Solution Manual for Accounting Principles 14th Edition by Jerry J.
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS
1. This is true. Virtually every organization and person in our society uses accounting information. Businesses,
investors, creditors, government agencies, and not-for-profit organizations must use accounting information to operate
effectively.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of an organization to
interested users of the information. The first activity of the accounting process is to identify economic events that are
relevant to a particular business. Once identified and measured, the events are recorded to provide a history of the
financial activities of the organization. Recording consists of keeping a chronological diary of these measured
events in an orderly and systematic manner. The information is communicated through the preparation and
distribution of accounting reports, the most common of which are called financial statements. A vital element in the
communication process is the accountant’s ability and responsibility to analyze and interpret the reported
information.
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision
makers.
(b) To assist management, managerial accounting provides internal reports. Examples include financial
comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash
needs for the next year.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell owner- ship shares of a
company.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore isjust one part of the
entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording, and
communicating economic events.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2022 balance sheet. This is true not
only at the time the land is purchased, but also over the time the land is held. In determining which measurement
principle to use (historical cost or fair value) companies weigh the factual nature of cost figures versus the relevance
of fair value. In general, companies use historical cost. Only in situations where assets are actively traded do
companies apply the fair value principle.
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
7. The monetary unit assumption requires that only transaction data that can be expressed in terms of money be
included in the accounting records. This assumption enables accounting to quantify (measure) economic events.
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
8. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the
activities of its owners and all other economic entities.
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
, Questions Chapter 1 (Continued)
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and
(3) corporation.
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is represented by transferable
shares of stock. This would allow Helen to raise money easily by selling a part of her ownership in the company.
Another advantage is that because holders of the shares (stockholders) enjoy limited liability; they are not
personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving
the corporation, the corporation enjoys an unlimited life.
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets. Put more simply,
liabilities are existing debts and obligations. Owner’s equity is the ownership claim on total assets.
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses.
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
LO3 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Reporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An
example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase
in the Equipment account which is offset by a decrease inthe Cash account is a specific example.
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
15. Business transactions are the economic events of the enterprise recorded by accountantsbecause they affect the
basic accounting equation.
(a) The death of the owner of the company is not a business transaction as it does not affect ofthe components of
the basic accounting equation.
(b) Supplies purchased on account is a business transaction as it affects the basic accounting equation.
(c) An employee being fired is not a business transaction as it does not affect any of the components
of the basic accounting equation.
(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the basic
accounting equation.
LO4 BT: C Difficulty: Moderate TOT: 4 min. AACSB: None AICPA FC: Reporting
16. (a) Decrease assets and decrease owner’s equity.
(b) Increase assets and decrease assets.
(c) Increase assets and increase owner’s equity.
(d) Decrease assets and decrease liabilities.
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS
1. This is true. Virtually every organization and person in our society uses accounting information. Businesses,
investors, creditors, government agencies, and not-for-profit organizations must use accounting information to operate
effectively.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of an organization to
interested users of the information. The first activity of the accounting process is to identify economic events that are
relevant to a particular business. Once identified and measured, the events are recorded to provide a history of the
financial activities of the organization. Recording consists of keeping a chronological diary of these measured
events in an orderly and systematic manner. The information is communicated through the preparation and
distribution of accounting reports, the most common of which are called financial statements. A vital element in the
communication process is the accountant’s ability and responsibility to analyze and interpret the reported
information.
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision
makers.
(b) To assist management, managerial accounting provides internal reports. Examples include financial
comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash
needs for the next year.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell owner- ship shares of a
company.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore isjust one part of the
entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording, and
communicating economic events.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2022 balance sheet. This is true not
only at the time the land is purchased, but also over the time the land is held. In determining which measurement
principle to use (historical cost or fair value) companies weigh the factual nature of cost figures versus the relevance
of fair value. In general, companies use historical cost. Only in situations where assets are actively traded do
companies apply the fair value principle.
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
7. The monetary unit assumption requires that only transaction data that can be expressed in terms of money be
included in the accounting records. This assumption enables accounting to quantify (measure) economic events.
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
8. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the
activities of its owners and all other economic entities.
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
, Questions Chapter 1 (Continued)
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and
(3) corporation.
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is represented by transferable
shares of stock. This would allow Helen to raise money easily by selling a part of her ownership in the company.
Another advantage is that because holders of the shares (stockholders) enjoy limited liability; they are not
personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving
the corporation, the corporation enjoys an unlimited life.
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets. Put more simply,
liabilities are existing debts and obligations. Owner’s equity is the ownership claim on total assets.
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses.
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
LO3 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Reporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An
example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase
in the Equipment account which is offset by a decrease inthe Cash account is a specific example.
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
15. Business transactions are the economic events of the enterprise recorded by accountantsbecause they affect the
basic accounting equation.
(a) The death of the owner of the company is not a business transaction as it does not affect ofthe components of
the basic accounting equation.
(b) Supplies purchased on account is a business transaction as it affects the basic accounting equation.
(c) An employee being fired is not a business transaction as it does not affect any of the components
of the basic accounting equation.
(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the basic
accounting equation.
LO4 BT: C Difficulty: Moderate TOT: 4 min. AACSB: None AICPA FC: Reporting
16. (a) Decrease assets and decrease owner’s equity.
(b) Increase assets and decrease assets.
(c) Increase assets and increase owner’s equity.
(d) Decrease assets and decrease liabilities.
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
