SOLUTIONS
MANUAL:Accounting n
28th Edition, Carl S. Warre
b nb nb nb nb
,n
, CHAPTERnb1
INTRODUCTIONnbTOnbACCOUNTINGnbANDnbBUSINESS
DISCUSSIONnbQUESTIONS
1. Somenbusersnbofnbaccountingnbinformationnbincludenbmanagers,nbemployees,nbinvestors,nb
creditors,nbcustomers,nbandnbthenbgovernment.
2. Thenbrolenbofnbaccountingnbisnbtonbprovidenbinformationnbfornbmanagersnbtonbusenbinnboperatin
gnbthenbbusiness.n b Innbaddition,nbaccountingnbprovidesnbinformationnbtonbothersnbtonbusenbinn
bassessingnbthenbeconomicnbperformancenbandnbconditionnbofnbthenbbusiness.
3. Then b corporaten b formn b allowsn b then b companyn b ton b obtainn b largen b amountsn b ofn b resourcesn
b byn b issuingn b stock.nbFornbthisnbreason,nbmostnbcompaniesnbthatnbrequirenblargenbinvestmentsnbi
nnbproperty,nbplant,nbandnbequipmentnbarenborganizednbasnbcorporations.
4. No.nbThenbbusinessnbentitynbconceptnblimitsnbthenbrecordingnbofnbeconomicnbdatanbtonbtransac
tionsnbdirectlynbaffectingnbthenbactivitiesnbofnbthenbbusiness.nbThenbpaymentnbofnbthenbinterest
nbofnb$4,500nbisnbanbpersonalnbtransactionnbofnbJoshnbReillynbandnbshouldnbnotnbbenbrecordedn
bbynbDispatchnbDeliverynbService.
5. Thenblandnbshouldnbbenbrecordednbatnbitsnbcostnbofnb$167,500nbtonbReliablenbRepairnbService.nbT
hisnbisnbconsistentn b withnbthenbcostnbconcept.
6. a.
No.nbThenboffernbofnb$2,000,000nbandnbthenbincreasenbinnbthenbassessednbvaluenbshould
nbnotnbbenbrecognizedn binnbthenbaccountingnbrecordsnbbecausenblandnbisnbrecordednbonnbthe
nbcostnbbasis.
b.
Cashnbwouldnbincreasenbbynb$2,125,000,nblandnbwouldnbdecreasenbbynb$900,000,nband
nbowner’snbequitynbwouldnbincreasenbbynb$1,225,000.
7. Annbaccountnbreceivablenbisnbanbclaimnbagainstnbanbcustomernbfornbgoodsnbornbservicesnbsold.nb
Annbaccountnbpayablenbisnbannbamountnbowednbtonbanbcreditornbfornbgoodsnbornbservicesnbpurch
ased.nbTherefore,nbannbaccountnbreceivablenbinnbthenbrecordsnbofnbthenbsellernbisnbannbaccountnb
payablenbinnbthenbrecordsnbofnbthenbpurchaser.
8. (b)n b Thenb businessnb realizednb netnb incomenb ofnb $91,000nb ($679,000nb –nb $588,000).
9. (a)n b n b Thenb businessnb incurrednb anb netnb lossnb ofnb $75,000nb ($640,000nb –nb $715,000).
10. (a)n b n b Netnb incomenbornbnetnb loss
(b) Owner’snb equitynb atnb thenb endnb ofnb thenb period
(c) Cashnb atnb thenb endnb ofnb thenb period
, 1-1
©nb 2021nb Cengagenb Learning,nb Inc.nb Maynb notnb benb scanned,nb copiednb ornb duplicated,nb ornb postednb tonb anb publiclynb accessiblenb website,nb innb wholenb
ornb innb part.
MANUAL:Accounting n
28th Edition, Carl S. Warre
b nb nb nb nb
,n
, CHAPTERnb1
INTRODUCTIONnbTOnbACCOUNTINGnbANDnbBUSINESS
DISCUSSIONnbQUESTIONS
1. Somenbusersnbofnbaccountingnbinformationnbincludenbmanagers,nbemployees,nbinvestors,nb
creditors,nbcustomers,nbandnbthenbgovernment.
2. Thenbrolenbofnbaccountingnbisnbtonbprovidenbinformationnbfornbmanagersnbtonbusenbinnboperatin
gnbthenbbusiness.n b Innbaddition,nbaccountingnbprovidesnbinformationnbtonbothersnbtonbusenbinn
bassessingnbthenbeconomicnbperformancenbandnbconditionnbofnbthenbbusiness.
3. Then b corporaten b formn b allowsn b then b companyn b ton b obtainn b largen b amountsn b ofn b resourcesn
b byn b issuingn b stock.nbFornbthisnbreason,nbmostnbcompaniesnbthatnbrequirenblargenbinvestmentsnbi
nnbproperty,nbplant,nbandnbequipmentnbarenborganizednbasnbcorporations.
4. No.nbThenbbusinessnbentitynbconceptnblimitsnbthenbrecordingnbofnbeconomicnbdatanbtonbtransac
tionsnbdirectlynbaffectingnbthenbactivitiesnbofnbthenbbusiness.nbThenbpaymentnbofnbthenbinterest
nbofnb$4,500nbisnbanbpersonalnbtransactionnbofnbJoshnbReillynbandnbshouldnbnotnbbenbrecordedn
bbynbDispatchnbDeliverynbService.
5. Thenblandnbshouldnbbenbrecordednbatnbitsnbcostnbofnb$167,500nbtonbReliablenbRepairnbService.nbT
hisnbisnbconsistentn b withnbthenbcostnbconcept.
6. a.
No.nbThenboffernbofnb$2,000,000nbandnbthenbincreasenbinnbthenbassessednbvaluenbshould
nbnotnbbenbrecognizedn binnbthenbaccountingnbrecordsnbbecausenblandnbisnbrecordednbonnbthe
nbcostnbbasis.
b.
Cashnbwouldnbincreasenbbynb$2,125,000,nblandnbwouldnbdecreasenbbynb$900,000,nband
nbowner’snbequitynbwouldnbincreasenbbynb$1,225,000.
7. Annbaccountnbreceivablenbisnbanbclaimnbagainstnbanbcustomernbfornbgoodsnbornbservicesnbsold.nb
Annbaccountnbpayablenbisnbannbamountnbowednbtonbanbcreditornbfornbgoodsnbornbservicesnbpurch
ased.nbTherefore,nbannbaccountnbreceivablenbinnbthenbrecordsnbofnbthenbsellernbisnbannbaccountnb
payablenbinnbthenbrecordsnbofnbthenbpurchaser.
8. (b)n b Thenb businessnb realizednb netnb incomenb ofnb $91,000nb ($679,000nb –nb $588,000).
9. (a)n b n b Thenb businessnb incurrednb anb netnb lossnb ofnb $75,000nb ($640,000nb –nb $715,000).
10. (a)n b n b Netnb incomenbornbnetnb loss
(b) Owner’snb equitynb atnb thenb endnb ofnb thenb period
(c) Cashnb atnb thenb endnb ofnb thenb period
, 1-1
©nb 2021nb Cengagenb Learning,nb Inc.nb Maynb notnb benb scanned,nb copiednb ornb duplicated,nb ornb postednb tonb anb publiclynb accessiblenb website,nb innb wholenb
ornb innb part.
