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

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© g 2021 g Cengage g Learning, g Inc. g May g not g be g scanned, g copied g or g duplicated, g or g posted g to g a g publicly g accessible g website, g in g whole
g or g in g part.

, CHAPTER 1 g



INTRODUCTION TO ACCOUNTING AND BUSINESS g g g g




DISCUSSION QUESTIONS g




1. Some users of accounting information include managers, employees, investors, creditors,
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customers, and the government.
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2. The role of accounting is to provide information for managers to use in operating the business.
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gIn addition, accounting provides information to others to use in assessing the economic
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performance and condition of the business.
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3. The corporate form allows the company to obtain large amounts of resources by issuing
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stock. For this reason, most companies that require large investments in property, plant, and
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equipment are organized as corporations.
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4. No. The business entity concept limits the recording of economic data to transactions directly
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affecting the activities of the business. The payment of the interest of $4,500 is a personal
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transaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.
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5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is consistent
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gwith the cost concept.
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6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be recognized
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gin the accounting records because land is recorded on the cost basis.
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b. Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s
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equity would increase by $1,225,000.
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7. An account receivable is a claim against a customer for goods or services sold. An account
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payable is an amount owed to a creditor for goods or services purchased. Therefore, an account
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receivable in the records of the seller is an account payable in the records of the purchaser.
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8. (b) g The business realized net income of $91,000 ($679,000 – $588,000).
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9. (a) g g The business incurred a net loss of $75,000 ($640,000 – $715,000).
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10. (a) Net income or net loss
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(b) Owner’s equity at the end of the period g g g g g g g


(c) Cash at the end of the period g g g g g g




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© g2021 gCengage gLearning, gInc. gMay gnot gbe gscanned, gcopied gor gduplicated, gor gposted gto ga gpublicly gaccessible gwebsite, gin gwhole gor
gin gpart.

, CHAPTER 1 g Introduction to Accounting and Business
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PE 1-3B
g PRACTICE EXERCISES g




PE 1-1A
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$597,000. Under the cost concept, the land should be recorded at the cost to Boulder
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Repair Service.
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PE 1-1B
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$369,500. Under the cost concept, the land should be recorded at the cost to
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Clementine Repair Service.
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PE 1-2A
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a. A = L + OE g g


$518,000 = $165,000 + OE g g


OE = $353,000

b. A = L + OE
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+$86,200 = +$25,000 + OE g g


OE = +$61,200
OE on December 31, 20Y9
g g g g = $353,000 + $61,200 g g


= $414,200


PE 1-2B
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a. A = L + OE g g


$382,000 = $94,000 + OE g g


OE = $288,000

b. A = L + OE
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– g = +$35,000 + OE – g g g


$63,000 = $98,000
OE = $288,000 – $98,000 g g


OE on December 31, 20Y9
g g g g = $190,000


PE 1-3A
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(2) Asset (Accounts Receivable) increases by $22,400;
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Owner’s Equity (Delivery Service Fees) increases by $22,400.
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(3) Liability (Accounts Payable) decreases by $4,100;
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Asset (Cash) decreases by $4,100.
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(4) Asset (Cash) increases by $14,700;
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Asset (Accounts Receivable) decreases by $14,700.
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(5) Asset (Cash) decreases by $1,600;
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Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
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© g 2021 g Cengage g Learning, g Inc. g May g not g be g scanned, g copied g or g duplicated, g or g posted g to g a g publicly g accessible g website, g in g whole
g or g in g part.

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