Solutions Manual For Accounting Principles 7th Canadian
Edition, (Volume 1) 7e Weygandt Donald Kieso Kimmel Trenholm Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
Warren Novak
CHAPTER 1 ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time
Accounting in Action Number Description Level Allotted (min.)
ASSIGNMENT CLASSIFICATION TABLE 1A Identify users and use of accounting information. Simple 15-20
2A Determine forms of business organization and Simple 15-20
Brief Problems Problems types of accounting standards.
Learning Objectives Questions Exercises Exercises Set A Set B 3A Determine missing items. Moderate 20-25
1. Identify the use and 1, 2, 3 1 1, 2, 5 1 1 4A Classify accounts and prepare accounting Simple 20-30
users of accounting equation.
and the objective of 5A Assess accounting treatment. Moderate 20-25
financial reporting. 6A Analyze transactions and calculate owner’s equity. Simple 35-45
2. Compare different 4 2 3, 2 2 7A Analyze transactions and prepare balance sheet. Simple 40-50
forms of business 8A Moderate 40-50
Analyze transactions and prepare financial
organization. statements.
9A Prepare financial statements. Simple 35-45
3. Explain the building 5, 6, 7, 8, 3, 4, 5, 6 4, 5, 9, 10 2, 5, 7, 2, 5, 7, 11
10A Determine missing amounts, and comment. Moderate 35-45
blocks of accounting: 9, 10, 11 11
ethics and the 11A Discuss errors and prepare corrected balance Moderate 45-55
concepts included in sheet.
the conceptual
framework. 1B Identify users and use of accounting information. Simple 15-20
4. Describe the 12, 13, 14. 7, 8, 9, 6, 7, 13 3, 4, 6, 7, 3, 4, 6, 7, 2B Determine forms of business organization and Simple 15-20
components of the 15, 16 10, 11, 15 8, 11 8, 11 types of accounting standards.
financial statements 3B Determine missing items. Moderate 20-25
and explain the
accounting equation. 4B Classify accounts and prepare accounting Simple 20-30
equation.
5. Analyze the effects of 17, 18 12, 13, 14 5, 8, 9, 5, 7, 8, 6, 7, 8, 9, 5B Assess accounting treatment. Moderate 20-25
business transactions 10, 11, 11 10, 11
on the accounting 12, 13 6B Analyze transactions and calculate owner’s equity. Simple 35-45
equation.
7B Analyze transactions and prepare balance sheet. Simple 40-50
6. Prepare financial 19, 20 14, 15, 16 9, 14, 15, 6, 7, 8, 9, 2, 5, 7, 11
8B Analyze transactions and prepare financial Moderate 40-50
statements. 17, 18 16, 17 10, 11 statements.
9B Prepare financial statements. Simple 35-45
10B Determine missing amounts, and comment. Moderate 35-45
11B Discuss errors and prepare corrected balance Moderate 45-55
sheet.
Solutions Manual 1-1 Chapter 1 Solutions Manual 1-2 Chapter 1
. .
,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
BLOOM’S TAXONOMY TABLE BLOOM’S TAXONOMY TABLE (Continued)
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of- Evaluat
Chapter Material Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
5. Analyze the effects Q1-19 Q1-17 Q1-18
of business E1-5 Q1-20 BE1-12
Evaluat transactions on the E1-8 BE1-13
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion accounting equation. E1-9 BE1-14
1. Identify the use and Q1-3 Q1-1 P1-1A E1-10 E1-12
users of accounting BE1-1 Q1-2 P1-1B E1-11 E1-13
and the objective of E1-5 E1-1 P1-5A P1-7A
financial reporting. E1-2 P1-5B P1-7B
P1-8A
Q1-4 P1-2A P1-8B
2. Compare different
BE1-2 P1-2B P1-11A
forms of business P1-11B
organization . BE1-4 P1-11B
BE1-10 6. Prepare financial Q1-19 BE1-15 P1-10A
E1-3 statements. Q1-20 BE1-16 P1-10B
E1-7 E1-9 BE1-17
BE1-18
Q1-6 Q1-5 P1-2A BE1-3 E1-14
3. Explain the building E1-15
blocks of accounting: Q1-7 Q1-8 P1-2B
E1-5 Q1-9 P1-3A E1-16
ethics and the E1-17
concepts included in Q1-10 P1-3B
Q1-11 P1-7A P1-6A
the conceptual P1-6B
framework. BE1-4 P1-7B
BE1-5 P1-11A P1-7A
BE1-6 P1-11B P1-7B
E1-4 P1-8A
E1-9 P1-8B
E1-10 P1-9A
P1-5A P1-9B
P1-5B P1-11A
P1-11B
4. Describe the Q1-12 BE1-7 BE1-8 Broadening Your BYP1-1 Santé Saga BYP1-3 BYP1-4 BYP1-2
components of the Q1-13 BE1-9 Perspective BYP1- 6 BYP1-5
financial statements Q1-14 BE1-10
and explain the Q1-16 BE1-14
accounting equation. BE1-11 BE1-15
E1-6
E1-7
E1-13
P1-4A
P1-4B
P1-6A
P1-6B
P1-7A
P1-7B
P1-8A
P1-8B
P1-11A
P1-11B
Solutions Manual 1-3 Chapter 1 Solutions Manual 1-4 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
ANSWERS TO QUESTIONS QUESTIONS (Continued)
4. Proprietorships, partnerships and corporations are the three main forms of
1. Yes. Accounting is the financial information system that provides useful business organization. The main difference among these three forms is the
financial information to every person who owns and uses economic size of the business. Since a proprietorship is a business owned by one
resources or otherwise engages in economic activity. person, it has limited resources. The size of the business is typically small
and the life of the business is limited to the life of the owner. The size of
2. Internal users are those who plan, organize, and run businesses and businesses can expand in the case of a partnership as more owners are
include managers, supervisors, directors, and company officers. External involved in the day to day operations of the business. In order to achieve a
users work for other organizations but have reasons to be interested in the large size, with a diverse group of owners, the corporate form is used to
company’s financial position and performance, and include current or have easy transferability of the ownership through the issuance of shares.
potential investors (owners), and creditors. Another important difference is that the corporation is a separate legal
entity and pays income taxes. In addition, the corporation is the only form
Internal users may want answers to several types of questions. For where owners have limited liability with respect to the business. The
example, the finance department wants to know if there is enough cash to following are the main characteristics of each form:
pay the bills. The marketing department wants to know what price the
business should use in selling its products to maximize profits. The human a) A proprietorship is a private business with one owner who has
resources department wants to know how many people the business can unlimited liability for the business. The proprietorship has a limited life
afford to hire. The production department wants to know which product tied to the life of the owner. There is transparency between the
lines make the business the most profit. owner and the business. Ultimately the owner is personally
responsible to pay tax on the profit of the business.
External users may want answers to several types of questions. For
example, investors want to know if the company is earning enough to give b) A partnership has essentially the same characteristics as a
them a return on their investment. Creditors want to know if the company proprietorship except that in a partnership, there is more than one
is able to pay its debts as they come due. Labour unions want to know owner. A partnership need not be a private business, although it
whether the owners can afford to pay increased wages and benefits. usually is.
Customers are interested in whether a company will continue to honour its
product warranties and support its product lines. Taxing authorities want to c) For corporations, the owners are one or more shareholders who
know whether the company respects the tax laws. Regulatory agencies enjoy limited liability. The corporation pays income taxes and can
want to know whether the company is respecting established rules. have an indefinite live since its ownership units, in the form of shares,
are easily transferred to other owners.
3. The main objective of financial reporting is to provide useful information to
investors and creditors (external users) to make decisions about a 5. Ethics is a fundamental business concept. If accountants do not have a
business. Users may be potential investors who need to decide if they high ethical standard, the information they produce will not have any
wish to invest in the business or they may be creditors deciding if they credibility.
wish to lend money to the business. These users want to know if the
business is running successfully and can generate cash and earn a profit. Ethics are important to statement users because it provides them comfort
that the financial information they are using is credible and reliable.
Solutions Manual 1-5 Chapter 1 Solutions Manual 1-6 Chapter 1
. .
, Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
QUESTIONS (Continued) QUESTIONS (Continued)
6. The users of financial information of publicly accountable companies have
different needs than the users of financial information of private 12. The basic accounting equation is Assets = Liabilities + Owner's Equity and
companies. Publicly traded corporations are required to to present financial the expanded accounting equation is Assets = Liabilities + Owner's Capital
information using accounting rules that are consistent with those used – Owner’s Drawings + Revenue − Expenses. The equation is the basis for
globally. To do this, public traded companies need to follow International recording and summarizing all of the economic events and transactions of
Financial Reporting Standards (IFRS). Doing so helps Canadian a business.
companies compete in a global market. But following this set of policies
and standards is often not essential or cost effective for privately owned 13. (a) Assets are resources controlled by a business as a result of past
businesses. The users of private company financial statements often do events and from which future economic benefits (like cash) are
not require the extensive measurements and disclosures required by IFRS expected to flow into the business. Liabilities are current obligations,
and thus private companies may report under Accounting Standards for arising from past events, the settlement of which will include an
Private Enterprises (ASPE). outflow of economic benefits (such as cash or services) Put more
simply, liabilities are existing debts and obligations. Owner's equity is
7. The reporting entity concept states that economic events can be identified the residual assets in a business after deducting liabilities.
with a particular unit of accountability. This concept requires that the
activities of the entity be kept separate and distinct from the activities of its (b) Revenues and investments by the owner increase owner's equity.
owners and all other economic entities. Drawings and expenses decrease owner’s equity.
8. Accounting information has relevance if it makes a difference in a decision.
Faithful representation shows the economic reality of events rather than 14. Accounts Receivable represent amounts owed to the business by its
just their legal form. Faithful representation is achieved if the information is customers for services performed or goods provided, but for which
complete, neutral and free from material error. Complete information collection has not yet been received. It is an asset. Accounts Payable
includes all information necessary to show the economic reality of the represent amounts owed by the business for services or goods received,
transaction. Accounting information is neutral if it is free from bias intended but for which payment has not yet been made. It is a liability.
to attain a predetermined result or encourage a particular behaviour.
15. Profit or loss is the result of the calculation: revenues less expenses. If
9. Historical cost represents the amount paid in a transaction. The fair value revenues exceed expenses, the business has experienced profit. If
of an asset is generally the amount an asset could be sold for in the expenses exceed revenues, a loss is experienced by the business.
market. On the date of purchase, fair value and cost are the same. As time
progresses, the fair value changes depending on the nature of the asset. 16. (a) Accounts for assets, liabilities and owner’s equity are reported on
the balance sheet.
10. In order for an event to be recognized in the accounting records, the event (b) Accounts for revenue and expenses are reported on the income
must change the entity’s financial position. Examples of events that are not statement.
transactions include hiring of employees and signing a lease for premises.
17. Yes, a business can enter into a transaction in which only the left side of
11. The monetary unit concept states that only transaction data that can be the accounting equation is affected. An example would be a transaction
expressed as an amount of money may be included in the accounting where an increase in one asset is offset by a decrease in another asset,
records. Consequently, information that cannot be objectively measured in such as when equipment is purchased for cash (resulting in an increase
dollars cannot be included as transactions of the business. It is also in the equipment asset account which is offset by a decrease in the cash
assumed that the monetary unit is stable with respect to the value over asset account).
several years. In other words, inflation is ignored.
Solutions Manual 1-7 Chapter 1 Solutions Manual 1-8 Chapter 1
. .
Edition, (Volume 1) 7e Weygandt Donald Kieso Kimmel Trenholm Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
Warren Novak
CHAPTER 1 ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time
Accounting in Action Number Description Level Allotted (min.)
ASSIGNMENT CLASSIFICATION TABLE 1A Identify users and use of accounting information. Simple 15-20
2A Determine forms of business organization and Simple 15-20
Brief Problems Problems types of accounting standards.
Learning Objectives Questions Exercises Exercises Set A Set B 3A Determine missing items. Moderate 20-25
1. Identify the use and 1, 2, 3 1 1, 2, 5 1 1 4A Classify accounts and prepare accounting Simple 20-30
users of accounting equation.
and the objective of 5A Assess accounting treatment. Moderate 20-25
financial reporting. 6A Analyze transactions and calculate owner’s equity. Simple 35-45
2. Compare different 4 2 3, 2 2 7A Analyze transactions and prepare balance sheet. Simple 40-50
forms of business 8A Moderate 40-50
Analyze transactions and prepare financial
organization. statements.
9A Prepare financial statements. Simple 35-45
3. Explain the building 5, 6, 7, 8, 3, 4, 5, 6 4, 5, 9, 10 2, 5, 7, 2, 5, 7, 11
10A Determine missing amounts, and comment. Moderate 35-45
blocks of accounting: 9, 10, 11 11
ethics and the 11A Discuss errors and prepare corrected balance Moderate 45-55
concepts included in sheet.
the conceptual
framework. 1B Identify users and use of accounting information. Simple 15-20
4. Describe the 12, 13, 14. 7, 8, 9, 6, 7, 13 3, 4, 6, 7, 3, 4, 6, 7, 2B Determine forms of business organization and Simple 15-20
components of the 15, 16 10, 11, 15 8, 11 8, 11 types of accounting standards.
financial statements 3B Determine missing items. Moderate 20-25
and explain the
accounting equation. 4B Classify accounts and prepare accounting Simple 20-30
equation.
5. Analyze the effects of 17, 18 12, 13, 14 5, 8, 9, 5, 7, 8, 6, 7, 8, 9, 5B Assess accounting treatment. Moderate 20-25
business transactions 10, 11, 11 10, 11
on the accounting 12, 13 6B Analyze transactions and calculate owner’s equity. Simple 35-45
equation.
7B Analyze transactions and prepare balance sheet. Simple 40-50
6. Prepare financial 19, 20 14, 15, 16 9, 14, 15, 6, 7, 8, 9, 2, 5, 7, 11
8B Analyze transactions and prepare financial Moderate 40-50
statements. 17, 18 16, 17 10, 11 statements.
9B Prepare financial statements. Simple 35-45
10B Determine missing amounts, and comment. Moderate 35-45
11B Discuss errors and prepare corrected balance Moderate 45-55
sheet.
Solutions Manual 1-1 Chapter 1 Solutions Manual 1-2 Chapter 1
. .
,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
BLOOM’S TAXONOMY TABLE BLOOM’S TAXONOMY TABLE (Continued)
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of- Evaluat
Chapter Material Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
5. Analyze the effects Q1-19 Q1-17 Q1-18
of business E1-5 Q1-20 BE1-12
Evaluat transactions on the E1-8 BE1-13
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion accounting equation. E1-9 BE1-14
1. Identify the use and Q1-3 Q1-1 P1-1A E1-10 E1-12
users of accounting BE1-1 Q1-2 P1-1B E1-11 E1-13
and the objective of E1-5 E1-1 P1-5A P1-7A
financial reporting. E1-2 P1-5B P1-7B
P1-8A
Q1-4 P1-2A P1-8B
2. Compare different
BE1-2 P1-2B P1-11A
forms of business P1-11B
organization . BE1-4 P1-11B
BE1-10 6. Prepare financial Q1-19 BE1-15 P1-10A
E1-3 statements. Q1-20 BE1-16 P1-10B
E1-7 E1-9 BE1-17
BE1-18
Q1-6 Q1-5 P1-2A BE1-3 E1-14
3. Explain the building E1-15
blocks of accounting: Q1-7 Q1-8 P1-2B
E1-5 Q1-9 P1-3A E1-16
ethics and the E1-17
concepts included in Q1-10 P1-3B
Q1-11 P1-7A P1-6A
the conceptual P1-6B
framework. BE1-4 P1-7B
BE1-5 P1-11A P1-7A
BE1-6 P1-11B P1-7B
E1-4 P1-8A
E1-9 P1-8B
E1-10 P1-9A
P1-5A P1-9B
P1-5B P1-11A
P1-11B
4. Describe the Q1-12 BE1-7 BE1-8 Broadening Your BYP1-1 Santé Saga BYP1-3 BYP1-4 BYP1-2
components of the Q1-13 BE1-9 Perspective BYP1- 6 BYP1-5
financial statements Q1-14 BE1-10
and explain the Q1-16 BE1-14
accounting equation. BE1-11 BE1-15
E1-6
E1-7
E1-13
P1-4A
P1-4B
P1-6A
P1-6B
P1-7A
P1-7B
P1-8A
P1-8B
P1-11A
P1-11B
Solutions Manual 1-3 Chapter 1 Solutions Manual 1-4 Chapter 1
. .
,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
ANSWERS TO QUESTIONS QUESTIONS (Continued)
4. Proprietorships, partnerships and corporations are the three main forms of
1. Yes. Accounting is the financial information system that provides useful business organization. The main difference among these three forms is the
financial information to every person who owns and uses economic size of the business. Since a proprietorship is a business owned by one
resources or otherwise engages in economic activity. person, it has limited resources. The size of the business is typically small
and the life of the business is limited to the life of the owner. The size of
2. Internal users are those who plan, organize, and run businesses and businesses can expand in the case of a partnership as more owners are
include managers, supervisors, directors, and company officers. External involved in the day to day operations of the business. In order to achieve a
users work for other organizations but have reasons to be interested in the large size, with a diverse group of owners, the corporate form is used to
company’s financial position and performance, and include current or have easy transferability of the ownership through the issuance of shares.
potential investors (owners), and creditors. Another important difference is that the corporation is a separate legal
entity and pays income taxes. In addition, the corporation is the only form
Internal users may want answers to several types of questions. For where owners have limited liability with respect to the business. The
example, the finance department wants to know if there is enough cash to following are the main characteristics of each form:
pay the bills. The marketing department wants to know what price the
business should use in selling its products to maximize profits. The human a) A proprietorship is a private business with one owner who has
resources department wants to know how many people the business can unlimited liability for the business. The proprietorship has a limited life
afford to hire. The production department wants to know which product tied to the life of the owner. There is transparency between the
lines make the business the most profit. owner and the business. Ultimately the owner is personally
responsible to pay tax on the profit of the business.
External users may want answers to several types of questions. For
example, investors want to know if the company is earning enough to give b) A partnership has essentially the same characteristics as a
them a return on their investment. Creditors want to know if the company proprietorship except that in a partnership, there is more than one
is able to pay its debts as they come due. Labour unions want to know owner. A partnership need not be a private business, although it
whether the owners can afford to pay increased wages and benefits. usually is.
Customers are interested in whether a company will continue to honour its
product warranties and support its product lines. Taxing authorities want to c) For corporations, the owners are one or more shareholders who
know whether the company respects the tax laws. Regulatory agencies enjoy limited liability. The corporation pays income taxes and can
want to know whether the company is respecting established rules. have an indefinite live since its ownership units, in the form of shares,
are easily transferred to other owners.
3. The main objective of financial reporting is to provide useful information to
investors and creditors (external users) to make decisions about a 5. Ethics is a fundamental business concept. If accountants do not have a
business. Users may be potential investors who need to decide if they high ethical standard, the information they produce will not have any
wish to invest in the business or they may be creditors deciding if they credibility.
wish to lend money to the business. These users want to know if the
business is running successfully and can generate cash and earn a profit. Ethics are important to statement users because it provides them comfort
that the financial information they are using is credible and reliable.
Solutions Manual 1-5 Chapter 1 Solutions Manual 1-6 Chapter 1
. .
, Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Seventh Canadian Edition
QUESTIONS (Continued) QUESTIONS (Continued)
6. The users of financial information of publicly accountable companies have
different needs than the users of financial information of private 12. The basic accounting equation is Assets = Liabilities + Owner's Equity and
companies. Publicly traded corporations are required to to present financial the expanded accounting equation is Assets = Liabilities + Owner's Capital
information using accounting rules that are consistent with those used – Owner’s Drawings + Revenue − Expenses. The equation is the basis for
globally. To do this, public traded companies need to follow International recording and summarizing all of the economic events and transactions of
Financial Reporting Standards (IFRS). Doing so helps Canadian a business.
companies compete in a global market. But following this set of policies
and standards is often not essential or cost effective for privately owned 13. (a) Assets are resources controlled by a business as a result of past
businesses. The users of private company financial statements often do events and from which future economic benefits (like cash) are
not require the extensive measurements and disclosures required by IFRS expected to flow into the business. Liabilities are current obligations,
and thus private companies may report under Accounting Standards for arising from past events, the settlement of which will include an
Private Enterprises (ASPE). outflow of economic benefits (such as cash or services) Put more
simply, liabilities are existing debts and obligations. Owner's equity is
7. The reporting entity concept states that economic events can be identified the residual assets in a business after deducting liabilities.
with a particular unit of accountability. This concept requires that the
activities of the entity be kept separate and distinct from the activities of its (b) Revenues and investments by the owner increase owner's equity.
owners and all other economic entities. Drawings and expenses decrease owner’s equity.
8. Accounting information has relevance if it makes a difference in a decision.
Faithful representation shows the economic reality of events rather than 14. Accounts Receivable represent amounts owed to the business by its
just their legal form. Faithful representation is achieved if the information is customers for services performed or goods provided, but for which
complete, neutral and free from material error. Complete information collection has not yet been received. It is an asset. Accounts Payable
includes all information necessary to show the economic reality of the represent amounts owed by the business for services or goods received,
transaction. Accounting information is neutral if it is free from bias intended but for which payment has not yet been made. It is a liability.
to attain a predetermined result or encourage a particular behaviour.
15. Profit or loss is the result of the calculation: revenues less expenses. If
9. Historical cost represents the amount paid in a transaction. The fair value revenues exceed expenses, the business has experienced profit. If
of an asset is generally the amount an asset could be sold for in the expenses exceed revenues, a loss is experienced by the business.
market. On the date of purchase, fair value and cost are the same. As time
progresses, the fair value changes depending on the nature of the asset. 16. (a) Accounts for assets, liabilities and owner’s equity are reported on
the balance sheet.
10. In order for an event to be recognized in the accounting records, the event (b) Accounts for revenue and expenses are reported on the income
must change the entity’s financial position. Examples of events that are not statement.
transactions include hiring of employees and signing a lease for premises.
17. Yes, a business can enter into a transaction in which only the left side of
11. The monetary unit concept states that only transaction data that can be the accounting equation is affected. An example would be a transaction
expressed as an amount of money may be included in the accounting where an increase in one asset is offset by a decrease in another asset,
records. Consequently, information that cannot be objectively measured in such as when equipment is purchased for cash (resulting in an increase
dollars cannot be included as transactions of the business. It is also in the equipment asset account which is offset by a decrease in the cash
assumed that the monetary unit is stable with respect to the value over asset account).
several years. In other words, inflation is ignored.
Solutions Manual 1-7 Chapter 1 Solutions Manual 1-8 Chapter 1
. .
