CHAPTER 1 CA
INTRODUCTION TO ACCOUNTING AND BUSINESS CA CA CA CA
1-1
©CA 2021CA CengageCA Learning,CA Inc.CA MayCA notCA beCA scanned,CA copiedCA orCA duplicated,CA orCA postedCA toCA aCA publiclyCA accessibleCA w
ebsite,CA inCA wholeCA orCA inCA part.
, DISCUSSION QUESTIONS CA
1. Some users of accounting information include managers, employees, investors, credi
CA CA CA CA CA CA CA CA CA
tors, customers, and the government.
CA CA CA CA
2. The role of accounting is to provide information for managers to use in operating the b
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
usiness. In addition, accounting provides information to others to use in assessing the
C A CA CA CA CA CA CA CA CA CA CA CA CA
economic performance and condition of the business.
CA CA CA CA CA CA
3. The corporate form allows the company to obtain large amounts of resources by is
CA CA CA CA CA CA CA CA CA CA CA CA CA
suing stock. For this reason, most companies that require large investments in property, p
CA CA CA CA CA CA CA CA CA CA CA CA CA
lant, and equipment are organized as corporations.
CA CA CA CA CA CA
4. No. The business entity concept limits the recording of economic data to transactions d
CA CA CA CA CA CA CA CA CA CA CA CA CA
irectly affecting the activities of the business. The payment of the interest of $4,500 is
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
CAa personal transaction of Josh Reilly and should not be recorded by Dispatch Deliver
CA CA CA CA CA CA CA CA CA CA CA CA CA
y Service.
CA
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is c
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
onsistent with the cost concept.
C A CA CA CA
6. a.
No. The offer of $2,000,000 and the increase in the assessed value should not b
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
e recognized in the accounting records because land is recorded on the cost basis.
CA C A CA CA CA CA CA CA CA CA CA CA CA
b.
Cash would increase by $2,125,000, land would decrease by $900,000, and ow
CA CA CA CA CA CA CA CA CA CA CA
ner’s equity would increase by $1,225,000.
CA CA CA CA CA
7. An account receivable is a claim against a customer for goods or services sold. An acco
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
unt payable is an amount owed to a creditor for goods or services purchased. Therefore,
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
an account receivable in the records of the seller is an account payable in the records
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
of the purchaser.
CA CA
8. (b) C A The business realized net income of $91,000 ($679,000 – $588,000).
CA CA CA CA CA CA CA CA CA
9. (a) CACA The business incurred a net loss of $75,000 ($640,000 – $715,000).
CA CA CA CA CA CA CA CA CA CA
10. (a) Net income or net loss
CACA CA CA CA CA
(b) Owner’s equity at the end of the period
CA CA CA CA CA CA CA
(c) Cash at the end of the period
CA CA CA CA CA CA
1-2
©CA2021CACengageCALearning, CAInc. CAMayCAnotCAbeCAscanned, CAcopiedCAorCAduplicated, CAorCApostedCAtoCAaCApubliclyCAaccessibleCAwebsit
e,CAinCAwholeCAorCAinCApart.
, CHAPTER CA Introduction to Accounting and Busine
CA CA CA CA
1 ss
PE 1- CA PRACTICE EXERCISES CA
3B
PE 1-1A
CA
$597,000. Under the cost concept, the land should be recorded at the cost to Bould
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
er Repair Service.
CA CA
PE 1-1B
CA
$369,500. Under the cost concept, the land should be recorded at the cost t
CA CA CA CA CA CA CA CA CA CA CA CA CA
o Clementine Repair Service.
CA CA CA
PE 1-2A
CA
a. A = L + OE C A C A
$518,000 = $165,000 + OE CA CA
OE = $353,000
b. A = L + OE C A C A
+$86,200 = +$25,000 + OE CA CA
OE = +$61,200
OE on December 31, 20
CA CA CA CA = $353,000 + $61,20 CA CA
Y9 0
= $414,200
PE 1-2B
CA
a. A = L + OE C A C A
$382,000 = $94,000 + OE CA CA
OE = $288,000
b. A = L + OE
C A C A
– CA = +$35,000 + OE – CA CA CA
$63,000 = $98,000
OE = $288,000 – CA
OE on December 31, 20Y
CA CA CA CA = $98,000
CA
9 $190,000
PE 1-3A
CA
(2) Asset (Accounts Receivable) increases by $22,400;
CA CA CA CA CA
Owner’s Equity (Delivery Service Fees) increases by $22,400.
CA CA CA CA CA CA CA
(3) Liability (Accounts Payable) decreases by $4,10
CA CA CA CA CA
0; Asset (Cash) decreases by $4,100.
CA CA CA CA CA
(4) Asset (Cash) increases by $14,700;
CA CA CA CA
Asset (Accounts Receivable) decreases by $14,700.
CA CA CA CA CA
(5) Asset (Cash) decreases by $1,600;
CA CA CA CA
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
CA CA CA CA CA CA CA
1-1
©CA 2021CA CengageCA Learning,CA Inc.CA MayCA notCA beCA scanned,CA copiedCA orCA duplicated,CA orCA postedCA toCA aCA publiclyCA accessibleCA w
ebsite,CA inCA wholeCA orCA inCA part.
,
INTRODUCTION TO ACCOUNTING AND BUSINESS CA CA CA CA
1-1
©CA 2021CA CengageCA Learning,CA Inc.CA MayCA notCA beCA scanned,CA copiedCA orCA duplicated,CA orCA postedCA toCA aCA publiclyCA accessibleCA w
ebsite,CA inCA wholeCA orCA inCA part.
, DISCUSSION QUESTIONS CA
1. Some users of accounting information include managers, employees, investors, credi
CA CA CA CA CA CA CA CA CA
tors, customers, and the government.
CA CA CA CA
2. The role of accounting is to provide information for managers to use in operating the b
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
usiness. In addition, accounting provides information to others to use in assessing the
C A CA CA CA CA CA CA CA CA CA CA CA CA
economic performance and condition of the business.
CA CA CA CA CA CA
3. The corporate form allows the company to obtain large amounts of resources by is
CA CA CA CA CA CA CA CA CA CA CA CA CA
suing stock. For this reason, most companies that require large investments in property, p
CA CA CA CA CA CA CA CA CA CA CA CA CA
lant, and equipment are organized as corporations.
CA CA CA CA CA CA
4. No. The business entity concept limits the recording of economic data to transactions d
CA CA CA CA CA CA CA CA CA CA CA CA CA
irectly affecting the activities of the business. The payment of the interest of $4,500 is
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
CAa personal transaction of Josh Reilly and should not be recorded by Dispatch Deliver
CA CA CA CA CA CA CA CA CA CA CA CA CA
y Service.
CA
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is c
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
onsistent with the cost concept.
C A CA CA CA
6. a.
No. The offer of $2,000,000 and the increase in the assessed value should not b
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
e recognized in the accounting records because land is recorded on the cost basis.
CA C A CA CA CA CA CA CA CA CA CA CA CA
b.
Cash would increase by $2,125,000, land would decrease by $900,000, and ow
CA CA CA CA CA CA CA CA CA CA CA
ner’s equity would increase by $1,225,000.
CA CA CA CA CA
7. An account receivable is a claim against a customer for goods or services sold. An acco
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
unt payable is an amount owed to a creditor for goods or services purchased. Therefore,
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
an account receivable in the records of the seller is an account payable in the records
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA
of the purchaser.
CA CA
8. (b) C A The business realized net income of $91,000 ($679,000 – $588,000).
CA CA CA CA CA CA CA CA CA
9. (a) CACA The business incurred a net loss of $75,000 ($640,000 – $715,000).
CA CA CA CA CA CA CA CA CA CA
10. (a) Net income or net loss
CACA CA CA CA CA
(b) Owner’s equity at the end of the period
CA CA CA CA CA CA CA
(c) Cash at the end of the period
CA CA CA CA CA CA
1-2
©CA2021CACengageCALearning, CAInc. CAMayCAnotCAbeCAscanned, CAcopiedCAorCAduplicated, CAorCApostedCAtoCAaCApubliclyCAaccessibleCAwebsit
e,CAinCAwholeCAorCAinCApart.
, CHAPTER CA Introduction to Accounting and Busine
CA CA CA CA
1 ss
PE 1- CA PRACTICE EXERCISES CA
3B
PE 1-1A
CA
$597,000. Under the cost concept, the land should be recorded at the cost to Bould
CA CA CA CA CA CA CA CA CA CA CA CA CA CA
er Repair Service.
CA CA
PE 1-1B
CA
$369,500. Under the cost concept, the land should be recorded at the cost t
CA CA CA CA CA CA CA CA CA CA CA CA CA
o Clementine Repair Service.
CA CA CA
PE 1-2A
CA
a. A = L + OE C A C A
$518,000 = $165,000 + OE CA CA
OE = $353,000
b. A = L + OE C A C A
+$86,200 = +$25,000 + OE CA CA
OE = +$61,200
OE on December 31, 20
CA CA CA CA = $353,000 + $61,20 CA CA
Y9 0
= $414,200
PE 1-2B
CA
a. A = L + OE C A C A
$382,000 = $94,000 + OE CA CA
OE = $288,000
b. A = L + OE
C A C A
– CA = +$35,000 + OE – CA CA CA
$63,000 = $98,000
OE = $288,000 – CA
OE on December 31, 20Y
CA CA CA CA = $98,000
CA
9 $190,000
PE 1-3A
CA
(2) Asset (Accounts Receivable) increases by $22,400;
CA CA CA CA CA
Owner’s Equity (Delivery Service Fees) increases by $22,400.
CA CA CA CA CA CA CA
(3) Liability (Accounts Payable) decreases by $4,10
CA CA CA CA CA
0; Asset (Cash) decreases by $4,100.
CA CA CA CA CA
(4) Asset (Cash) increases by $14,700;
CA CA CA CA
Asset (Accounts Receivable) decreases by $14,700.
CA CA CA CA CA
(5) Asset (Cash) decreases by $1,600;
CA CA CA CA
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
CA CA CA CA CA CA CA
1-1
©CA 2021CA CengageCA Learning,CA Inc.CA MayCA notCA beCA scanned,CA copiedCA orCA duplicated,CA orCA postedCA toCA aCA publiclyCA accessibleCA w
ebsite,CA inCA wholeCA orCA inCA part.
,
