SOLUTIONS
MANUAL:Accounting
28th Edition, Carl S.Warren
t tt tt tt t
, CHAPTER 1 tt
INTRODUCTION TO ACCOUNTING AND BUSINESS
tt tt tt tt
DISCUSSION ttQUESTIONS
1. Some t t users t t of t t accounting t t information t t include t t managers, t t employees,
t t investors, t t creditors,c
t ustomers, ttand ttthe ttgovernment.
2. The ttrole ttof ttaccounting ttis ttto ttprovide ttinformation ttfor ttmanagers ttto ttuse ttin ttoperating ttthe
ttbusiness.tIn ttaddition, ttaccounting tt provides tt information tt to tt others tt to tt use tt in ttassessing
ttthe tt economic tt performance ttand ttcondition ttof ttthe ttbusiness.
3. The ttcorporate ttform ttallows ttthe ttcompany ttto ttobtain ttlarge ttamounts ttof ttresources ttby
ttissuing tt stock.F t or t t this t t reason, t t most t t companies t t that t t require t t large t t investments t t in
t t property, t t plant, t t and t t equipmenttare ttorganized ttas ttcorporations.
4. No. ttThe ttbusiness ttentity ttconcept ttlimits ttthe ttrecording ttof tteconomic ttdata ttto tttransactions
ttdirectlya
t ffecting tt the tt activities tt of ttthe tt business. tt The ttpayment tt of ttthe tt interest tt of
tt$4,500 ttis tt a tt personal tt transaction ttof ttJosh ttReilly ttand ttshould ttnot ttbe ttrecorded ttby
ttDispatch ttDelivery ttService.
5. The ttland ttshould ttbe ttrecorded ttat ttits ttcost ttof tt$167,500 ttto ttReliable ttRepair ttService. ttThis ttis
ttconsistenttw ith ttthe ttcost ttconcept.
6. a. No. ttThe ttoffer ttof tt$2,000,000 ttand ttthe ttincrease ttin ttthe ttassessed ttvalue ttshould ttnot ttbe
ttrecognizedi t n ttthe ttaccounting ttrecords ttbecause ttland ttis ttrecorded tton ttthe ttcost ttbasis.
b. Cash t t would t t increase t t by t t $2,125,000, t t land t t would t t decrease t t by t t $900,000, t t and
t t owner’s t t equityw
t ould ttincrease ttby tt $1,225,000.
7. An ttaccount ttreceivable ttis tta ttclaim ttagainst tta ttcustomer ttfor ttgoods ttor ttservices ttsold. ttAn
ttaccount tt payable ttis ttan ttamount ttowed ttto tta ttcreditor ttfor ttgoods ttor ttservices ttpurchased.
ttTherefore, ttan ttaccounttreceivable ttin ttthe ttrecords ttof ttthe ttseller ttis ttan ttaccount ttpayable ttin ttthe
ttrecords ttof ttthe ttpurchaser.
8. (b) t t The ttbusiness ttrealized ttnet ttincome ttof tt$91,000 tt($679,000 tt– tt$588,000).
9. (a) t t The ttbusiness ttincurred tta ttnet ttloss ttof tt$75,000 tt($640,000 tt– tt$715,000).
10. (a) t t Net ttincome ttor ttnet ttloss
(b) Owner’s ttequity ttat ttthe ttend ttof ttthe ttperiod
(c) Cash ttat ttthe ttend ttof ttthe ttperiod
, 1-1
© tt2021 ttCengage ttLearning, ttInc. ttMay ttnot ttbe ttscanned, ttcopied ttor ttduplicated, ttor ttposted ttto tta ttpublicly ttaccessible ttwebsite, ttin
ttwhole ttor ttin ttpart.
,
MANUAL:Accounting
28th Edition, Carl S.Warren
t tt tt tt t
, CHAPTER 1 tt
INTRODUCTION TO ACCOUNTING AND BUSINESS
tt tt tt tt
DISCUSSION ttQUESTIONS
1. Some t t users t t of t t accounting t t information t t include t t managers, t t employees,
t t investors, t t creditors,c
t ustomers, ttand ttthe ttgovernment.
2. The ttrole ttof ttaccounting ttis ttto ttprovide ttinformation ttfor ttmanagers ttto ttuse ttin ttoperating ttthe
ttbusiness.tIn ttaddition, ttaccounting tt provides tt information tt to tt others tt to tt use tt in ttassessing
ttthe tt economic tt performance ttand ttcondition ttof ttthe ttbusiness.
3. The ttcorporate ttform ttallows ttthe ttcompany ttto ttobtain ttlarge ttamounts ttof ttresources ttby
ttissuing tt stock.F t or t t this t t reason, t t most t t companies t t that t t require t t large t t investments t t in
t t property, t t plant, t t and t t equipmenttare ttorganized ttas ttcorporations.
4. No. ttThe ttbusiness ttentity ttconcept ttlimits ttthe ttrecording ttof tteconomic ttdata ttto tttransactions
ttdirectlya
t ffecting tt the tt activities tt of ttthe tt business. tt The ttpayment tt of ttthe tt interest tt of
tt$4,500 ttis tt a tt personal tt transaction ttof ttJosh ttReilly ttand ttshould ttnot ttbe ttrecorded ttby
ttDispatch ttDelivery ttService.
5. The ttland ttshould ttbe ttrecorded ttat ttits ttcost ttof tt$167,500 ttto ttReliable ttRepair ttService. ttThis ttis
ttconsistenttw ith ttthe ttcost ttconcept.
6. a. No. ttThe ttoffer ttof tt$2,000,000 ttand ttthe ttincrease ttin ttthe ttassessed ttvalue ttshould ttnot ttbe
ttrecognizedi t n ttthe ttaccounting ttrecords ttbecause ttland ttis ttrecorded tton ttthe ttcost ttbasis.
b. Cash t t would t t increase t t by t t $2,125,000, t t land t t would t t decrease t t by t t $900,000, t t and
t t owner’s t t equityw
t ould ttincrease ttby tt $1,225,000.
7. An ttaccount ttreceivable ttis tta ttclaim ttagainst tta ttcustomer ttfor ttgoods ttor ttservices ttsold. ttAn
ttaccount tt payable ttis ttan ttamount ttowed ttto tta ttcreditor ttfor ttgoods ttor ttservices ttpurchased.
ttTherefore, ttan ttaccounttreceivable ttin ttthe ttrecords ttof ttthe ttseller ttis ttan ttaccount ttpayable ttin ttthe
ttrecords ttof ttthe ttpurchaser.
8. (b) t t The ttbusiness ttrealized ttnet ttincome ttof tt$91,000 tt($679,000 tt– tt$588,000).
9. (a) t t The ttbusiness ttincurred tta ttnet ttloss ttof tt$75,000 tt($640,000 tt– tt$715,000).
10. (a) t t Net ttincome ttor ttnet ttloss
(b) Owner’s ttequity ttat ttthe ttend ttof ttthe ttperiod
(c) Cash ttat ttthe ttend ttof ttthe ttperiod
, 1-1
© tt2021 ttCengage ttLearning, ttInc. ttMay ttnot ttbe ttscanned, ttcopied ttor ttduplicated, ttor ttposted ttto tta ttpublicly ttaccessible ttwebsite, ttin
ttwhole ttor ttin ttpart.
,
