Solution Manual for Accounting Principles 14th Edition by Jerry J. Weygandt, P
A A A A A A A A A AA A
aul D. Kimmel All Chapters
A A A A A
Complete Guide A+
A A
, CHAPTER 1 A
Accounting in Action A A
Learning Objectives
A
1. Identify the activities and users associated with accounting.
A A A A A A A
2. Explain the building blocks of accounting: ethics, principles, and assumption
A A A A A A A A A
s.
3. State the accounting equation, and define its components.
A A A A A A A
4. Analyze the effects of business transactions on the accounting equation.
A A A A A A A A A
5. Describe the four financial statements and how they are prepared.
A A A A A A A A A
*6. Explain the career opportunities in accounting.
A A A A A
*Note:A AllA asteriskedA Questions,A BriefA Exercises,A Exercises,A andA ProblemsA relateA toA materialA containedAinAthe
AappendixA toAtheAchapter.
, ANSWERS TO QUESTIONS A A
1. ThisA isA true.A VirtuallyA everyA organizationA andA personA inA ourA societyA usesA accountingA information.A Businesses,Ainve
stors,Acreditors,AgovernmentAagencies,AandA not-for-
profitAorganizationsAmustAuseA accountingAinformationA toAoperateAeffectively.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneAAAICPAAFC:AReporting
2. AccountingA isA theA processA ofA identifying,A recording,A andA communicatingA theA economicA eventsA ofA anA organizationA toA i
nterestedA usersA ofA theA information.A TheA firstA activityA ofA theA accountingA processA isA toA identifyA economicA eventsA thatA ar
eA relevantA toA aA particularA business.A OnceA identifiedA andA measured,A theAeventsA areArecordedA toA provideAaAhistoryAofA t
heA financialAactivitiesA ofA theA organization.A RecordingA consistsA ofA keepingA aA chronologicalA diaryA ofA theseA measuredA
eventsA inA anAorderlyA andA systematicA manner.A TheA informationA isA communicatedA throughA theA preparationA andA distrib
utionA ofA accountingA reports,A theA mostA commonA ofA whichA areA calledA financialA statements.A AA vitalA elementA inA theA com
municationA processA isA theA accountant’sA abilityA andA responsibilityA toA analyzeA andA interpretA theA reportedAinformation.
LO1ABT:ACA Difficulty:AEasyA TOT:A4Amin.A AACSB:ANoneA AICPAAFC:AReporting
3. (a)A InternalA usersA areA thoseA whoA plan,A organize,A andA runA theA businessA andA thereforeA areA officersA andA otherAdecisionA
makers.
(b) ToA assistA management,AmanagerialA accountingAprovidesA internalA reports.A ExamplesA includeA financialA compariso
nsAofA operatingAalternatives,A projectionsAofA incomeAfromAnewAsalesA campaigns,AandAforecastsAofA cashAneedsAfor
AtheAnextAyear.
LO1A BT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
4. (a)AInvestorsA(owners)AuseAaccountingAinformationAtoAmakeAdecisionsAtoAbuy,Ahold,AorAsellAowner-
AshipA sharesAofAaAcompany.
(b) CreditorsAuseAaccountingAinformationAtoAevaluateAtheArisksAofAgrantingAcreditAorAlendingAmoney.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneA AICPAAFC:AReporting
5. ThisAisAfalse.ABookkeepingAusuallyAinvolvesAonlyAtheArecordingAofAeconomicAeventsAandAthereforeAisjustA oneApartA ofAtheA
entireA accountingAprocess.AAccounting,AonAtheA otherA hand,A involvesA theAentireA processA ofAidentifying,Arecording,AandA co
mmunicatingAeconomicAevents.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
6. BentonA TravelA AgencyA shouldA reportA theA landA atA $90,000A onA itsA DecemberA 31,A 2022A balanceA sheet.A ThisA isA trueA no
tA onlyA atA theA timeA theA landA isA purchased,A butA alsoA overA theA timeA theA landA isA held.A InA determiningAwhichA measurem
entA principleA toA useA(historicalAcostA orA fairA value)A companiesA weighAtheA factualA natureA ofA costA figuresA versusA theA releva
nceA ofA fairA value.A InA general,A companiesA useA historicalA cost.AOnlyAinAsituationsAwhereAassetsAareAactivelyAtradedAdoAA co
mpaniesAapplyAtheAfairAvalueAprinciple.
LO2A BT:ACA Difficulty:AEasyA TOT:A4Amin.AAAACSB:ANoneA AICPAAFC:AReporting
7. TheA monetaryA unitA assumptionA requiresA thatA onlyA transactionA dataA thatA canA beA expressedAinAtermsA ofA moneyAbeAinclud
edA inA theA accountingA records.AThisA assumptionA enablesA accountingA toA quantifyA (measure)AeconomicAevents.
LO2A BT:AKA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneA AICPAAFC:AReporting
8. TheAeconomicAentityAassumptionArequiresAAthatAtheAactivitiesAofA theAentityAbeAkeptA separateAandA distinctAfromAtheAactiviti
esAofA itsAownersAandAallAotherAeconomicAentities.
LO2ABT:AKA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
, QuestionsAChapterA1A(Continued)
9. TheA threeA basicA formsAAofA businessA organizationsA are:A (1)A proprietorship,A (2)A partnership,A and
(3)A corporation.
LO2A BT:AKA Difficulty:AEasyA TOT:1Amin.A AACSB:ANoneAAAICPAAFC:A Reporting
10. OneA ofA theA advantagesA HelenA RuppAwouldA enjoyAisA thatA ownershipA ofA aAcorporationA isA representedA byA transferableA sh
aresA ofA stock.A ThisA wouldA allowA HelenA toA raiseA moneyA easilyA byA sellingA aA partA ofA herA ownershipA inA theA company.A A
notherA advantageA isA thatA becauseA holdersA ofA theA sharesA (stockholders)A enjoyA limitedAliability;A theyAareA notApersonally
AliableA forA theAdebtsA ofA theA corporateAentity.A Also,A becauseA ownershipA canA beA transferredA withoutA dissolvingA theA corp
oration,A theA corporationAenjoysA anA unlimitedAlife.
LO2A BT:AKA Difficulty:AEasyA TOT:A4Amin.AA AACSB:ANoneAAAICPAAFC:AReporting
11. TheAbasicAaccountingAequationAisAAssetsA=ALiabilitiesA+AOwner’sAEquity.
LO3ABT:AKA Difficulty:AEasyA TOT:A1Amin.AAAACSB:ANoneAAAICPAAFC:AMeasurement
12. (a)A AssetsAareAresourcesA ownedAbyA aAbusiness.ALiabilitiesAareAcreditorAclaimsA againstAassets.APutA moreA simply,A liabilitie
sA areA existingA debtsA andA obligations.A Owner’sA equityA isA theA ownershipA claimA onA totalAassets.
(b) Owner’sAequityAisAaffectedAbyAowner’sAinvestments,Adrawings,Arevenues,AandAexpenses.
LO3ABT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
13. TheAliabilitiesAare:A(b)AAccountsApayableAandA(g)ASalariesAandAwagesApayable.
LO3ABT:ACA Difficulty:AEasyA TOT:A1Amin.A AACSB:ANoneAAAICPAAFC:AReporting
14. Yes,A aA businessA canA enterA intoA aA transactionA inA whichA onlyA theA leftA sideA ofA theA accountingA equationA isA affected.AAnAex
ampleAwouldA beAaAtransactionAwhereA anAincreaseAinAoneAassetAisAoffsetAbyAaA decreaseAinA anotherAasset.AAnAincreaseAin
AtheAEquipmentAaccountAwhichAisAoffsetAbyAaAdecreaseAinthe ACashA accountA isA aAspecificAexample.
LO4ABT:ACA Difficulty:AModerateA TOT:A3Amin.A AACSB:ANoneA AICPAAFC:AReporting
15. BusinessA transactionsA areAtheAeconomicA eventsA ofA theAenterpriseA recordedA byAaccountantsbecauseA theyAaffectAth
eAbasicAaccountingAequation.
(a) TheA deathAofAtheAownerAofA theA companyAisAnotA aA businessA transactionA asAitAdoesAnotAaffectA oftheA componentsA
ofA theAbasicAaccountingAequation.
(b) SuppliesA purchasedA onA accountA isA aA businessA transactionA asA itA affectsA theA basicA accountingA equation.
(c) AnAAemployeeA beingAAfiredAA isAAnotAAaA businessAAtransactionAAasAAitAAdoesAAnotAAaffectAanyA ofAAtheA componen
tsAofAtheAbasicAaccountingAequation.
(d) AAwithdrawalAofAcashAbyAtheAownerAfromAtheAbusinessAisAaAbusinessAtransactionAasAitAaffectsAtheA basicAaccounti
ngAequation.
LO4ABT:ACA Difficulty:AModerateA TOT:A4Amin.A AACSB:ANoneA AICPAAFC:AReporting
16. (a) DecreaseAassetsAandAdecreaseAowner’sAequity.
(b) IncreaseAassetsAandAdecreaseAassets.
(c) IncreaseAassetsAandAincreaseAowner’sAequity.
(d) DecreaseAassetsAandAdecreaseAliabilities.
LO4ABT:ACA Difficulty:AModerateA TOT:A3Amin.A AACSB:ANoneA AICPAAFC:AReporting
A A A A A A A A A AA A
aul D. Kimmel All Chapters
A A A A A
Complete Guide A+
A A
, CHAPTER 1 A
Accounting in Action A A
Learning Objectives
A
1. Identify the activities and users associated with accounting.
A A A A A A A
2. Explain the building blocks of accounting: ethics, principles, and assumption
A A A A A A A A A
s.
3. State the accounting equation, and define its components.
A A A A A A A
4. Analyze the effects of business transactions on the accounting equation.
A A A A A A A A A
5. Describe the four financial statements and how they are prepared.
A A A A A A A A A
*6. Explain the career opportunities in accounting.
A A A A A
*Note:A AllA asteriskedA Questions,A BriefA Exercises,A Exercises,A andA ProblemsA relateA toA materialA containedAinAthe
AappendixA toAtheAchapter.
, ANSWERS TO QUESTIONS A A
1. ThisA isA true.A VirtuallyA everyA organizationA andA personA inA ourA societyA usesA accountingA information.A Businesses,Ainve
stors,Acreditors,AgovernmentAagencies,AandA not-for-
profitAorganizationsAmustAuseA accountingAinformationA toAoperateAeffectively.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneAAAICPAAFC:AReporting
2. AccountingA isA theA processA ofA identifying,A recording,A andA communicatingA theA economicA eventsA ofA anA organizationA toA i
nterestedA usersA ofA theA information.A TheA firstA activityA ofA theA accountingA processA isA toA identifyA economicA eventsA thatA ar
eA relevantA toA aA particularA business.A OnceA identifiedA andA measured,A theAeventsA areArecordedA toA provideAaAhistoryAofA t
heA financialAactivitiesA ofA theA organization.A RecordingA consistsA ofA keepingA aA chronologicalA diaryA ofA theseA measuredA
eventsA inA anAorderlyA andA systematicA manner.A TheA informationA isA communicatedA throughA theA preparationA andA distrib
utionA ofA accountingA reports,A theA mostA commonA ofA whichA areA calledA financialA statements.A AA vitalA elementA inA theA com
municationA processA isA theA accountant’sA abilityA andA responsibilityA toA analyzeA andA interpretA theA reportedAinformation.
LO1ABT:ACA Difficulty:AEasyA TOT:A4Amin.A AACSB:ANoneA AICPAAFC:AReporting
3. (a)A InternalA usersA areA thoseA whoA plan,A organize,A andA runA theA businessA andA thereforeA areA officersA andA otherAdecisionA
makers.
(b) ToA assistA management,AmanagerialA accountingAprovidesA internalA reports.A ExamplesA includeA financialA compariso
nsAofA operatingAalternatives,A projectionsAofA incomeAfromAnewAsalesA campaigns,AandAforecastsAofA cashAneedsAfor
AtheAnextAyear.
LO1A BT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
4. (a)AInvestorsA(owners)AuseAaccountingAinformationAtoAmakeAdecisionsAtoAbuy,Ahold,AorAsellAowner-
AshipA sharesAofAaAcompany.
(b) CreditorsAuseAaccountingAinformationAtoAevaluateAtheArisksAofAgrantingAcreditAorAlendingAmoney.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneA AICPAAFC:AReporting
5. ThisAisAfalse.ABookkeepingAusuallyAinvolvesAonlyAtheArecordingAofAeconomicAeventsAandAthereforeAisjustA oneApartA ofAtheA
entireA accountingAprocess.AAccounting,AonAtheA otherA hand,A involvesA theAentireA processA ofAidentifying,Arecording,AandA co
mmunicatingAeconomicAevents.
LO1ABT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
6. BentonA TravelA AgencyA shouldA reportA theA landA atA $90,000A onA itsA DecemberA 31,A 2022A balanceA sheet.A ThisA isA trueA no
tA onlyA atA theA timeA theA landA isA purchased,A butA alsoA overA theA timeA theA landA isA held.A InA determiningAwhichA measurem
entA principleA toA useA(historicalAcostA orA fairA value)A companiesA weighAtheA factualA natureA ofA costA figuresA versusA theA releva
nceA ofA fairA value.A InA general,A companiesA useA historicalA cost.AOnlyAinAsituationsAwhereAassetsAareAactivelyAtradedAdoAA co
mpaniesAapplyAtheAfairAvalueAprinciple.
LO2A BT:ACA Difficulty:AEasyA TOT:A4Amin.AAAACSB:ANoneA AICPAAFC:AReporting
7. TheA monetaryA unitA assumptionA requiresA thatA onlyA transactionA dataA thatA canA beA expressedAinAtermsA ofA moneyAbeAinclud
edA inA theA accountingA records.AThisA assumptionA enablesA accountingA toA quantifyA (measure)AeconomicAevents.
LO2A BT:AKA Difficulty:AEasyA TOT:A2Amin.AAAACSB:ANoneA AICPAAFC:AReporting
8. TheAeconomicAentityAassumptionArequiresAAthatAtheAactivitiesAofA theAentityAbeAkeptA separateAandA distinctAfromAtheAactiviti
esAofA itsAownersAandAallAotherAeconomicAentities.
LO2ABT:AKA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
, QuestionsAChapterA1A(Continued)
9. TheA threeA basicA formsAAofA businessA organizationsA are:A (1)A proprietorship,A (2)A partnership,A and
(3)A corporation.
LO2A BT:AKA Difficulty:AEasyA TOT:1Amin.A AACSB:ANoneAAAICPAAFC:A Reporting
10. OneA ofA theA advantagesA HelenA RuppAwouldA enjoyAisA thatA ownershipA ofA aAcorporationA isA representedA byA transferableA sh
aresA ofA stock.A ThisA wouldA allowA HelenA toA raiseA moneyA easilyA byA sellingA aA partA ofA herA ownershipA inA theA company.A A
notherA advantageA isA thatA becauseA holdersA ofA theA sharesA (stockholders)A enjoyA limitedAliability;A theyAareA notApersonally
AliableA forA theAdebtsA ofA theA corporateAentity.A Also,A becauseA ownershipA canA beA transferredA withoutA dissolvingA theA corp
oration,A theA corporationAenjoysA anA unlimitedAlife.
LO2A BT:AKA Difficulty:AEasyA TOT:A4Amin.AA AACSB:ANoneAAAICPAAFC:AReporting
11. TheAbasicAaccountingAequationAisAAssetsA=ALiabilitiesA+AOwner’sAEquity.
LO3ABT:AKA Difficulty:AEasyA TOT:A1Amin.AAAACSB:ANoneAAAICPAAFC:AMeasurement
12. (a)A AssetsAareAresourcesA ownedAbyA aAbusiness.ALiabilitiesAareAcreditorAclaimsA againstAassets.APutA moreA simply,A liabilitie
sA areA existingA debtsA andA obligations.A Owner’sA equityA isA theA ownershipA claimA onA totalAassets.
(b) Owner’sAequityAisAaffectedAbyAowner’sAinvestments,Adrawings,Arevenues,AandAexpenses.
LO3ABT:ACA Difficulty:AEasyA TOT:A2Amin.A AACSB:ANoneAAAICPAAFC:AReporting
13. TheAliabilitiesAare:A(b)AAccountsApayableAandA(g)ASalariesAandAwagesApayable.
LO3ABT:ACA Difficulty:AEasyA TOT:A1Amin.A AACSB:ANoneAAAICPAAFC:AReporting
14. Yes,A aA businessA canA enterA intoA aA transactionA inA whichA onlyA theA leftA sideA ofA theA accountingA equationA isA affected.AAnAex
ampleAwouldA beAaAtransactionAwhereA anAincreaseAinAoneAassetAisAoffsetAbyAaA decreaseAinA anotherAasset.AAnAincreaseAin
AtheAEquipmentAaccountAwhichAisAoffsetAbyAaAdecreaseAinthe ACashA accountA isA aAspecificAexample.
LO4ABT:ACA Difficulty:AModerateA TOT:A3Amin.A AACSB:ANoneA AICPAAFC:AReporting
15. BusinessA transactionsA areAtheAeconomicA eventsA ofA theAenterpriseA recordedA byAaccountantsbecauseA theyAaffectAth
eAbasicAaccountingAequation.
(a) TheA deathAofAtheAownerAofA theA companyAisAnotA aA businessA transactionA asAitAdoesAnotAaffectA oftheA componentsA
ofA theAbasicAaccountingAequation.
(b) SuppliesA purchasedA onA accountA isA aA businessA transactionA asA itA affectsA theA basicA accountingA equation.
(c) AnAAemployeeA beingAAfiredAA isAAnotAAaA businessAAtransactionAAasAAitAAdoesAAnotAAaffectAanyA ofAAtheA componen
tsAofAtheAbasicAaccountingAequation.
(d) AAwithdrawalAofAcashAbyAtheAownerAfromAtheAbusinessAisAaAbusinessAtransactionAasAitAaffectsAtheA basicAaccounti
ngAequation.
LO4ABT:ACA Difficulty:AModerateA TOT:A4Amin.A AACSB:ANoneA AICPAAFC:AReporting
16. (a) DecreaseAassetsAandAdecreaseAowner’sAequity.
(b) IncreaseAassetsAandAdecreaseAassets.
(c) IncreaseAassetsAandAincreaseAowner’sAequity.
(d) DecreaseAassetsAandAdecreaseAliabilities.
LO4ABT:ACA Difficulty:AModerateA TOT:A3Amin.A AACSB:ANoneA AICPAAFC:AReporting
