TEST BANK
J
, CHAPTERJ1
INTRODUCTIONJTOJACCOUNTINGJANDJBUSINESSJ
DISCUSSIONJQUESTIONS
1. SomeJusersJofJaccountingJinformationJincludeJmanagers,Jemployees,Jinvestors,Jcreditors,Jcus
tomers,JandJtheJgovernment.
2. TheJroleJofJaccountingJisJtoJprovideJinformationJforJmanagersJtoJuseJinJoperatingJtheJbusiness.J InJa
ddition,JaccountingJprovidesJinformationJtoJothersJtoJuseJinJassessingJtheJeconomicJperforman
ceJandJconditionJofJtheJbusiness.
3. TheJ corporateJformJ allowsJ theJ companyJtoJ obtainJlargeJ amountsJ ofJresourcesJ byJ issuingJ stock.JFo
rJthisJreason,JmostJcompaniesJthatJrequireJlargeJinvestmentsJinJproperty,Jplant,JandJequipmentJareJorg
anizedJasJcorporations.
4. No.JTheJbusinessJentityJconceptJlimitsJtheJrecordingJofJeconomicJdataJtoJtransactionsJdirectlyJaffe
ctingJtheJactivitiesJofJtheJbusiness.JTheJpaymentJofJtheJinterestJofJ$4,500JisJaJpersonalJtransac
tionJofJJoshJReillyJandJshouldJnotJbeJrecordedJbyJDispatchJDeliveryJService.
5. TheJlandJshouldJbeJrecordedJatJitsJcostJofJ$167,500JtoJReliableJRepairJService.JThisJisJconsistentJwith
JtheJ costJ concept.
6. a.
No.JTheJofferJofJ$2,000,000JandJtheJincreaseJinJtheJassessedJvalueJshouldJnotJbeJrecognized
J inJtheJaccountingJrecordsJbecauseJlandJisJrecordedJonJtheJcostJbasis.
b.
CashJwouldJincreaseJbyJ$2,125,000,JlandJwouldJdecreaseJbyJ$900,000,JandJowner’sJequit
yJwouldJincreaseJbyJ$1,225,000.
7. AnJaccountJreceivableJisJaJclaimJagainstJaJcustomerJforJgoodsJorJservicesJsold.JAnJaccountJpay
ableJisJanJamountJowedJtoJaJcreditorJforJgoodsJorJservicesJpurchased.JTherefore,JanJaccountJreceiva
bleJinJtheJrecordsJofJtheJsellerJisJanJaccountJpayableJinJtheJrecordsJofJtheJpurchaser.
8. (b)J TheJ businessJ realizedJ netJ incomeJ ofJ $91,000J ($679,000J –J $588,000).
9. (a)J TheJ businessJ incurredJ aJ netJ lossJ ofJ $75,000J ($640,000J –J $715,000).
10. (a)J NetJincomeJorJnetJloss
(b) Owner’sJ equityJ atJ theJ endJ ofJtheJ period
(c) CashJatJtheJendJofJtheJperiod
1-1
©J2021J CengageJ Learning,JInc.J MayJnotJ beJscanned,JcopiedJorJ duplicated,J orJ postedJ toJaJpubliclyJ accessibleJ website,JinJ wholeJ orJinJpart.
,
, CHAPTERJ1 IntroductionJtoJAccountingJandJBusiness
PRACTICEJ EXERCISES
PEJ1-1A
$597,000.JUnderJtheJcostJconcept,JtheJlandJshouldJbeJrecordedJatJtheJcostJtoJBoulderJR
epairJService.
PEJ1-1B
$369,500.JUnderJtheJcostJconcept,JtheJlandJshouldJbeJrecordedJatJtheJcostJtoJClementin
eJRepairJService.
PEJ1-2A
a. A = LJ +J OE
$518,000 = $165,000J+JOE
OE = $353,000
b. A = LJ +J OE
+$86,200 = +$25,000J+JOE
OE = +$61,200
OEJonJDecemberJ31,J20Y9 = $353,000J+J$61,200
= $414,200
PEJ1-2B
a. A = LJ +J OE
$382,000 = $94,000J+JOE
OE = $288,000
b. A = LJ +J OE
– J = +$35,000J+JOEJ–
$63,000 = $98,000
OE = $288,000J–J$98,000
OEJonJDecemberJ31,J20Y9 = $190,000
PEJ1-3A
(2) AssetJ(AccountsJReceivable)JincreasesJbyJ$22,400;
Owner’sJEquityJ(DeliveryJServiceJFees)JincreasesJbyJ$22,400.
(3) LiabilityJ(AccountsJPayable)JdecreasesJbyJ$4,100;J
AssetJ(Cash)JdecreasesJbyJ$4,100.
(4) AssetJ(Cash)JincreasesJbyJ$14,700;
AssetJ(AccountsJReceivable)JdecreasesJbyJ$14,700.
(5) AssetJ(Cash)JdecreasesJbyJ$1,600;
Owner’sJEquityJ(TerryJYoung,JDrawing)JdecreasesJbyJ$1,600.
1-2
©J 2021J CengageJ Learning,J Inc.J MayJ notJ beJ scanned,J copiedJ orJ duplicated,J orJ postedJ toJ aJ publiclyJaccessibleJ website,J inJ wholeJ orJinJ part.
J
, CHAPTERJ1
INTRODUCTIONJTOJACCOUNTINGJANDJBUSINESSJ
DISCUSSIONJQUESTIONS
1. SomeJusersJofJaccountingJinformationJincludeJmanagers,Jemployees,Jinvestors,Jcreditors,Jcus
tomers,JandJtheJgovernment.
2. TheJroleJofJaccountingJisJtoJprovideJinformationJforJmanagersJtoJuseJinJoperatingJtheJbusiness.J InJa
ddition,JaccountingJprovidesJinformationJtoJothersJtoJuseJinJassessingJtheJeconomicJperforman
ceJandJconditionJofJtheJbusiness.
3. TheJ corporateJformJ allowsJ theJ companyJtoJ obtainJlargeJ amountsJ ofJresourcesJ byJ issuingJ stock.JFo
rJthisJreason,JmostJcompaniesJthatJrequireJlargeJinvestmentsJinJproperty,Jplant,JandJequipmentJareJorg
anizedJasJcorporations.
4. No.JTheJbusinessJentityJconceptJlimitsJtheJrecordingJofJeconomicJdataJtoJtransactionsJdirectlyJaffe
ctingJtheJactivitiesJofJtheJbusiness.JTheJpaymentJofJtheJinterestJofJ$4,500JisJaJpersonalJtransac
tionJofJJoshJReillyJandJshouldJnotJbeJrecordedJbyJDispatchJDeliveryJService.
5. TheJlandJshouldJbeJrecordedJatJitsJcostJofJ$167,500JtoJReliableJRepairJService.JThisJisJconsistentJwith
JtheJ costJ concept.
6. a.
No.JTheJofferJofJ$2,000,000JandJtheJincreaseJinJtheJassessedJvalueJshouldJnotJbeJrecognized
J inJtheJaccountingJrecordsJbecauseJlandJisJrecordedJonJtheJcostJbasis.
b.
CashJwouldJincreaseJbyJ$2,125,000,JlandJwouldJdecreaseJbyJ$900,000,JandJowner’sJequit
yJwouldJincreaseJbyJ$1,225,000.
7. AnJaccountJreceivableJisJaJclaimJagainstJaJcustomerJforJgoodsJorJservicesJsold.JAnJaccountJpay
ableJisJanJamountJowedJtoJaJcreditorJforJgoodsJorJservicesJpurchased.JTherefore,JanJaccountJreceiva
bleJinJtheJrecordsJofJtheJsellerJisJanJaccountJpayableJinJtheJrecordsJofJtheJpurchaser.
8. (b)J TheJ businessJ realizedJ netJ incomeJ ofJ $91,000J ($679,000J –J $588,000).
9. (a)J TheJ businessJ incurredJ aJ netJ lossJ ofJ $75,000J ($640,000J –J $715,000).
10. (a)J NetJincomeJorJnetJloss
(b) Owner’sJ equityJ atJ theJ endJ ofJtheJ period
(c) CashJatJtheJendJofJtheJperiod
1-1
©J2021J CengageJ Learning,JInc.J MayJnotJ beJscanned,JcopiedJorJ duplicated,J orJ postedJ toJaJpubliclyJ accessibleJ website,JinJ wholeJ orJinJpart.
,
, CHAPTERJ1 IntroductionJtoJAccountingJandJBusiness
PRACTICEJ EXERCISES
PEJ1-1A
$597,000.JUnderJtheJcostJconcept,JtheJlandJshouldJbeJrecordedJatJtheJcostJtoJBoulderJR
epairJService.
PEJ1-1B
$369,500.JUnderJtheJcostJconcept,JtheJlandJshouldJbeJrecordedJatJtheJcostJtoJClementin
eJRepairJService.
PEJ1-2A
a. A = LJ +J OE
$518,000 = $165,000J+JOE
OE = $353,000
b. A = LJ +J OE
+$86,200 = +$25,000J+JOE
OE = +$61,200
OEJonJDecemberJ31,J20Y9 = $353,000J+J$61,200
= $414,200
PEJ1-2B
a. A = LJ +J OE
$382,000 = $94,000J+JOE
OE = $288,000
b. A = LJ +J OE
– J = +$35,000J+JOEJ–
$63,000 = $98,000
OE = $288,000J–J$98,000
OEJonJDecemberJ31,J20Y9 = $190,000
PEJ1-3A
(2) AssetJ(AccountsJReceivable)JincreasesJbyJ$22,400;
Owner’sJEquityJ(DeliveryJServiceJFees)JincreasesJbyJ$22,400.
(3) LiabilityJ(AccountsJPayable)JdecreasesJbyJ$4,100;J
AssetJ(Cash)JdecreasesJbyJ$4,100.
(4) AssetJ(Cash)JincreasesJbyJ$14,700;
AssetJ(AccountsJReceivable)JdecreasesJbyJ$14,700.
(5) AssetJ(Cash)JdecreasesJbyJ$1,600;
Owner’sJEquityJ(TerryJYoung,JDrawing)JdecreasesJbyJ$1,600.
1-2
©J 2021J CengageJ Learning,J Inc.J MayJ notJ beJ scanned,J copiedJ orJ duplicated,J orJ postedJ toJ aJ publiclyJaccessibleJ website,J inJ wholeJ orJinJ part.
