Solution Manual for Accounting Principles 14th Edition by Jerry J.
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS P P
1. This P is P true. P Virtually P every P organization P and P person P in P our P society P uses P accounting P information.
P Businesses, Pinvestors, Pcreditors, Pgovernment P agencies, Pand P not-for-profit P organizations P must P use P accounting
Pinformation P to Poperate Peffectively.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P PAICPA PFC: PReporting
2. Accounting P is P the P process P of P identifying, P recording, P and P communicating P the P economic P events P of P an
P organization P to P interested P users P of P the P information. P The P first P activity P of P the P accounting P process P is P to
P identify P economic P events P that P are P relevant P to P a P particular P business. P Once P identified P and P measured,
P the P events P are P recorded P to P provide P a P history P of P the P financial P activities P of P the P organization. P Recording
P consists P of P keeping P a P chronological P diary P of P these P measured P events P in P an Porderly P and P systematic
P manner. P The P information P is P communicated P through P the P preparation P and P distribution P of P accounting
P reports, P the P most P common P of P which P are P called P financial P statements. P A P vital P element P in P the
P communication P process P is P the P accountant’s P ability P and P responsibility P to P analyze P and P interpret P the
P reported P information.
LO1 PBT: PC P Difficulty: PEasy P TOT: P4 Pmin. P AACSB: PNone P AICPA PFC: PReporting
3. (a) P Internal P users P are P those P who P plan, P organize, P and P run P the P business P and P therefore P are P officers P and
P other Pdecision Pmakers.
(b) To Passist P management, Pmanagerial Paccounting Pprovides P internal Preports. PExamples P include P financial
P comparisons Pof P operating Palternatives, P projections Pof P income Pfrom Pnew Psales P campaigns, Pand
Pforecasts Pof P cash Pneeds Pfor Pthe Pnext Pyear.
LO1 P BT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
4. (a) PInvestors P(owners) Puse Paccounting Pinformation Pto Pmake Pdecisions Pto Pbuy, Phold, Por Psell Powner- Pship P shares
P of P a Pcompany.
(b) Creditors Puse Paccounting Pinformation Pto Pevaluate Pthe Prisks Pof Pgranting Pcredit Por Plending Pmoney.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
5. This Pis Pfalse. PBookkeeping Pusually Pinvolves Ponly Pthe Precording Pof Peconomic Pevents Pand Ptherefore Pisjust P one
P part P of Pthe P entire P accounting P process. P Accounting, P on P the P other P hand, P involves P the P entire P process P of
P identifying, P recording, Pand P communicating Peconomic Pevents.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
6. Benton P Travel P Agency P should P report P the P land P at P $90,000 P on P its P December P 31, P 2022 P balance P sheet.
P This P is P true P not P only P at P the P time P the P land P is P purchased, P but P also P over P the P time P the P land P is P held.
P In P determining P which P measurement P principle P to P use P (historical P cost P or P fair P value) P companies P weigh P the
P factual P nature P of P cost P figures P versus P the P relevance P of P fair P value. P In P general, P companies P use P historical
P cost. POnly Pin Psituations Pwhere Passets Pare Pactively Ptraded Pdo P P companies Papply Pthe Pfair Pvalue Pprinciple.
LO2 P BT: PC P Difficulty: PEasy P TOT: P4 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
7. The Pmonetary Punit P assumption Prequires P that P only Ptransaction P data Pthat P can P be Pexpressed Pin Pterms P of P money
P be P included P in P the P accounting P records. P This P assumption P enables P accounting P to P quantify P (measure) Peconomic
Pevents.
LO2 P BT: PK P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
8. The Peconomic Pentity Passumption Prequires P Pthat Pthe Pactivities Pof P the Pentity Pbe Pkept P separate Pand P distinct Pfrom
Pthe Pactivities Pof P its Powners Pand Pall Pother Peconomic Pentities.
LO2 PBT: PK P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
, Questions PChapter P1 P(Continued)
9. The P three P basic P forms P Pof P business P organizations P are: P (1) P proprietorship, P (2) P partnership, P and
(3) P corporation.
LO2 P BT: PK P Difficulty: PEasy P TOT:1 Pmin. P AACSB: PNone P PAICPA PFC: P Reporting
10. One Pof P the Padvantages P Helen P Rupp Pwould P enjoy Pis P that P ownership P of P a Pcorporation P is P represented P by
P transferable P shares P of P stock. P This P would P allow P Helen P to P raise P money P easily P by P selling P a P part P of P her
P ownership P in P the P company. P Another P advantage P is P that P because P holders P of P the P shares P (stockholders)
P enjoy P limited Pliability; P they Pare P not Ppersonally Pliable P for P the Pdebts P of P the P corporate Pentity. P Also,
P because P ownership P can P be P transferred P without P dissolving P the P corporation, P the P corporation Penjoys P an
P unlimited P life.
LO2 P BT: PK P Difficulty: PEasy P TOT: P4 Pmin. P PAACSB: PNone P PAICPA PFC: PReporting
11. The Pbasic Paccounting Pequation Pis PAssets P= PLiabilities P+ POwner’s PEquity.
LO3 PBT: PK P Difficulty: PEasy P TOT: P1 Pmin. P PAACSB: PNone P PAICPA PFC: PMeasurement
12. (a) PAssets Pare Presources P owned Pby Pa Pbusiness. PLiabilities Pare Pcreditor Pclaims P against Passets. PPut P more
P simply, P liabilities P are P existing P debts P and P obligations. P Owner’s P equity P is P the P ownership P claim P on
P total Passets.
(b) Owner’s Pequity Pis Paffected Pby Powner’s Pinvestments, Pdrawings, Prevenues, Pand Pexpenses.
LO3 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
13. The Pliabilities Pare: P(b) PAccounts Ppayable Pand P(g) PSalaries Pand Pwages Ppayable.
LO3 PBT: PC P Difficulty: PEasy P TOT: P1 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
14. Yes, P a P business P can P enter P into P a P transaction P in P which P only P the P left P side P of P the P accounting P equation P is
P affected. PAn P example Pwould P be P a Ptransaction P where P an P increase Pin P one Passet P is P offset P by Pa P decrease Pin
P another Passet. PAn Pincrease Pin Pthe PEquipment Paccount Pwhich Pis Poffset Pby Pa Pdecrease Pinthe PCash P account P is
P a Pspecific Pexample.
LO4 PBT: PC P Difficulty: PModerate P TOT: P3 Pmin. P AACSB: PNone P AICPA PFC: PReporting
15. Business P transactions P are Pthe Peconomic Pevents P of P the Penterprise P recorded P by Paccountantsbecause P they
Paffect P the Pbasic Paccounting Pequation.
(a) The Pdeath Pof Pthe Powner Pof P the Pcompany Pis Pnot P a Pbusiness Ptransaction Pas Pit Pdoes Pnot Paffect P ofthe
P components Pof P the Pbasic Paccounting Pequation.
(b) Supplies P purchased P on P account P is P a P business P transaction P as P it P affects P the P basic P accounting
P equation.
(c) An P Pemployee P being P Pfired P Pis P Pnot P Pa P business P Ptransaction P Pas P Pit P Pdoes P Pnot P Paffect Pany P of P
P the P components Pof P the Pbasic Paccounting Pequation.
(d) A Pwithdrawal Pof Pcash Pby Pthe Powner Pfrom Pthe Pbusiness Pis Pa Pbusiness Ptransaction Pas Pit Paffects Pthe P basic
Paccounting Pequation.
LO4 PBT: PC P Difficulty: PModerate P TOT: P4 Pmin. P AACSB: PNone P AICPA PFC: PReporting
16. (a) Decrease Passets Pand Pdecrease Powner’s Pequity.
(b) Increase Passets Pand Pdecrease Passets.
(c) Increase Passets Pand Pincrease Powner’s Pequity.
(d) Decrease Passets Pand Pdecrease Pliabilities.
LO4 PBT: PC P Difficulty: PModerate P TOT: P3 Pmin. P AACSB: PNone P AICPA PFC: PReporting
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS P P
1. This P is P true. P Virtually P every P organization P and P person P in P our P society P uses P accounting P information.
P Businesses, Pinvestors, Pcreditors, Pgovernment P agencies, Pand P not-for-profit P organizations P must P use P accounting
Pinformation P to Poperate Peffectively.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P PAICPA PFC: PReporting
2. Accounting P is P the P process P of P identifying, P recording, P and P communicating P the P economic P events P of P an
P organization P to P interested P users P of P the P information. P The P first P activity P of P the P accounting P process P is P to
P identify P economic P events P that P are P relevant P to P a P particular P business. P Once P identified P and P measured,
P the P events P are P recorded P to P provide P a P history P of P the P financial P activities P of P the P organization. P Recording
P consists P of P keeping P a P chronological P diary P of P these P measured P events P in P an Porderly P and P systematic
P manner. P The P information P is P communicated P through P the P preparation P and P distribution P of P accounting
P reports, P the P most P common P of P which P are P called P financial P statements. P A P vital P element P in P the
P communication P process P is P the P accountant’s P ability P and P responsibility P to P analyze P and P interpret P the
P reported P information.
LO1 PBT: PC P Difficulty: PEasy P TOT: P4 Pmin. P AACSB: PNone P AICPA PFC: PReporting
3. (a) P Internal P users P are P those P who P plan, P organize, P and P run P the P business P and P therefore P are P officers P and
P other Pdecision Pmakers.
(b) To Passist P management, Pmanagerial Paccounting Pprovides P internal Preports. PExamples P include P financial
P comparisons Pof P operating Palternatives, P projections Pof P income Pfrom Pnew Psales P campaigns, Pand
Pforecasts Pof P cash Pneeds Pfor Pthe Pnext Pyear.
LO1 P BT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
4. (a) PInvestors P(owners) Puse Paccounting Pinformation Pto Pmake Pdecisions Pto Pbuy, Phold, Por Psell Powner- Pship P shares
P of P a Pcompany.
(b) Creditors Puse Paccounting Pinformation Pto Pevaluate Pthe Prisks Pof Pgranting Pcredit Por Plending Pmoney.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
5. This Pis Pfalse. PBookkeeping Pusually Pinvolves Ponly Pthe Precording Pof Peconomic Pevents Pand Ptherefore Pisjust P one
P part P of Pthe P entire P accounting P process. P Accounting, P on P the P other P hand, P involves P the P entire P process P of
P identifying, P recording, Pand P communicating Peconomic Pevents.
LO1 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
6. Benton P Travel P Agency P should P report P the P land P at P $90,000 P on P its P December P 31, P 2022 P balance P sheet.
P This P is P true P not P only P at P the P time P the P land P is P purchased, P but P also P over P the P time P the P land P is P held.
P In P determining P which P measurement P principle P to P use P (historical P cost P or P fair P value) P companies P weigh P the
P factual P nature P of P cost P figures P versus P the P relevance P of P fair P value. P In P general, P companies P use P historical
P cost. POnly Pin Psituations Pwhere Passets Pare Pactively Ptraded Pdo P P companies Papply Pthe Pfair Pvalue Pprinciple.
LO2 P BT: PC P Difficulty: PEasy P TOT: P4 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
7. The Pmonetary Punit P assumption Prequires P that P only Ptransaction P data Pthat P can P be Pexpressed Pin Pterms P of P money
P be P included P in P the P accounting P records. P This P assumption P enables P accounting P to P quantify P (measure) Peconomic
Pevents.
LO2 P BT: PK P Difficulty: PEasy P TOT: P2 Pmin. P PAACSB: PNone P AICPA PFC: PReporting
8. The Peconomic Pentity Passumption Prequires P Pthat Pthe Pactivities Pof P the Pentity Pbe Pkept P separate Pand P distinct Pfrom
Pthe Pactivities Pof P its Powners Pand Pall Pother Peconomic Pentities.
LO2 PBT: PK P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
, Questions PChapter P1 P(Continued)
9. The P three P basic P forms P Pof P business P organizations P are: P (1) P proprietorship, P (2) P partnership, P and
(3) P corporation.
LO2 P BT: PK P Difficulty: PEasy P TOT:1 Pmin. P AACSB: PNone P PAICPA PFC: P Reporting
10. One Pof P the Padvantages P Helen P Rupp Pwould P enjoy Pis P that P ownership P of P a Pcorporation P is P represented P by
P transferable P shares P of P stock. P This P would P allow P Helen P to P raise P money P easily P by P selling P a P part P of P her
P ownership P in P the P company. P Another P advantage P is P that P because P holders P of P the P shares P (stockholders)
P enjoy P limited Pliability; P they Pare P not Ppersonally Pliable P for P the Pdebts P of P the P corporate Pentity. P Also,
P because P ownership P can P be P transferred P without P dissolving P the P corporation, P the P corporation Penjoys P an
P unlimited P life.
LO2 P BT: PK P Difficulty: PEasy P TOT: P4 Pmin. P PAACSB: PNone P PAICPA PFC: PReporting
11. The Pbasic Paccounting Pequation Pis PAssets P= PLiabilities P+ POwner’s PEquity.
LO3 PBT: PK P Difficulty: PEasy P TOT: P1 Pmin. P PAACSB: PNone P PAICPA PFC: PMeasurement
12. (a) PAssets Pare Presources P owned Pby Pa Pbusiness. PLiabilities Pare Pcreditor Pclaims P against Passets. PPut P more
P simply, P liabilities P are P existing P debts P and P obligations. P Owner’s P equity P is P the P ownership P claim P on
P total Passets.
(b) Owner’s Pequity Pis Paffected Pby Powner’s Pinvestments, Pdrawings, Prevenues, Pand Pexpenses.
LO3 PBT: PC P Difficulty: PEasy P TOT: P2 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
13. The Pliabilities Pare: P(b) PAccounts Ppayable Pand P(g) PSalaries Pand Pwages Ppayable.
LO3 PBT: PC P Difficulty: PEasy P TOT: P1 Pmin. P AACSB: PNone P PAICPA PFC: PReporting
14. Yes, P a P business P can P enter P into P a P transaction P in P which P only P the P left P side P of P the P accounting P equation P is
P affected. PAn P example Pwould P be P a Ptransaction P where P an P increase Pin P one Passet P is P offset P by Pa P decrease Pin
P another Passet. PAn Pincrease Pin Pthe PEquipment Paccount Pwhich Pis Poffset Pby Pa Pdecrease Pinthe PCash P account P is
P a Pspecific Pexample.
LO4 PBT: PC P Difficulty: PModerate P TOT: P3 Pmin. P AACSB: PNone P AICPA PFC: PReporting
15. Business P transactions P are Pthe Peconomic Pevents P of P the Penterprise P recorded P by Paccountantsbecause P they
Paffect P the Pbasic Paccounting Pequation.
(a) The Pdeath Pof Pthe Powner Pof P the Pcompany Pis Pnot P a Pbusiness Ptransaction Pas Pit Pdoes Pnot Paffect P ofthe
P components Pof P the Pbasic Paccounting Pequation.
(b) Supplies P purchased P on P account P is P a P business P transaction P as P it P affects P the P basic P accounting
P equation.
(c) An P Pemployee P being P Pfired P Pis P Pnot P Pa P business P Ptransaction P Pas P Pit P Pdoes P Pnot P Paffect Pany P of P
P the P components Pof P the Pbasic Paccounting Pequation.
(d) A Pwithdrawal Pof Pcash Pby Pthe Powner Pfrom Pthe Pbusiness Pis Pa Pbusiness Ptransaction Pas Pit Paffects Pthe P basic
Paccounting Pequation.
LO4 PBT: PC P Difficulty: PModerate P TOT: P4 Pmin. P AACSB: PNone P AICPA PFC: PReporting
16. (a) Decrease Passets Pand Pdecrease Powner’s Pequity.
(b) Increase Passets Pand Pdecrease Passets.
(c) Increase Passets Pand Pincrease Powner’s Pequity.
(d) Decrease Passets Pand Pdecrease Pliabilities.
LO4 PBT: PC P Difficulty: PModerate P TOT: P3 Pmin. P AACSB: PNone P AICPA PFC: PReporting
