Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley solution manual

 
               Cash                 $15,000      Deferred revenue         $35,000
               Supplies                12,620      Loan payable 22,500                                     
               Spare parts           15,000      Common shares             30,000
               Equipment            65,000      Retained earnings        20,120
                                          $ 107,620                                               $107,620
c. Inventory refers to products that have been purchased for resale to customers. Josephine’s business does not have any products for resale to customers, but instead it provides a service, water park.
 
d. Josephine’s business does not produce a product for which customers would be extended credit. Josephine would want her customers to pay in advance.  Unlike a car dealership where the company can repossess the car if the customer does not pay, it would not be possible for Josephine to repossess a day at the water park once it is complete. Furthermore, the cost for the service is likely not too high for customers to pay right away. Thus, Josephine’s business is not likely to have an accounts receivable account. If Josephine provided water park usage to a company for several people, it is possible that she would invoice the customer and allow them to pay after the event.  In this case, Josephine would have an accounts receivable.
 
LO 5  BT: AP  Difficulty: M Time: 20 min.  AACSB: None  CPA: cpa-t001  CM: Reporting

USER PERSPECTIVE SOLUTIONS
 
UP1-1
Selling price of each model of laptop computer
Cost of each model of laptop computer
Selling price of assembly services
Cost of assembly services
Wages paid to any employees
Costs of parts inventory that would be required
Information on customers, as in name, model purchased, account balance
Information on suppliers such as time to delivery and payment policy
Warranty information on laptops sold
Return policy for products sold
         
An accounting software package could reliably keep track of the above information, as well as other relevant information for running the business. 
 
A bank would want assurance that the loan will be repaid.  This might include information about past sales and further sales prospects, as well as the cost of goods and services provided.  A bank would also want to know about other current financial obligations of the business, and what the loan would be used for.  It would be of particular interest whether the loan would be used to cover operating expenses or used for expansion.  The bank would also be interested in any other assets you may have that could be used as security for the loan. 
 
LO 2  BT: C  Difficulty: M Time: 20 min.  AACSB: None  CPA: cpa-t001  CM: Reporting
 

UP1-2  
a.
 The loan officer would be interested in your company’s ability to repay the loan and thus would look at net income and cash flows. The loan officer would also need to consider a backup plan in the event your company does not make the required loan payments. For example, which assets of your company could be given to the bank in lieu of repayment, or sold to provide cash for repayment? The loan officer would also look at your statement of financial position to identify the assets owned by your company, but would prefer up-to-date market values for these assets rather than the historical costs listed on the statement of financial position.  Any other current or non-current liabilities would be of interest to the loan officer, as they may indicate previous obligations that could compromise the ability to repay a new loan.