SOLUTIONS MANUAL for Accounting 28th Edition
c c c c c
by Carl Warren, Christine Jonick & Jennifer
c c c c c c c
Schneider. (Complete Chapters 1-26)
c c c c
, CHAPTER 1 c
INTRODUCTION TO ACCOUNTING AND BUSINESS c c c c
DISCUSSION QUESTIONS c
1. Some users of accounting information include managers, employees, investors,
c c c c c c c c
creditors,customers, and the government.
c c c c c
2. The role of accounting is to provide information for managers to use in operating the
c c c c c c c c c c c c c c
business.In addition, accounting provides information to others to use in assessing the
c c c c c c c c c c c c c
economic performance and condition of the business.
c c c c c c c
3. The corporate form allows the company to obtain large amounts of resources by issuing
c c c c c c c c c c c c c
stock. For this reason, most companies that require large investments in property, plant, and
c c c c c c c c c c c c c c
equipment are organized as corporations.
c c c c c
4. No. The business entity concept limits the recording of economic data to transactions
c c c c c c c c c c c c
directlyaffecting the activities of the business. The payment of the interest of $4,500 is a
c c c c c c c c c c c c c c c c
personaltransaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.
c c c c c c c c c c c c c c
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is
c c c c c c c c c c c c c c c
consistent with the cost concept.
c c c c c
6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be
c c c c c c c c c c c c c c
recognizedin the accounting records because land is recorded on the cost basis.
c c c c c c c c c c c c c
b. Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s
c c c c c c c c c c c
equitywould increase by $1,225,000.
c c c c c
7. An account receivable is a claim against a customer for goods or services sold. An account
c c c c c c c c c c c c c c c
payable is an amount owed to a creditor for goods or services purchased. Therefore, an
c c c c c c c c c c c c c c c
accountreceivable in the records of the seller is an account payable in the records of the
c c c c c c c c c c c c c c c c c
purchaser.
c
8. (b) c The business realized net income of $91,000 ($679,000 – $588,000).
c c c c c c c c c
9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000).
c c c c c c c c c c c
10. (a) Net income or net loss
c c c c c
(b) Owner’s equity at the end of the period c c c c c c c
(c) Cash at the end of the period c c c c c c
1-1
,
, CHAPTER 1 c Introduction to Accounting and Business
c c c c
PRACTICE EXERCISES c
PE 1-1A c
$597,000. Under the cost concept, the land should be recorded at the cost to
c c c c c c c c c c c c c
BoulderRepair Service.
c c c
PE 1-1B c
$369,500. Under the cost concept, the land should be recorded at the cost
c c c c c c c c c c c c
toClementine Repair Service.
c c c c
PE 1-2A c
a. A = L + OE c cc
$518,000 = $165,000 + OE c c
OE = $353,000
b. A = L + OE
c cc
+$86,200 = +$25,000 + OE c c
OE = +$61,200
OE on December 31, 20Y9
c c c c = $353,000 + $61,200 c c
= $414,200
PE 1-2B c
a. A = L + OE c cc
$382,000 = $94,000 + OE c c
OE = $288,000
b. A = L + OE
c cc
–$63,000 = +$35,000 + OE c c
OE = –$98,000
OE on December 31, 20Y9
c c c c = $288,000 – $98,000 c c
= $190,000
PE 1-3A c
(2) Asset (Accounts Receivable) increases by $22,400;
c c c c c
Owner’s Equity (Delivery Service Fees) increases by $22,400.
c c c c c c c
(3) Liability (Accounts Payable) decreases by
c c c c
$4,100;Asset (Cash) decreases by $4,100.
c c c c c c
(4) Asset (Cash) increases by $14,700;
c c c c
Asset (Accounts Receivable) decreases by $14,700.
c c c c c
(5) Asset (Cash) decreases by $1,600;
c c c c
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
c c c c c c c
c c c c c
by Carl Warren, Christine Jonick & Jennifer
c c c c c c c
Schneider. (Complete Chapters 1-26)
c c c c
, CHAPTER 1 c
INTRODUCTION TO ACCOUNTING AND BUSINESS c c c c
DISCUSSION QUESTIONS c
1. Some users of accounting information include managers, employees, investors,
c c c c c c c c
creditors,customers, and the government.
c c c c c
2. The role of accounting is to provide information for managers to use in operating the
c c c c c c c c c c c c c c
business.In addition, accounting provides information to others to use in assessing the
c c c c c c c c c c c c c
economic performance and condition of the business.
c c c c c c c
3. The corporate form allows the company to obtain large amounts of resources by issuing
c c c c c c c c c c c c c
stock. For this reason, most companies that require large investments in property, plant, and
c c c c c c c c c c c c c c
equipment are organized as corporations.
c c c c c
4. No. The business entity concept limits the recording of economic data to transactions
c c c c c c c c c c c c
directlyaffecting the activities of the business. The payment of the interest of $4,500 is a
c c c c c c c c c c c c c c c c
personaltransaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.
c c c c c c c c c c c c c c
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is
c c c c c c c c c c c c c c c
consistent with the cost concept.
c c c c c
6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be
c c c c c c c c c c c c c c
recognizedin the accounting records because land is recorded on the cost basis.
c c c c c c c c c c c c c
b. Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s
c c c c c c c c c c c
equitywould increase by $1,225,000.
c c c c c
7. An account receivable is a claim against a customer for goods or services sold. An account
c c c c c c c c c c c c c c c
payable is an amount owed to a creditor for goods or services purchased. Therefore, an
c c c c c c c c c c c c c c c
accountreceivable in the records of the seller is an account payable in the records of the
c c c c c c c c c c c c c c c c c
purchaser.
c
8. (b) c The business realized net income of $91,000 ($679,000 – $588,000).
c c c c c c c c c
9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000).
c c c c c c c c c c c
10. (a) Net income or net loss
c c c c c
(b) Owner’s equity at the end of the period c c c c c c c
(c) Cash at the end of the period c c c c c c
1-1
,
, CHAPTER 1 c Introduction to Accounting and Business
c c c c
PRACTICE EXERCISES c
PE 1-1A c
$597,000. Under the cost concept, the land should be recorded at the cost to
c c c c c c c c c c c c c
BoulderRepair Service.
c c c
PE 1-1B c
$369,500. Under the cost concept, the land should be recorded at the cost
c c c c c c c c c c c c
toClementine Repair Service.
c c c c
PE 1-2A c
a. A = L + OE c cc
$518,000 = $165,000 + OE c c
OE = $353,000
b. A = L + OE
c cc
+$86,200 = +$25,000 + OE c c
OE = +$61,200
OE on December 31, 20Y9
c c c c = $353,000 + $61,200 c c
= $414,200
PE 1-2B c
a. A = L + OE c cc
$382,000 = $94,000 + OE c c
OE = $288,000
b. A = L + OE
c cc
–$63,000 = +$35,000 + OE c c
OE = –$98,000
OE on December 31, 20Y9
c c c c = $288,000 – $98,000 c c
= $190,000
PE 1-3A c
(2) Asset (Accounts Receivable) increases by $22,400;
c c c c c
Owner’s Equity (Delivery Service Fees) increases by $22,400.
c c c c c c c
(3) Liability (Accounts Payable) decreases by
c c c c
$4,100;Asset (Cash) decreases by $4,100.
c c c c c c
(4) Asset (Cash) increases by $14,700;
c c c c
Asset (Accounts Receivable) decreases by $14,700.
c c c c c
(5) Asset (Cash) decreases by $1,600;
c c c c
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
c c c c c c c
