1-1
© q 2021 q Cengage q Learning, q Inc. q May q not q be q scanned, q copied q or q duplicated, q or q posted q to q a q publicly q accessible q website, q in
q whole q or q in q part.
, CHAPTER 1 q
INTRODUCTION TO ACCOUNTING AND BUSINESS q q q q
DISCUSSION qQUESTIONS
1. Some qusers qof qaccounting qinformation qinclude qmanagers, qemployees, qinvestors, qcreditors,
qcustomers, qand qthe qgovernment.
2. The qrole qof qaccounting qis qto qprovide qinformation qfor qmanagers qto quse qin qoperating qthe
qbusiness. q In qaddition, qaccounting qprovides qinformation qto qothers qto quse qin qassessing qthe
qeconomic qperformance qand qcondition qof qthe qbusiness.
3. The q corporate q form q allows q the q company q to q obtain q large q amounts q of q resources q by q issuing
q stock. qFor qthis qreason, qmost qcompanies qthat qrequire qlarge qinvestments qin qproperty, qplant, qand
qequipment qare qorganized qas qcorporations.
4. No. qThe qbusiness qentity qconcept qlimits qthe qrecording qof qeconomic qdata qto qtransactions
qdirectly qaffecting qthe qactivities qof qthe qbusiness. qThe qpayment qof qthe qinterest qof q$4,500 qis qa
qpersonal qtransaction qof qJosh qReilly qand qshould qnot qbe qrecorded qby qDispatch qDelivery
qService.
5. The qland qshould qbe qrecorded qat qits qcost qof q$167,500 qto qReliable qRepair qService. qThis qis
qconsistent q with qthe qcost qconcept.
6. a. No. qThe qoffer qof q$2,000,000 qand qthe qincrease qin qthe qassessed qvalue qshould qnot qbe
qrecognized q in qthe qaccounting qrecords qbecause qland qis qrecorded qon qthe qcost qbasis.
b. Cash qwould qincrease qby q$2,125,000, qland qwould qdecrease qby q$900,000, qand qowner’s
qequity qwould qincrease qby q$1,225,000.
7. An qaccount qreceivable qis qa qclaim qagainst qa qcustomer qfor qgoods qor qservices qsold. qAn qaccount
qpayable qis qan qamount qowed qto qa qcreditor qfor qgoods qor qservices qpurchased. qTherefore, qan
qaccount qreceivable qin qthe qrecords qof qthe qseller qis qan qaccount qpayable qin qthe qrecords qof qthe
qpurchaser.
8. (b) q The q business q realized q net q income q of q $91,000 q ($679,000 q – q $588,000).
9. (a) q q The qbusiness q incurred q a q net q loss q of q $75,000 q ($640,000 q – q $715,000).
10. (a) q q Net q income qor q net q loss
(b) Owner’s qequity q at q the qend qof q the q period
(c) Cash q at q the q end q of q the qperiod
1-2
© q2021 qCengage qLearning, qInc. qMay qnot qbe qscanned, qcopied qor qduplicated, qor qposted qto qa qpublicly qaccessible qwebsite, qin
qwhole qor qin qpart.
, CHAPTER q1 Introduction qto qAccounting qand
qBusiness
PE q1-3B PRACTICE q EXERCISES
PE q1-1A
$597,000. qUnder qthe qcost qconcept, qthe qland qshould qbe qrecorded qat qthe qcost qto qBoulder
qRepair qService.
PE q1-1B
$369,500. qUnder qthe qcost qconcept, qthe qland qshould qbe qrecorded qat qthe qcost qto
qClementine qRepair qService.
PE q1-2A
a. A = L q + q OE
$518,000 = $165,000 q+ qOE
OE = $353,000
b. A = L q + q OE
+$86,200 = +$25,000 q+ qOE
OE = +$61,200
OE qon qDecember q31, = $353,000 q+ q$61,200
q20Y9
= $414,200
PE q1-2B
a. A = L q + q OE
$382,000 = $94,000 q+ qOE
OE = $288,000
b. A = L q + q OE
– q = +$35,000 q+ qOE q–
$63,000 = $98,000
OE = $288,000 q– q$98,000
OE qon qDecember q31, q20Y9 = $190,000
PE q1-3A
(2) Asset q(Accounts qReceivable) qincreases qby q$22,400;
Owner’s qEquity q(Delivery qService qFees) qincreases qby q$22,400.
(3) Liability q(Accounts qPayable) qdecreases qby
q$4,100; qAsset q(Cash) qdecreases qby q$4,100.
(4) Asset q(Cash) qincreases qby q$14,700;
Asset q(Accounts qReceivable) qdecreases qby q$14,700.
(5) Asset q(Cash) qdecreases qby q$1,600;
Owner’s qEquity q(Terry qYoung, qDrawing) qdecreases qby q$1,600.
1-1
© q 2021 q Cengage q Learning, q Inc. q May q not q be q scanned, q copied q or q duplicated, q or q posted q to q a q publicly q accessible q website, q in
q whole q or q in q part.
,
© q 2021 q Cengage q Learning, q Inc. q May q not q be q scanned, q copied q or q duplicated, q or q posted q to q a q publicly q accessible q website, q in
q whole q or q in q part.
, CHAPTER 1 q
INTRODUCTION TO ACCOUNTING AND BUSINESS q q q q
DISCUSSION qQUESTIONS
1. Some qusers qof qaccounting qinformation qinclude qmanagers, qemployees, qinvestors, qcreditors,
qcustomers, qand qthe qgovernment.
2. The qrole qof qaccounting qis qto qprovide qinformation qfor qmanagers qto quse qin qoperating qthe
qbusiness. q In qaddition, qaccounting qprovides qinformation qto qothers qto quse qin qassessing qthe
qeconomic qperformance qand qcondition qof qthe qbusiness.
3. The q corporate q form q allows q the q company q to q obtain q large q amounts q of q resources q by q issuing
q stock. qFor qthis qreason, qmost qcompanies qthat qrequire qlarge qinvestments qin qproperty, qplant, qand
qequipment qare qorganized qas qcorporations.
4. No. qThe qbusiness qentity qconcept qlimits qthe qrecording qof qeconomic qdata qto qtransactions
qdirectly qaffecting qthe qactivities qof qthe qbusiness. qThe qpayment qof qthe qinterest qof q$4,500 qis qa
qpersonal qtransaction qof qJosh qReilly qand qshould qnot qbe qrecorded qby qDispatch qDelivery
qService.
5. The qland qshould qbe qrecorded qat qits qcost qof q$167,500 qto qReliable qRepair qService. qThis qis
qconsistent q with qthe qcost qconcept.
6. a. No. qThe qoffer qof q$2,000,000 qand qthe qincrease qin qthe qassessed qvalue qshould qnot qbe
qrecognized q in qthe qaccounting qrecords qbecause qland qis qrecorded qon qthe qcost qbasis.
b. Cash qwould qincrease qby q$2,125,000, qland qwould qdecrease qby q$900,000, qand qowner’s
qequity qwould qincrease qby q$1,225,000.
7. An qaccount qreceivable qis qa qclaim qagainst qa qcustomer qfor qgoods qor qservices qsold. qAn qaccount
qpayable qis qan qamount qowed qto qa qcreditor qfor qgoods qor qservices qpurchased. qTherefore, qan
qaccount qreceivable qin qthe qrecords qof qthe qseller qis qan qaccount qpayable qin qthe qrecords qof qthe
qpurchaser.
8. (b) q The q business q realized q net q income q of q $91,000 q ($679,000 q – q $588,000).
9. (a) q q The qbusiness q incurred q a q net q loss q of q $75,000 q ($640,000 q – q $715,000).
10. (a) q q Net q income qor q net q loss
(b) Owner’s qequity q at q the qend qof q the q period
(c) Cash q at q the q end q of q the qperiod
1-2
© q2021 qCengage qLearning, qInc. qMay qnot qbe qscanned, qcopied qor qduplicated, qor qposted qto qa qpublicly qaccessible qwebsite, qin
qwhole qor qin qpart.
, CHAPTER q1 Introduction qto qAccounting qand
qBusiness
PE q1-3B PRACTICE q EXERCISES
PE q1-1A
$597,000. qUnder qthe qcost qconcept, qthe qland qshould qbe qrecorded qat qthe qcost qto qBoulder
qRepair qService.
PE q1-1B
$369,500. qUnder qthe qcost qconcept, qthe qland qshould qbe qrecorded qat qthe qcost qto
qClementine qRepair qService.
PE q1-2A
a. A = L q + q OE
$518,000 = $165,000 q+ qOE
OE = $353,000
b. A = L q + q OE
+$86,200 = +$25,000 q+ qOE
OE = +$61,200
OE qon qDecember q31, = $353,000 q+ q$61,200
q20Y9
= $414,200
PE q1-2B
a. A = L q + q OE
$382,000 = $94,000 q+ qOE
OE = $288,000
b. A = L q + q OE
– q = +$35,000 q+ qOE q–
$63,000 = $98,000
OE = $288,000 q– q$98,000
OE qon qDecember q31, q20Y9 = $190,000
PE q1-3A
(2) Asset q(Accounts qReceivable) qincreases qby q$22,400;
Owner’s qEquity q(Delivery qService qFees) qincreases qby q$22,400.
(3) Liability q(Accounts qPayable) qdecreases qby
q$4,100; qAsset q(Cash) qdecreases qby q$4,100.
(4) Asset q(Cash) qincreases qby q$14,700;
Asset q(Accounts qReceivable) qdecreases qby q$14,700.
(5) Asset q(Cash) qdecreases qby q$1,600;
Owner’s qEquity q(Terry qYoung, qDrawing) qdecreases qby q$1,600.
1-1
© q 2021 q Cengage q Learning, q Inc. q May q not q be q scanned, q copied q or q duplicated, q or q posted q to q a q publicly q accessible q website, q in
q whole q or q in q part.
,
