SOLUTION MANUAL FOR
Financial Accounting Tools for Business Decision Making, 9th Canadian Edition
Paul D. Kimmel, Jerry J. Weygandt, Jill E. Mitchell, Barbara Trenholm, Wayne
Irvine, Christopher D. Burnley
Chapter 1-14
CHAPTERT1
THETPURPOSETANDTUSETOFTFINANCIALTSTATEMENTS
LEARNINGTOBJECTIVES
1. IdentifyTtheTusesTandTusersTofTaccountingTinformation.
2. DescribeTtheTprimaryTformsTofTbusinessTorganization.
3. ExplainTtheTthreeTmainTtypesTofTbusinessTactivity.
4. DescribeTtheTpurposeTandTcontentTofTeachTofTtheTfinancialTstatements.
SUMMARYTOFTQUESTIONSTBYTLEARNINGTOBJECTIVESTA
NDTBLOOM’STTAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
Questions
1. 1 K 7. 2 C 13. 3 C 19. 4 K 25. 4 C
2. 1 C 8. 2 C 14. 3 C 20. 4 K 26. 4 C
3. 1 K 9. 2 C 15. 3 C 21. 4 AP 27. 4 K
4. 1 C 10. 2 C 16. 3 C 22. 4 C 28. 4 C
5. 1 C 11. 2 C 17. 3 C 23. 4 K 29. 4 C
6. 1 C 12. 2 K 18. 3 C 24. 4 C 30. 4 C
BriefTExercises
1. 1 C 4. 3 C 7. 4 AP 10. 4 C
2. 1 C 5. 3 C 8. 4 K 11. 4 AN
3. 2 K 6. 4 AP 9. 4 K
Exercises
1. 1 C 4. 3 C 7. 4 AN 10. 4 AP 13. 4 AP
2. 2 C 5. 4 K 8. 4 AN 11. 4 AP 14. 4 AN
3. 3 K 6. 4 AP 9. 4 AP 12. 4 AP
Problems:TSetTATandTB
1. 1 C 3. 3 C 5. 4 AP 7. 4 AP 9. 4 AN
2. 2 C 4. 4 K 6. 4 AN 8. 4 AN 10. 4 AN
Cases
1. 3,4 C 3. 3,4 AN 5. 3,4 AN 7. 4 AN 9 1,3 C
2. 1 C 4. 3,4 AN 6. 1 C 8. 1 E
SolutionsTManua 1-1 ChapterT
l 1
, Legend:TTheTfollowingTabbreviationsTwillTappearTthroughoutTtheTsolutionsTmanualTfile.
LO LearningTobjective
BT Bloom'sTTaxonom
y
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: LevelTofTdifficulty
S Simple
M Moderate
C Complex
Time: EstimatedTtimeTtoTprepareTinTminutes
AACSB AssociationTtoTAdvanceTCollegiateTSchoolsTofTBusiness
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec.TThinking ReflectiveTThinking
CPATCM CPATCanadaTCompetency
cpa-e001 Ethics ProfessionalTandTEthicalTBehaviour
cpa-e002 PSTandTDM Problem-SolvingTandTDecision-Making
cpa-e003 Comm. Communication
cpa-e004 Self-Mgt. Self-Management
cpa-e005 TeamT&TLead TeamworkTandTLeadership
cpa-t001 Reporting FinancialTReporting
cpa-t002 Stat.T&TGov. StrategyTandTGovernance
cpa-t003 Mgt.TAccounting ManagementTAccounting
cpa-t004 Audit AuditTandTAssurance
cpa-t005 Finance Finance
cpa-t006 Tax Taxation
SolutionsTManua 1-2 ChapterT
l 1
, ANSWERSTTOTQUESTIONS
1. AccountingTisTtheTinformationTsystemTthatTidentifiesTandTrecordsTtheTec
onomicTeventsTofTanTorganization,TandTthenTcommunicatesTthemTtoTaT
wideTvarietyTofTinterestedTusers.
LOT1T BT:TKT Difficulty:TST TIME:T3Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
2. (a)T InternalTusersTofTaccountingTinformationTworkTforTtheTcompanyTand
TincludeTfinanceTdirectors,TmarketingTmanagers,ThumanTresourceT
personnel,TproductionTsupervisors,TandTcompanyTofficers.T InternalT
usersThaveTaccessTtoTcompanyTinformationTthatTisTnotTavailableTto
TexternalTusers.
(b)T SomeTexternalTusersTmayTbeTindividualsTwhoTareTemployeesTofTth
eTcompanyTbutTareTnotTdirectlyTinvolvedTinTmanagingTtheTcompan
y.TAsTaTresult,TtheyTdoTnotThaveTaccessTtoTmuchTinformation.TExte
rnalT usersTofTaccountingTinformationTgenerallyTdoTnotTworkTforTthe
Tcompany.TTheTprimaryTexternalTusersTareTinvestorsTandTcreditors.
TOtherTexternalTusersTincludeTlabourTunions,Tcustomers,TtheTCana
daTRevenueTAgencyT(CRA),TandTsecuritiesTcommissions.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001TCM:TReporting
3. InternalTusersTmayTwantTtheTfollowingTquestionsTanswered:
• IsTthereTenoughTcashTtoTpurchaseTaTnewTpieceTofTequipment?
• WhatT priceT shouldT weT sellT ourT productT forT toT coverT costsT and
T toTmaximizeTnetTincome?
• HowTmanyTemployeesTcanTweTaffordTtoThireTthisTyear?
• WhichTproductTlineTisTtheTmostTprofitable?
• HowTmuchTofTaTpayTraiseTcanTtheTcompanyTaffordTtoTgiveTme?
ExternalTusersTmayTwantTtheTfollowingTquestionsTanswered:
• IsT theT companyT earningT enoughT toT giveT meT myT requiredT returnT
onTinvestment?
• WillTtheTcompanyTbeTableTtoTrepayTitsTdebtsTasTtheTdebtsTcomeTdue?
• WillTtheTcompanyTstayTinTbusinessTlongTenoughTtoTserviceTtheTprod
uctsTITbuyTfromTit?
LOT1T BT:TKT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
SolutionsTManua 1-3 ChapterT
l 1
, 4. PrimaryTusersTofTaccountingTinformationTincludeTinvestorsTandTcreditors
.TTheseTexternalTusersTneedTtoTmakeTdecisionsTconcerningTtheirTongoi
ngTbusinessTrelationshipTwithTtheTcompany.TTheyTneedTtoTbeTableTtoTa
ssessTtheTcompany‘sTperformanceTandTfinancialThealthTbecauseTtheyTin
tendTtoTstart,Tcontinue,TorTdiscontinueThavingTtransactionsTwithTtheTcom
pany.TOtherTdecisionTmakersTwhoThaveTspecificTneedsTforTcertainTfinan
cialTinformation,TsuchTasTtheTamountTofTtaxesTpaidTbyTtheTcompany,Tar
eTnotTconsideredTprimaryTusers.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
5. DecisionTmakersTrelyTonTfinancialTstatementTinformationTandTexpectTthe
TaccountingTinformationTtoThaveTbeenTpreparedTethically.TWithoutTtheTe
xpectationTofTethicalTbehaviour,TtheTinformationTpresentedTinTtheTfinanci
alTstatementsTwouldThaveTnoTcredibilityTforTtheTusersTofTtheTaccounting
Tinformation.TWithoutTcredibility,TfinancialTstatementTinformationTwouldTb
eTuselessTtoTfinancialTstatementTusers.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT EthicsT CPA:Tcpa-t001T CM:TReportingTandTEthics
6. DescriptiveTdataTanalyticTprovidesTinformationTaboutTwhatThappened.T O
nTtheTotherThand,TpredictiveTdataTanalyticsThelpsTtheTorganizationTlookTi
ntoTtheTfutureTandTgivesTsomeTvisibilityTintoTwhatTisTlikelyTtoThappen.TPr
edictiveTdataTanalyticsTisTofTtheTmostTuseTtoTmanagement
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT EthicsT CPA:Tcpa-t001T CM:TReportingTandTEthics
7. (a)TProprietorship:TProprietorshipsTareTeasierTtoTformT(andTdissolve)TthanT o
therTtypesTofTbusinessTorganizations.TTheyTareTnotTtaxedTasTseparateTe
ntities;Trather,TtheTproprietorTpaysTpersonalTincomeTtaxTonTtheTcompany
‘sTnetTincome.TDependingTonTtheTcircumstances,TthisTmayTbeTanTadvan
tageTorTdisadvantage.
DisadvantagesTofTaTproprietorshipTincludeTunlimitedTliabilityT(proprietors
TareTpersonallyTliableTforTallTdebtsTofTtheTbusiness)TandTdifficultyTinT obt
ainingTfinancingTcomparedTtoTotherTformsTofTorganization.TInTaddition,Tt
heTlifeTofTtheTproprietorshipTisTlimitedTasTitTisTdependentTonTtheTwillingn
essTandTcapabilityTofTtheTproprietorTtoTcontinueToperations.
SolutionsTManua 1-4 ChapterT
l 1
Financial Accounting Tools for Business Decision Making, 9th Canadian Edition
Paul D. Kimmel, Jerry J. Weygandt, Jill E. Mitchell, Barbara Trenholm, Wayne
Irvine, Christopher D. Burnley
Chapter 1-14
CHAPTERT1
THETPURPOSETANDTUSETOFTFINANCIALTSTATEMENTS
LEARNINGTOBJECTIVES
1. IdentifyTtheTusesTandTusersTofTaccountingTinformation.
2. DescribeTtheTprimaryTformsTofTbusinessTorganization.
3. ExplainTtheTthreeTmainTtypesTofTbusinessTactivity.
4. DescribeTtheTpurposeTandTcontentTofTeachTofTtheTfinancialTstatements.
SUMMARYTOFTQUESTIONSTBYTLEARNINGTOBJECTIVESTA
NDTBLOOM’STTAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
Questions
1. 1 K 7. 2 C 13. 3 C 19. 4 K 25. 4 C
2. 1 C 8. 2 C 14. 3 C 20. 4 K 26. 4 C
3. 1 K 9. 2 C 15. 3 C 21. 4 AP 27. 4 K
4. 1 C 10. 2 C 16. 3 C 22. 4 C 28. 4 C
5. 1 C 11. 2 C 17. 3 C 23. 4 K 29. 4 C
6. 1 C 12. 2 K 18. 3 C 24. 4 C 30. 4 C
BriefTExercises
1. 1 C 4. 3 C 7. 4 AP 10. 4 C
2. 1 C 5. 3 C 8. 4 K 11. 4 AN
3. 2 K 6. 4 AP 9. 4 K
Exercises
1. 1 C 4. 3 C 7. 4 AN 10. 4 AP 13. 4 AP
2. 2 C 5. 4 K 8. 4 AN 11. 4 AP 14. 4 AN
3. 3 K 6. 4 AP 9. 4 AP 12. 4 AP
Problems:TSetTATandTB
1. 1 C 3. 3 C 5. 4 AP 7. 4 AP 9. 4 AN
2. 2 C 4. 4 K 6. 4 AN 8. 4 AN 10. 4 AN
Cases
1. 3,4 C 3. 3,4 AN 5. 3,4 AN 7. 4 AN 9 1,3 C
2. 1 C 4. 3,4 AN 6. 1 C 8. 1 E
SolutionsTManua 1-1 ChapterT
l 1
, Legend:TTheTfollowingTabbreviationsTwillTappearTthroughoutTtheTsolutionsTmanualTfile.
LO LearningTobjective
BT Bloom'sTTaxonom
y
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: LevelTofTdifficulty
S Simple
M Moderate
C Complex
Time: EstimatedTtimeTtoTprepareTinTminutes
AACSB AssociationTtoTAdvanceTCollegiateTSchoolsTofTBusiness
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec.TThinking ReflectiveTThinking
CPATCM CPATCanadaTCompetency
cpa-e001 Ethics ProfessionalTandTEthicalTBehaviour
cpa-e002 PSTandTDM Problem-SolvingTandTDecision-Making
cpa-e003 Comm. Communication
cpa-e004 Self-Mgt. Self-Management
cpa-e005 TeamT&TLead TeamworkTandTLeadership
cpa-t001 Reporting FinancialTReporting
cpa-t002 Stat.T&TGov. StrategyTandTGovernance
cpa-t003 Mgt.TAccounting ManagementTAccounting
cpa-t004 Audit AuditTandTAssurance
cpa-t005 Finance Finance
cpa-t006 Tax Taxation
SolutionsTManua 1-2 ChapterT
l 1
, ANSWERSTTOTQUESTIONS
1. AccountingTisTtheTinformationTsystemTthatTidentifiesTandTrecordsTtheTec
onomicTeventsTofTanTorganization,TandTthenTcommunicatesTthemTtoTaT
wideTvarietyTofTinterestedTusers.
LOT1T BT:TKT Difficulty:TST TIME:T3Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
2. (a)T InternalTusersTofTaccountingTinformationTworkTforTtheTcompanyTand
TincludeTfinanceTdirectors,TmarketingTmanagers,ThumanTresourceT
personnel,TproductionTsupervisors,TandTcompanyTofficers.T InternalT
usersThaveTaccessTtoTcompanyTinformationTthatTisTnotTavailableTto
TexternalTusers.
(b)T SomeTexternalTusersTmayTbeTindividualsTwhoTareTemployeesTofTth
eTcompanyTbutTareTnotTdirectlyTinvolvedTinTmanagingTtheTcompan
y.TAsTaTresult,TtheyTdoTnotThaveTaccessTtoTmuchTinformation.TExte
rnalT usersTofTaccountingTinformationTgenerallyTdoTnotTworkTforTthe
Tcompany.TTheTprimaryTexternalTusersTareTinvestorsTandTcreditors.
TOtherTexternalTusersTincludeTlabourTunions,Tcustomers,TtheTCana
daTRevenueTAgencyT(CRA),TandTsecuritiesTcommissions.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001TCM:TReporting
3. InternalTusersTmayTwantTtheTfollowingTquestionsTanswered:
• IsTthereTenoughTcashTtoTpurchaseTaTnewTpieceTofTequipment?
• WhatT priceT shouldT weT sellT ourT productT forT toT coverT costsT and
T toTmaximizeTnetTincome?
• HowTmanyTemployeesTcanTweTaffordTtoThireTthisTyear?
• WhichTproductTlineTisTtheTmostTprofitable?
• HowTmuchTofTaTpayTraiseTcanTtheTcompanyTaffordTtoTgiveTme?
ExternalTusersTmayTwantTtheTfollowingTquestionsTanswered:
• IsT theT companyT earningT enoughT toT giveT meT myT requiredT returnT
onTinvestment?
• WillTtheTcompanyTbeTableTtoTrepayTitsTdebtsTasTtheTdebtsTcomeTdue?
• WillTtheTcompanyTstayTinTbusinessTlongTenoughTtoTserviceTtheTprod
uctsTITbuyTfromTit?
LOT1T BT:TKT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
SolutionsTManua 1-3 ChapterT
l 1
, 4. PrimaryTusersTofTaccountingTinformationTincludeTinvestorsTandTcreditors
.TTheseTexternalTusersTneedTtoTmakeTdecisionsTconcerningTtheirTongoi
ngTbusinessTrelationshipTwithTtheTcompany.TTheyTneedTtoTbeTableTtoTa
ssessTtheTcompany‘sTperformanceTandTfinancialThealthTbecauseTtheyTin
tendTtoTstart,Tcontinue,TorTdiscontinueThavingTtransactionsTwithTtheTcom
pany.TOtherTdecisionTmakersTwhoThaveTspecificTneedsTforTcertainTfinan
cialTinformation,TsuchTasTtheTamountTofTtaxesTpaidTbyTtheTcompany,Tar
eTnotTconsideredTprimaryTusers.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT CPA:Tcpa-t001T CM:TReporting
5. DecisionTmakersTrelyTonTfinancialTstatementTinformationTandTexpectTthe
TaccountingTinformationTtoThaveTbeenTpreparedTethically.TWithoutTtheTe
xpectationTofTethicalTbehaviour,TtheTinformationTpresentedTinTtheTfinanci
alTstatementsTwouldThaveTnoTcredibilityTforTtheTusersTofTtheTaccounting
Tinformation.TWithoutTcredibility,TfinancialTstatementTinformationTwouldTb
eTuselessTtoTfinancialTstatementTusers.
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT EthicsT CPA:Tcpa-t001T CM:TReportingTandTEthics
6. DescriptiveTdataTanalyticTprovidesTinformationTaboutTwhatThappened.T O
nTtheTotherThand,TpredictiveTdataTanalyticsThelpsTtheTorganizationTlookTi
ntoTtheTfutureTandTgivesTsomeTvisibilityTintoTwhatTisTlikelyTtoThappen.TPr
edictiveTdataTanalyticsTisTofTtheTmostTuseTtoTmanagement
LOT1T BT:TCT Difficulty:TMT TIME:T5Tmin.T AACSB:TNoneT EthicsT CPA:Tcpa-t001T CM:TReportingTandTEthics
7. (a)TProprietorship:TProprietorshipsTareTeasierTtoTformT(andTdissolve)TthanT o
therTtypesTofTbusinessTorganizations.TTheyTareTnotTtaxedTasTseparateTe
ntities;Trather,TtheTproprietorTpaysTpersonalTincomeTtaxTonTtheTcompany
‘sTnetTincome.TDependingTonTtheTcircumstances,TthisTmayTbeTanTadvan
tageTorTdisadvantage.
DisadvantagesTofTaTproprietorshipTincludeTunlimitedTliabilityT(proprietors
TareTpersonallyTliableTforTallTdebtsTofTtheTbusiness)TandTdifficultyTinT obt
ainingTfinancingTcomparedTtoTotherTformsTofTorganization.TInTaddition,Tt
heTlifeTofTtheTproprietorshipTisTlimitedTasTitTisTdependentTonTtheTwillingn
essTandTcapabilityTofTtheTproprietorTtoTcontinueToperations.
SolutionsTManua 1-4 ChapterT
l 1
