benefits .
15.The amount of income tax withheld from employee paycheques depends on the employee’s gross pay, the amount of nonrefundable tax credits claimed on the Personal Tax Credit Form (TD1) and the tax rate set by CRA.
16.Canada Pension Plan is a pension plan administered by the federal government. The Quebec Pension Plan is administered by the Quebec government. The governments collect contributions from employees and employers to fund the plan. The funds are used to pay retirement pensions, disability pensions, and death benefits to eligible Canadians and Quebec residents.
- / 4
.png)