Instructor key — Module 1: Demystifying Small Business Accounting: Cash vs. Accrual & QuickBooks Reality
Instructor/solutions version. Keep separate from the student assignment during assessment.
Calculation solution
Collections are $950,000; AR rises $65,000 and advances rise $15,000. Calculate simplified accrual revenue.
Calculated result: 1,000,000.00000000 (actual USD, except where the question requests a ratio or return). Earned uncollected sales increase revenue; unearned collections do not. Use appropriate display rounding while retaining formula precision. This result is generated from the independent assignment inputs, not copied from the chapter answer.
Conceptual and judgment marking
A complete conceptual response identifies the measure's economic purpose, the defined perimeter and the risk of confusing it with another metric. Award up to 20 points for explanation, not terminology alone. For the applied question, award up to 15 for linking evidence to a concrete acquisition consequence; do not require an optimistic recommendation.
Spreadsheet marking
Award 15 of the 30 spreadsheet points for live links from assumptions, 10 for a coherent 10% mutation and predicted direction, and 5 for units, readable formatting and checks. Inspect formulas directly rather than accepting cached numbers. Use the instructor workbook for the controlling capstone model; this independent lab uses different inputs.
Calculation marking: 10 points for the correct equation/perimeter, 15 for intermediate arithmetic, and 10 for result, units and rounding. Overall pass requires 80 and all critical checks in the student version.
Original chapter practice solutions
The following solutions were moved out of the chapter so full answers no longer sit immediately below student questions. Match them in order to the chapter's practice problems.
Worked solution: Remove the loan and contribution to identify total customer collections of $580,000. Remove the $20,000 advances to obtain $560,000 collected for completed work. That is not necessarily accrual revenue: earned but uncollected sales and any release of beginning advances must also be considered. Financing inflows never become sales simply because they enter the operating bank account.
Worked solution: Purchases are $420,000 + $35,000 = $455,000. Cost sold is $80,000 + $455,000 − $105,000 = $430,000. Other accrual expenses are $260,000 + $12,000 − (−$4,000) = $276,000. The prepaid decline increases expense because benefits purchased earlier were consumed now. Total costs from these two pools are $706,000; the payable adjustment is not repeated in overhead.
Worked solution: Reverse the premature December revenue and receivable by $60,000, then recognize the sale in January when acceptance occurs. December revenue and pretax earnings fall $60,000 before any related cost adjustment. December cash is unchanged because no collection occurred. Review the associated inventory and cost of goods sold as well; revenue cutoff and inventory cutoff belong to the same production transaction.
Worked solution: Reduce ending inventory by $40,000 to $170,000 and record the corresponding expense, reducing current pretax profit by $40,000. This correction is noncash when recognized. Beginning inventory matters because an error originating in an earlier period may require prior-period analysis rather than charging the entire amount against the latest year's operating performance. The assignment of the loss affects both earnings trends and the opening balance sheet.
Worked solution: Obtain the adjusting journal entries and the dated before-and-after trial balances, along with the ledger accounts affected. Determine whether the difference concerns timing, returns, duplicate sales, entity scope, or report settings. A supported correction can explain the difference, but an unexplained plug cannot. Preserve the $70,000 as unresolved until its source and economic period are established, and show how it could affect normalized earnings and the contemplated price.