SOLUTIONS MANUAL
INTERMEDIATE ACCOUNTING, VOLUME 2,
14TH CANADIAN EDITION
Table of Contents
Chapter 13. Non-financial and Current
Liabilities
Chapter 14. Long-Term Financial Liabilities
Chapter 15. Shareholders’ Equity
Chapter 16. Complex Financial Instruments
Chapter 17. Earnings per Share
Chapter 18. Income Taxes
Chapter 19. Pensions and Other Post-
Employment Benefits
Chapter 20. Leases
Chapter 21. Accounting Changes and Error
Analysis
Chapter 22. Statement of Cash Flows
Chapter 23. Other Measurement and
Disclosure Issues
CHAPTER 13: NON-FINANCIAL AND CURRENT
LIABILITIES
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 13.1
(a) Working capital is the excess of total current assets over total
current liabilities. It represents the liquid buffer that is
available to meet the financial demands of the company’s
operating cycle. Current liabilities place a demand on the
company’s current assets. Management of the due dates of
current liabilities and management of current assets to
, generate cash on a timely basis are important for effective
management of business operations. Effective management
of working capital to achieve high liquidity may also
contribute to positive cash from operating activities, as seen
on the statement of cash flows.
(b) Wellson can improve its management of working capital by
focusing on the management of current liabilities as well as
current assets. For example, if Wellson has a cash flow
shortage, it can take advantage of the full credit period
extended by its suppliers. As another example, Wellson may
also time the due dates of short-term notes payable to
coincide with expected periods of positive cash flow.
LO 1 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.2
07/01 Purchases .................................................. 60,000
Accounts Payable ............................ 60,000
To record purchase on account
Freight in .................................................... 1,200
Cash .................................................. 1,200
To record freight on purchase
07/03 Accounts Payable ..................................... 6,000
Purchase Returns and Allowances 6,000
07/10 Accounts Payable ..................................... 54,000
Cash ($54,000 X 98%) ...................... 52,920
Purchase Discounts......................... 1,080
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.3
07/01 Inventory .................................................... 60,000
Accounts Payable ............................ 60,000
To record purchase on account
Inventory .................................................... 1,200
, Cash .................................................. 1,200
To record freight on purchase
07/03 Accounts Payable ..................................... 6,000
Inventory ........................................... 6,000
07/10 Accounts Payable ..................................... 54,000
Cash ($54,000 X 98%) ...................... 52,920
Inventory ........................................... 1,080
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.4
11/01/27 Cash ..................................................... 40,000
Notes Payable ............................. 40,000
12/31/27 Interest Expense1 ................................ 600
Interest Payable .......................... 600
1
($40,000 X 9% X 2/12)
02/01/28 Notes Payable ...................................... 40,000
Interest Payable ................................... 600
Interest Expense2 ................................ 300
Cash ............................................ 40,900
2
($40,000 X 9% X 1/12)
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.5
01/01/28 Interest Payable ................................... 600
Interest Expense......................... 600
02/01/28 Notes Payable ...................................... 40,000
Interest Expense1 ................................ 900
Cash ............................................ 40,900
1
($40,000 X 9% X 3/12)
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
, BRIEF EXERCISE 13.6
(a)
Using a financial calculator:
PV $ 60,000
I ? % Yields .744 % per month or 8.9% per year
N 3
PMT 0
FV $ (61,350)
Type 0
Excel formula =RATE(nper,pmt,pv,fv,type)
Result: .0074444
INTERMEDIATE ACCOUNTING, VOLUME 2,
14TH CANADIAN EDITION
Table of Contents
Chapter 13. Non-financial and Current
Liabilities
Chapter 14. Long-Term Financial Liabilities
Chapter 15. Shareholders’ Equity
Chapter 16. Complex Financial Instruments
Chapter 17. Earnings per Share
Chapter 18. Income Taxes
Chapter 19. Pensions and Other Post-
Employment Benefits
Chapter 20. Leases
Chapter 21. Accounting Changes and Error
Analysis
Chapter 22. Statement of Cash Flows
Chapter 23. Other Measurement and
Disclosure Issues
CHAPTER 13: NON-FINANCIAL AND CURRENT
LIABILITIES
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 13.1
(a) Working capital is the excess of total current assets over total
current liabilities. It represents the liquid buffer that is
available to meet the financial demands of the company’s
operating cycle. Current liabilities place a demand on the
company’s current assets. Management of the due dates of
current liabilities and management of current assets to
, generate cash on a timely basis are important for effective
management of business operations. Effective management
of working capital to achieve high liquidity may also
contribute to positive cash from operating activities, as seen
on the statement of cash flows.
(b) Wellson can improve its management of working capital by
focusing on the management of current liabilities as well as
current assets. For example, if Wellson has a cash flow
shortage, it can take advantage of the full credit period
extended by its suppliers. As another example, Wellson may
also time the due dates of short-term notes payable to
coincide with expected periods of positive cash flow.
LO 1 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.2
07/01 Purchases .................................................. 60,000
Accounts Payable ............................ 60,000
To record purchase on account
Freight in .................................................... 1,200
Cash .................................................. 1,200
To record freight on purchase
07/03 Accounts Payable ..................................... 6,000
Purchase Returns and Allowances 6,000
07/10 Accounts Payable ..................................... 54,000
Cash ($54,000 X 98%) ...................... 52,920
Purchase Discounts......................... 1,080
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.3
07/01 Inventory .................................................... 60,000
Accounts Payable ............................ 60,000
To record purchase on account
Inventory .................................................... 1,200
, Cash .................................................. 1,200
To record freight on purchase
07/03 Accounts Payable ..................................... 6,000
Inventory ........................................... 6,000
07/10 Accounts Payable ..................................... 54,000
Cash ($54,000 X 98%) ...................... 52,920
Inventory ........................................... 1,080
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.4
11/01/27 Cash ..................................................... 40,000
Notes Payable ............................. 40,000
12/31/27 Interest Expense1 ................................ 600
Interest Payable .......................... 600
1
($40,000 X 9% X 2/12)
02/01/28 Notes Payable ...................................... 40,000
Interest Payable ................................... 600
Interest Expense2 ................................ 300
Cash ............................................ 40,900
2
($40,000 X 9% X 1/12)
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 13.5
01/01/28 Interest Payable ................................... 600
Interest Expense......................... 600
02/01/28 Notes Payable ...................................... 40,000
Interest Expense1 ................................ 900
Cash ............................................ 40,900
1
($40,000 X 9% X 3/12)
LO 3 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
, BRIEF EXERCISE 13.6
(a)
Using a financial calculator:
PV $ 60,000
I ? % Yields .744 % per month or 8.9% per year
N 3
PMT 0
FV $ (61,350)
Type 0
Excel formula =RATE(nper,pmt,pv,fv,type)
Result: .0074444
