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, TABLE OF CONTENTS
Solutions Manual: Fundamental Accounting Principles, Volume 1,
18th Canadian Edition
Authors: Kermit Larson, Heidi Dieckmann, John Harris, Erin Creagh
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CHAPTER 1. Accounting in Business
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CHAPTER 2. Analyzing and Recording Transactions
CHAPTER 3. Adjusting Accounts for Financial Statements
CHAPTER 4. Completing the Accounting Cycle and Classifying Accounts
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CHAPTER 5. Accounting for Merchandising Activities
CHAPTER 6. Inventory Costing and Valuation
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CHAPTER 7. Internal Control and Cash
CHAPTER 8. Receivables
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CHAPTER 9. Property, Plant, and Equipment and Intangibles
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, Solutions Manual, Chapter 1 2
Chapter 1 Accounting in Business
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Concept Review Questions
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1. Accounting will provide Molly Burke (MB) useful information to make good decisions. For
EK
instance, it is important for Molly Burke to track MB revenues and expenses to determine
whether business is profitable (MB revenues are exceeding MB expenses). Based on the
accounting information, Molly Burke can make decisions on how to price creative
production activities where MB can decrease expenses to improve profits. Accounting will
provide Molly Burke important information on MB business’ performance to make informed
GE
IA
decisions on existing and planned activities strategy.
2. Businesses offering products include Spin Master Corp., Lululemon, NIKE, and Reebok
which produce apparel; Dell, Hewlett-Packard, and Apple which produce computer
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equipment; and Abercrombie and Fitch, GAP, and Zara which produce clothing. Service
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business examples include: WestJet Airlines which provides airline services; Bell Canada,
Rogers Communications, and Telus provide information communication services; and
Google, X, Zoom, Facebook and Instagram which provide internet services.
AP
3. “Accounting is relevant to all students even if they do not plan on becoming an accountant.
If you are pursuing a career in marketing, you will need to understand information such as
_M
sales volume, advertising costs, promotion costs, salaries of sales personnel, and sales
commissions. If you are studying human resources, you will need to understand the
financial position of your company to determine whether you have the resources to hire
new employees or provide existing employees a pay increase. Even if you do not pursue a
PR
career in business, understanding the basics of accounting can help you better understand
your own personal finances and the world around us. I am convinced that this course will
be a good investment of our time.”
A?
4. Answers will vary on what students would sell. Business organizations can be organized in
OV
one of three forms: sole proprietorship, partnership, or corporation. These forms have
implications for legal liability, taxation, continuity, number of owners, and legal status as
follows:
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Sole Proprietorship Partnership Corporation
Legal entity no no yes
Limited liability no no yes
ED
Unlimited life no no yes
U
Business income taxed no no yes
One owner allowed yes no yes
ST
Answers and reasons will vary for the best form of business. Possible answers include: A
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sole proprietorship would be easiest to form for a student. A partnership would be helpful
in bringing people with multiple skills and/or resources together. A corporation would be
the easiest to obtain financing and to limit liability.
5. The equity section of the balance sheet reports a Hailey Walker, Capital account. The
presence of the owner’s capital account indicates that Organico has been organized as a
sole proprietorship.
, Solutions Manual, Chapter 1 3
6. The two organizations for which accounting information is available in Appendix III at the
end of the book are Gildan Activewear Inc and Spin Master Corp..
7. Hospitals, colleges, prisons, and bus lines are examples of organizations that can be
formed as profit-oriented businesses, government units, or not-for-profit establishments.
ST
?
8. External users and their uses of accounting information include: (1) lenders for measuring
the return of loans; (2) shareholders for assessing the acquisition of shares; (3) members
?
of the board of directors for overseeing management; and (4) potential employees for
judging employment opportunities. Other users are external auditors, consultants,
UV
EK
regulators, unions, suppliers, and appraisers. Internal users and their uses of accounting
information include: (1) management for overseeing performance, financial position, and
cash flow; (2) current employees for generating special purpose reports to assist
management; (3) internal auditors for identifying high-risk areas to audit; and (4) Sales staff
to determine how to increase sales.
GE
IA
9. The internal role of accounting is to serve the organization’s internal operating functions by
providing useful information in completing their tasks more effectively and efficiently. By
providing this information, accounting helps the organization reach its overall goals.
10. “Tyler, there are a number of areas you could pursue within accounting. There are also a
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number of opportunities within those accounting areas. I have put together some
information to help with your decision.”
ED
AP
Accounting professionals practice in four Accounting-related opportunities within each
broad fields including: field are numerous and include:
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Financial accounting - Statement preparation
- Statement analysis
- Auditing
PR
- Regulatory
- Consulting
- Planning
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- Criminal investigation
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Managerial accounting - General accounting
- Cost accounting
- Budgeting
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- Internal auditing
- Management advisory services
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Taxation - Preparation
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- Planning
- Regulatory
- Investigations
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- Consulting
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Accounting-related - Lenders
- Consultants
- Analysts
- Traders
- Managers
- Directors
- Underwriters
EK ED
GE OV
ED PR
AP
M
?_
?_ IA
IA UV
UV ST
ST
, TABLE OF CONTENTS
Solutions Manual: Fundamental Accounting Principles, Volume 1,
18th Canadian Edition
Authors: Kermit Larson, Heidi Dieckmann, John Harris, Erin Creagh
ST
??
CHAPTER 1. Accounting in Business
UV
EK
CHAPTER 2. Analyzing and Recording Transactions
CHAPTER 3. Adjusting Accounts for Financial Statements
CHAPTER 4. Completing the Accounting Cycle and Classifying Accounts
GE
IA
CHAPTER 5. Accounting for Merchandising Activities
CHAPTER 6. Inventory Costing and Valuation
?_
CHAPTER 7. Internal Control and Cash
CHAPTER 8. Receivables
ED
CHAPTER 9. Property, Plant, and Equipment and Intangibles
_M AP
PR
A?
OV
VI
ED
U
ST
? ?
, Solutions Manual, Chapter 1 2
Chapter 1 Accounting in Business
ST
?
Concept Review Questions
?
UV
1. Accounting will provide Molly Burke (MB) useful information to make good decisions. For
EK
instance, it is important for Molly Burke to track MB revenues and expenses to determine
whether business is profitable (MB revenues are exceeding MB expenses). Based on the
accounting information, Molly Burke can make decisions on how to price creative
production activities where MB can decrease expenses to improve profits. Accounting will
provide Molly Burke important information on MB business’ performance to make informed
GE
IA
decisions on existing and planned activities strategy.
2. Businesses offering products include Spin Master Corp., Lululemon, NIKE, and Reebok
which produce apparel; Dell, Hewlett-Packard, and Apple which produce computer
?_
equipment; and Abercrombie and Fitch, GAP, and Zara which produce clothing. Service
ED
business examples include: WestJet Airlines which provides airline services; Bell Canada,
Rogers Communications, and Telus provide information communication services; and
Google, X, Zoom, Facebook and Instagram which provide internet services.
AP
3. “Accounting is relevant to all students even if they do not plan on becoming an accountant.
If you are pursuing a career in marketing, you will need to understand information such as
_M
sales volume, advertising costs, promotion costs, salaries of sales personnel, and sales
commissions. If you are studying human resources, you will need to understand the
financial position of your company to determine whether you have the resources to hire
new employees or provide existing employees a pay increase. Even if you do not pursue a
PR
career in business, understanding the basics of accounting can help you better understand
your own personal finances and the world around us. I am convinced that this course will
be a good investment of our time.”
A?
4. Answers will vary on what students would sell. Business organizations can be organized in
OV
one of three forms: sole proprietorship, partnership, or corporation. These forms have
implications for legal liability, taxation, continuity, number of owners, and legal status as
follows:
VI
Sole Proprietorship Partnership Corporation
Legal entity no no yes
Limited liability no no yes
ED
Unlimited life no no yes
U
Business income taxed no no yes
One owner allowed yes no yes
ST
Answers and reasons will vary for the best form of business. Possible answers include: A
??
sole proprietorship would be easiest to form for a student. A partnership would be helpful
in bringing people with multiple skills and/or resources together. A corporation would be
the easiest to obtain financing and to limit liability.
5. The equity section of the balance sheet reports a Hailey Walker, Capital account. The
presence of the owner’s capital account indicates that Organico has been organized as a
sole proprietorship.
, Solutions Manual, Chapter 1 3
6. The two organizations for which accounting information is available in Appendix III at the
end of the book are Gildan Activewear Inc and Spin Master Corp..
7. Hospitals, colleges, prisons, and bus lines are examples of organizations that can be
formed as profit-oriented businesses, government units, or not-for-profit establishments.
ST
?
8. External users and their uses of accounting information include: (1) lenders for measuring
the return of loans; (2) shareholders for assessing the acquisition of shares; (3) members
?
of the board of directors for overseeing management; and (4) potential employees for
judging employment opportunities. Other users are external auditors, consultants,
UV
EK
regulators, unions, suppliers, and appraisers. Internal users and their uses of accounting
information include: (1) management for overseeing performance, financial position, and
cash flow; (2) current employees for generating special purpose reports to assist
management; (3) internal auditors for identifying high-risk areas to audit; and (4) Sales staff
to determine how to increase sales.
GE
IA
9. The internal role of accounting is to serve the organization’s internal operating functions by
providing useful information in completing their tasks more effectively and efficiently. By
providing this information, accounting helps the organization reach its overall goals.
10. “Tyler, there are a number of areas you could pursue within accounting. There are also a
?_
number of opportunities within those accounting areas. I have put together some
information to help with your decision.”
ED
AP
Accounting professionals practice in four Accounting-related opportunities within each
broad fields including: field are numerous and include:
_M
Financial accounting - Statement preparation
- Statement analysis
- Auditing
PR
- Regulatory
- Consulting
- Planning
A?
- Criminal investigation
OV
Managerial accounting - General accounting
- Cost accounting
- Budgeting
VI
- Internal auditing
- Management advisory services
ED
Taxation - Preparation
U
- Planning
- Regulatory
- Investigations
ST
- Consulting
??
Accounting-related - Lenders
- Consultants
- Analysts
- Traders
- Managers
- Directors
- Underwriters
