Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley solution manual
Common shares 18,000
Equipment 18,695 Retained earnings 2,706
Total Assets $ 29,656 Total Liabilities and
Shareholders’ Equity $29,656
c. It is unlikely that Lydia will have an account called ‘accounts receivable’ since most of her sales will be on a cash basis. If customers purchased flowers and other items on credit, then Lydia would have accounts receivable on her statement of financial position that would represent the amount that she is owed from her customers. However, florist shops sell products that are relatively inexpensive, therefore most customers, if not all, will have enough funds to pay cash for their purchase, which is why it is unlikely that Lydia will have an account called “accounts receivable”. It may be necessary for her to have an accounts receivable account if she has customers that purchase frequently and/or in large quantities, such as an event planner. In that case, it would be appropriate to ship a large order of flowers along with an invoice. Until the invoice is paid (by the event planner for example), the amount owing would be “accounts receivable”.
LO 5 BT: AP Difficulty: M Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
AP1-15B
a. Item Classification
Cash in bank accounts Asset
Chemical supplies on hand Asset
Loans owed to an investor Liability
Retained earnings Shareholders’ equity
Spare parts Asset
Common shares Shareholders’ equity
Amount prepaid by customers
to access park in August Liability
Cost of kayaks and pedal boats Asset
b. Slip and Slide Ltd.
Statement of Financial Position
As at July 31, 2xxx