Test Bank for solution manual for accounting 28th EDITION by carl s. warren, christine jonick_ jennifer schneider COMPLETE GUIDE

Test Bank for solution manual for accounting 28th EDITION by carl s. warren, christine jonick_ jennifer schneider CHAPTER 1 INTRODUCTION TO ACCOUNTING AND BUSINESS DISCUSSION QUESTIONS 1. Some users of accounting information include managers, employees, investors, creditors, customers, and the government. 2. The role of accounting is to provide information for managers to use in operating the business. In addition, accounting provides information to others to use in assessing the economic performance and condition of the business. 3. The corporate form allows the company to obtain large amounts of resources by issuing stock. For this reason, most companies that require large investments in property, plant, and equipment are organized as corporations. 4. No. The business entity concept limits the recording of economic data to transactions directly affecting the activities of the business. The payment of the interest of $4,500 is a personal transaction of Josh Reilly and should not be recorded by Dispatch Delivery Service. 5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is consistent with the cost concept. 6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be recognized in the accounting records because land is recorded on the cost basis. b. Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s equity would increase by $1,225,000. 7. An account receivable is a claim against a customer for goods or services sold. An account payable is an amount owed to a creditor for goods or services purchased. Therefore, an account receivable in the records of the seller is an account payable in the records of the purchaser. 8. (b) The business realized net income of $91,000 ($679,000 – $588,000). 9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000). 10. (a) Net income or net loss (b) Owner’s equity at the end of the period (c) Cash at the end of the period 1-1 © 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 1 Introduction to Accounting and Business 1-2 © 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PRACTICE EXERCISES PE 1-1A $597,000. Under the cost concept, the land should be recorded at the cost to Boulder Repair Service. PE 1-1B $369,500. Under the cost concept, the land should be recorded at the cost to Clementine Repair Service. PE 1-2A a. A = L + OE $518,000 OE = = $165,000 + OE $353,000 b. A = L + OE +$86,200 = +$25,000 + OE OE = +$61,200 OE on December 31, 20Y9 = $353,000 + $61,200 = $414,200 PE 1-2B a. A = L + OE $382,000 OE = = $94,000 + OE $288,000 b. A –$63,000 OE OE on December 31, 20Y9 = = = = = L + OE +$35,000 + OE – $98,000 $288,000 – $98,000 $190,000 PE 1-3A (2) Asset (Accounts Receivable) increases by $22,400; Owner’s Equity (Delivery Service Fees) increases by $22,400. (3) Liability (Accounts Payable) decreases by $4,100; Asset (Cash) decreases by $4,100. (4) Asset (Cash) increases by $14,700; Asset (Accounts Receivable) decreases by $14,700. (5) Asset (Cash) decreases by $1,600; Owner’s Equity (Terry Young, Drawing) decreases by $1,600. CHAPTER 1 Introduction to Accounting and Business PE 1-3B 1-3 © 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (2) Owner’s Equity (Advertising Expense, increases) decreases by $6,750; Asset (Cash) decreases by $6,750. (3) Asset (Supplies) increases by $2,920; Liability (Accounts Payable) increases by $2,920. (4) Asset (Accounts Receivable) increases by $20,460; Owner’s Equity (Delivery Service Fees) increases by $20,460. (5) Asset (Cash) increases by $11,410; Asset (Accounts Receivable) decreases by $11,410.