Horngren’s Accounting, Volume 1, 11th Canadian Edition by Tracie Miller-Nobles Solution manual

Insurance, Accumulated Amortization, Amortization Expense, Salaries Payable, and other
liability accounts.
Horngren’s Accounting, 11Ce  Chapter 2  Instructor’s Solutions Manual
Copyright © 2020 Pearson Canada Inc.  2-63
Ethical Issue  EI2-1
Is Associated Charities Trust taking advantage of the bank’s generosity or the other users of the
charity?
Students who approve of the Associated Charities action can point out that the bank allows
Associated Charities to overdraw its cash balance. In this view, Associated Charities is merely
using a privilege the bank has granted. Most banks are civic-minded and are relatively generous
with charitable organizations.
Students who disapprove may argue that Associated Charities is using the bank’s money and
presumably incurring interest charges. In this view, Associated Charities should curtail its
spending until it has the money to cover its expenditures and maintain a positive balance.
Alternatively, Associated Charities could sign a note payable to borrow the needed money. The
related interest is the bank’s compensation. By incurring this interest, the charity is essentially
using future donations to pay the cost.
The bank is the key player in this case. Whether the bank approves or disapproves of the
Associated Charities overdrafts is critical to the ethical decision. Approval by the bank turns the
overdrafts into an unsecured loan to Associated Charities. Disapproval by the bank would no
doubt be communicated to Mr. Glowa.
The other users (volunteers, recipients, donors, etc.) could also lose if the charity ends up in
financial trouble.
Steps used to analyze ethical dilemmas:
1.  Recognize an ethical situation and the ethical issues involved.
2.  Identify and analyze the principal elements in the situation.
3.  Identify the alternatives, and weigh the impact of each alternative on various users.
Horngren’s Accounting, 11Ce  Chapter 2  Instructor’s Solutions Manual
2-64  Copyright © 2020 Pearson Canada Inc.
Problems
Group A
Req. 1 (transaction analysis) (20-30 min.)  P2-1A
Baycrest Cinema Company
Date  Analysis of Transactions
2019
Nov.  1  Given in the problem; not required for Nov. 1 transaction.
1  The expense Rent Expense is increased. Increases in expenses are recorded by
debits; therefore, debit Rent Expense.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
2  The asset Land is increased. Increases in assets are recorded by debits; therefore,
debit Land.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
5  The asset Cash is increased. Increases in assets are recorded by debits; therefore,
debit Cash.
The liability Note Payable is increased. Increases in liabilities are recorded by
credits; therefore, credit Note Payable.
10  The asset Supplies is increased. Increases in assets are recorded by debits;
therefore, debit Supplies.
The liability Accounts Payable is increased. Increases in liabilities are recorded
by credits; therefore, credit Accounts Payable.
16  The expense Salaries Expense is increased. Increases in expenses are recorded
by debits; therefore, debit Salaries Expense.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
22  The liability Accounts Payable is decreased. Decreases in liabilities are recorded
by debits; therefore, debit Accounts Payable.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
28  The owner’s equity of the business is decreased. Decreases in owner’s equity are
recorded by debits. Decreases due to withdrawals are debited to the withdrawals
account; therefore, debit Darrell Palusky, Withdrawals.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
29  The expense Property Tax Expense is increased. Increases in expenses are
recorded by debits; therefore, debit Property Tax Expense.
The asset Cash is decreased. Decreases in assets are recorded by credits;
therefore, credit Cash.
30  The asset Cash is increased. Increases in assets are recorded by debits; therefore,
debit Cash.
Horngren’s Accounting, 11Ce  Chapter 2  Instructor’s Solutions Manual
Copyright © 2020 Pearson Canada Inc.  2-65
The revenue Service Revenue is increased. Increases in revenues are recorded by
credits; therefore, credit Service Revenue.
Horngren’s Accounting, 11Ce  Chapter 2  Instructor’s Solutions Manual