Accounting Tools for Business Decisions Making, 8ek k k k k k
Paul Kimmel, Jerry Weygandt, Jill Mitchell (Solutions
k k k k k k k
k Manual All Chapters, 100% Original Verified, A+ Grade)
k k k k k k k
All Chapters Solutions Manual Supplement files
k k k k k k
download link at the end of this file.
k k k k k k k k
CHAPTER 1 k
Introduction to Financial Statements k k k
Learning Objectives
k
1. Identify the forms of business organization and the uses of accounting information.
k k k k k k k k k k k
2. Explain the three principal types of business activity.
k k k k k k k
3. Describe the four financial statements and how they are prepared.
k k k k k k k k k
*4. Explain the career opportunities in accounting.
k k k k k
, ANSWERS TO QUESTIONS k k
1. The three basic forms of business organizations are (1) sole proprietorship, (2) partnership, and
k k k k k k k k k k k k k
(3) corporation.
k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
2. Advantages of a corporation are limited liability (stockholders not being personally liable for cor-
k k k k k k k k k k k k k
porate debts), easy transferability of ownership, and ease of raising funds. Disadvantages of a
k k k k k k k k k k k k k k
corporation are increased taxation and government regulations.
k k k k k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
3. Proprietorships and partnerships receive favorable tax treatment compared to corporations and are
k k k k k k k k k k k
easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships
k k k k k k k k k k k k k
and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and
k k k k k k k k k k k k k
difficulty in obtaining financing compared to corporations.
k k k k k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
4. Yes. Companies can choose one of the hybrid business forms, limited liability corporations (LLCs)
k k k k k k k k k k k k k
or subchapter S corporations, which combine the tax advantages of partnerships with the limited
k k k k k k k k k k k k k k
liability of corporations.
k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment, or pay taxes
k k k k k k k k k k k k k k k k k
without receiving, using, or dispensing financial information. Accounting provides financial
k k k k k k k k k k
information to interested users through the preparation and distribution of financial statements.
k k k k k k k k k k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
6. Internal users are managers who plan, organize, and run a business. To assist management,
k k k k k k k k k k k k k
kaccounting provides timely internal reports. Examples include financial comparisons of operating
k k k k k k k k k k
kalternatives, projections of income from new sales campaigns, forecasts of cash needs for the next
k k k k k k k k k k k k k k
kyear, and financial statements.
k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
7. External users are those outside the business who have either a present or potential direct financial
k k k k k k k k k k k k k k k
interest (investors and creditors) or an indirect financial interest (taxing authorities, regu- latory
k k k k k k k k k k k k k
agencies, labor unions, customers, and economic planners).
k k k k k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
8. The four most common types of data analytics and the basic question each addresses are:
k k k k k k k k k k k k k k
Descriptive (What happened?), Diagnostic (Why did it happen?), Predictive (What is likely to
k k k k k k k k k k k k k
happen?), and Prescriptive (What should we do about it?).
k k k k k k k k k
LO 1 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Analysis and Interpretation
k k k k k k k k k k k k k k k k
,Questions Chapter 1 (Continued) k k k
9. The three types of business activities are financing activities, investing activities, and operating
k k k k k k k k k k k k
activities. Financing activities include borrowing money and selling shares of stock. Investing
k k k k k k k k k k k k
activities include the purchase and sale of property, plant, and equipment. Operating activities
k k k k k k k k k k k k k
include selling goods, performing services, and purchasing inventory.
k k k k k k k k
LO 2 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
10. (a) Income statement. k (d) Balance sheet. k
(b) Balance sheet. k (e) Balance sheet. k
(c) Income statement. k (f) Balance sheet. k
LO 3 BT: K Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
11. When a company pays dividends, it reduces the amount of assets available to pay creditors.
k k k k k k k k k k k k k k
Therefore, banks and other creditors monitor dividend payments to ensure they do not put a
k k k k k k k k k k k k k k k
company’s ability to make debt payments at risk.
k k k k k k k k
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Anallysis and Interpretation
k k k k k k k k k k k k k k k k
12. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
k k k k k k k k k k k k k k
from revenues. In addition, net income appears in the retained earnings statement—it is shown as an
k k k k k k k k k k k k k k k k
addition to the beginning-of-period retained earnings. Indirectly, the net income of a company is
k k k k k k k k k k k k k k
also included in the balance sheet. It is included in the retained earnings account which appears in
k k k k k k k k k k k k k k k k k
the stockholders’ equity section of the balance sheet.
k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
13. The primary purpose of the statement of cash flows is to provide financial information about the
k k k k k k k k k k k k k k k
cash receipts and cash payments of a business for a specific period of time.
k k k k k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
14. The three categories of the statement of cash flows are operating activities, investing activities, and
k k k k k k k k k k k k k k
financing activities. The categories were chosen because they represent the three principal types
k k k k k k k k k k k k k
of business activities.
k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
15. Retained earnings is the net income retained in a corporation. Retained earnings is increased by
k k k k k k k k k k k k k k
net income and is decreased by dividends and a net loss.
k k k k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
16. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
, Questions Chapter 1 (Continued) k k k
17. (a) Assets are resources owned by a business. Liabilities are amounts owed to creditors. Put more
k k k k k k k k k k k k k k k
simply, liabilities are existing debts and obligations. Stockholders’ equity is the ownership claim
k k k k k k k k k k k k k
on net assets. k k k
(b) The items that affect stockholders’ equity are issuance of common stock
k k k k k k k k k k
and the components of retained earnings (dividends, revenues, and expenses).
k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
18. The liabilities are (b) Accounts payable and (g) Salaries and wages payable.
k k k k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
19. (a) k Net income from the income statement is reported as an increase to retained earnings on the
k k k k k k k k k k k k k k k
retained earnings statement.
k k k
(b) The ending amount on the retained earnings statement is reported as the retained earnings
k k k k k k k k k k k k k
amount on the balance sheet.
k k k k k
(c) The ending amount on the statement of cash flows is reported as the cash amount on the
k k k k k k k k k k k k k k k k
kbalance sheet. k
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
20. The purpose of the management discussion and analysis section is to provide management’s
k k k k k k k k k k k k
views on its ability to pay short-term obligations, its ability to fund operations and expansion, and its
k k k k k k k k k k k k k k k k k
results of operations. The MD&A section is a required part of the annual report.
k k k k k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
21. An unqualified opinion shows that, in the opinion of an independent auditor, the financial state-
k k k k k k k k k k k k k k
ments have been presented fairly, in conformity with generally accepted accounting principles.
k k k k k k k k k k k k
This gives investors more confidence that they can rely on the figures reported in the financial
k k k k k k k k k k k k k k k k
statements.
k
LO 3 BT: C Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
22. Information included in the notes to the financial statements clarifies information presented in the
k k k k k k k k k k k k k
kfinancial statements and includes descriptions of accounting policies, explanations of uncertain-
k k k k k k k k k k
kties and contingencies, and statistics and details too voluminous to be reported in the financial
k k k k k k k k k k k k k k
kstatements.
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: None AICPA FC: Reporting
k k k k k k k k k k k k k
23. Using dollar amounts, Apple’s accounting equation (in millions) is:
k k k k k k k k
Assets = Liabilities + Stockholders’ Equity k
$323,,888 $258,549 $65,339
LO 3 BT: AP Difficulty: E TOT: 2 min. AACSB: Analytic AICPA AC: Reporting
k k k k k k k k k k k k k
Paul Kimmel, Jerry Weygandt, Jill Mitchell (Solutions
k k k k k k k
k Manual All Chapters, 100% Original Verified, A+ Grade)
k k k k k k k
All Chapters Solutions Manual Supplement files
k k k k k k
download link at the end of this file.
k k k k k k k k
CHAPTER 1 k
Introduction to Financial Statements k k k
Learning Objectives
k
1. Identify the forms of business organization and the uses of accounting information.
k k k k k k k k k k k
2. Explain the three principal types of business activity.
k k k k k k k
3. Describe the four financial statements and how they are prepared.
k k k k k k k k k
*4. Explain the career opportunities in accounting.
k k k k k
, ANSWERS TO QUESTIONS k k
1. The three basic forms of business organizations are (1) sole proprietorship, (2) partnership, and
k k k k k k k k k k k k k
(3) corporation.
k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
2. Advantages of a corporation are limited liability (stockholders not being personally liable for cor-
k k k k k k k k k k k k k
porate debts), easy transferability of ownership, and ease of raising funds. Disadvantages of a
k k k k k k k k k k k k k k
corporation are increased taxation and government regulations.
k k k k k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
3. Proprietorships and partnerships receive favorable tax treatment compared to corporations and are
k k k k k k k k k k k
easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships
k k k k k k k k k k k k k
and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and
k k k k k k k k k k k k k
difficulty in obtaining financing compared to corporations.
k k k k k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
4. Yes. Companies can choose one of the hybrid business forms, limited liability corporations (LLCs)
k k k k k k k k k k k k k
or subchapter S corporations, which combine the tax advantages of partnerships with the limited
k k k k k k k k k k k k k k
liability of corporations.
k k k
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
k k k k k k k k k k k k k k
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment, or pay taxes
k k k k k k k k k k k k k k k k k
without receiving, using, or dispensing financial information. Accounting provides financial
k k k k k k k k k k
information to interested users through the preparation and distribution of financial statements.
k k k k k k k k k k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
6. Internal users are managers who plan, organize, and run a business. To assist management,
k k k k k k k k k k k k k
kaccounting provides timely internal reports. Examples include financial comparisons of operating
k k k k k k k k k k
kalternatives, projections of income from new sales campaigns, forecasts of cash needs for the next
k k k k k k k k k k k k k k
kyear, and financial statements.
k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
7. External users are those outside the business who have either a present or potential direct financial
k k k k k k k k k k k k k k k
interest (investors and creditors) or an indirect financial interest (taxing authorities, regu- latory
k k k k k k k k k k k k k
agencies, labor unions, customers, and economic planners).
k k k k k k k
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
8. The four most common types of data analytics and the basic question each addresses are:
k k k k k k k k k k k k k k
Descriptive (What happened?), Diagnostic (Why did it happen?), Predictive (What is likely to
k k k k k k k k k k k k k
happen?), and Prescriptive (What should we do about it?).
k k k k k k k k k
LO 1 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Analysis and Interpretation
k k k k k k k k k k k k k k k k
,Questions Chapter 1 (Continued) k k k
9. The three types of business activities are financing activities, investing activities, and operating
k k k k k k k k k k k k
activities. Financing activities include borrowing money and selling shares of stock. Investing
k k k k k k k k k k k k
activities include the purchase and sale of property, plant, and equipment. Operating activities
k k k k k k k k k k k k k
include selling goods, performing services, and purchasing inventory.
k k k k k k k k
LO 2 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
10. (a) Income statement. k (d) Balance sheet. k
(b) Balance sheet. k (e) Balance sheet. k
(c) Income statement. k (f) Balance sheet. k
LO 3 BT: K Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
11. When a company pays dividends, it reduces the amount of assets available to pay creditors.
k k k k k k k k k k k k k k
Therefore, banks and other creditors monitor dividend payments to ensure they do not put a
k k k k k k k k k k k k k k k
company’s ability to make debt payments at risk.
k k k k k k k k
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Anallysis and Interpretation
k k k k k k k k k k k k k k k k
12. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
k k k k k k k k k k k k k k
from revenues. In addition, net income appears in the retained earnings statement—it is shown as an
k k k k k k k k k k k k k k k k
addition to the beginning-of-period retained earnings. Indirectly, the net income of a company is
k k k k k k k k k k k k k k
also included in the balance sheet. It is included in the retained earnings account which appears in
k k k k k k k k k k k k k k k k k
the stockholders’ equity section of the balance sheet.
k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
13. The primary purpose of the statement of cash flows is to provide financial information about the
k k k k k k k k k k k k k k k
cash receipts and cash payments of a business for a specific period of time.
k k k k k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
14. The three categories of the statement of cash flows are operating activities, investing activities, and
k k k k k k k k k k k k k k
financing activities. The categories were chosen because they represent the three principal types
k k k k k k k k k k k k k
of business activities.
k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
15. Retained earnings is the net income retained in a corporation. Retained earnings is increased by
k k k k k k k k k k k k k k
net income and is decreased by dividends and a net loss.
k k k k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
16. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
, Questions Chapter 1 (Continued) k k k
17. (a) Assets are resources owned by a business. Liabilities are amounts owed to creditors. Put more
k k k k k k k k k k k k k k k
simply, liabilities are existing debts and obligations. Stockholders’ equity is the ownership claim
k k k k k k k k k k k k k
on net assets. k k k
(b) The items that affect stockholders’ equity are issuance of common stock
k k k k k k k k k k
and the components of retained earnings (dividends, revenues, and expenses).
k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
18. The liabilities are (b) Accounts payable and (g) Salaries and wages payable.
k k k k k k k k k k k
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
19. (a) k Net income from the income statement is reported as an increase to retained earnings on the
k k k k k k k k k k k k k k k
retained earnings statement.
k k k
(b) The ending amount on the retained earnings statement is reported as the retained earnings
k k k k k k k k k k k k k
amount on the balance sheet.
k k k k k
(c) The ending amount on the statement of cash flows is reported as the cash amount on the
k k k k k k k k k k k k k k k k
kbalance sheet. k
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
20. The purpose of the management discussion and analysis section is to provide management’s
k k k k k k k k k k k k
views on its ability to pay short-term obligations, its ability to fund operations and expansion, and its
k k k k k k k k k k k k k k k k k
results of operations. The MD&A section is a required part of the annual report.
k k k k k k k k k k k k k k
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
21. An unqualified opinion shows that, in the opinion of an independent auditor, the financial state-
k k k k k k k k k k k k k k
ments have been presented fairly, in conformity with generally accepted accounting principles.
k k k k k k k k k k k k
This gives investors more confidence that they can rely on the figures reported in the financial
k k k k k k k k k k k k k k k k
statements.
k
LO 3 BT: C Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
k k k k k k k k k k k k k
22. Information included in the notes to the financial statements clarifies information presented in the
k k k k k k k k k k k k k
kfinancial statements and includes descriptions of accounting policies, explanations of uncertain-
k k k k k k k k k k
kties and contingencies, and statistics and details too voluminous to be reported in the financial
k k k k k k k k k k k k k k
kstatements.
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: None AICPA FC: Reporting
k k k k k k k k k k k k k
23. Using dollar amounts, Apple’s accounting equation (in millions) is:
k k k k k k k k
Assets = Liabilities + Stockholders’ Equity k
$323,,888 $258,549 $65,339
LO 3 BT: AP Difficulty: E TOT: 2 min. AACSB: Analytic AICPA AC: Reporting
k k k k k k k k k k k k k
