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,1
Accounting Concepts and Procedur 2p 2p 2p
es: An Introduction
2p 2p
ANSWERS TO DISCUSSION QUESTIONS AND CRITICA 2p 2p 2p 2p 2p
L THINKING/ETHICAL CASE 2p 2p
1. The functions of accounting are to analyze, record, classify, summarize, report and inter
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
pret information.
2p
2. Sole proprietorship—one owner, unlimited liability; easy to form Partnership—
2p 2p 2p 2p 2p 2p 2p 2p
two or more owners; unlimited liability, easy to form Corporation—
2p 2p 2p 2p 2p 2p 2p 2p 2p
one or more shareholders; limited liability; more difficult to form.
2p 2p 2p 2p 2p 2p 2p 2p 2p
3. Service, merchandising, or manufacturing.
2p 2p 2p
4. The objective of accounting is to provide relevant, timely information for user decision making.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
Accountants must behave in an ethical manner so that the information they provide will be trus
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
tworthy and, therefore, useful for all decisions. Ethics are moral principles that guide the conduc
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
t of individuals. Sometimes business managers and accountants behave in an unethical manner.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
5. The three elements of the basic accounting equation are assets, liabilities, owner’s equity.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
6. Capital is the owner’s current investment or equity in the assets of a business. It is one subdivision of
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
owner’s equity. 2p
7. True. The sum of the left side of the equation must equal the sum of the right side of the equation.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
8. False. It is the income statement that tells how well the company has performed.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
9. False. Revenue is a subdivision of owner’s equity.
2p 2p 2p 2p 2p 2p 2p
10. Owner’s equity is subdivided into Capital, Withdrawals, Revenue, and Expenses.
2p 2p 2p 2p 2p 2p 2p 2p 2p
11. False. It is a subdivision of owner’s equity.
2p 2p 2p 2p 2p 2p 2p
12. Reject. As expenses increase and revenue remains the same, owner’s equity decreases.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
13. Revenue less Expenses; an income statement shows performance—profit or loss for the period.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
14. False. It calculates ending capital.
2p 2p 2p 2p
15. The question in this case is whether Paul should be allowed to ―pad‖ his expense account with
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
an additional $100 of expenses. Paul should be allowed to charge only those items that are busin
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
ess related. Paul’s argument that he is entitled to an additional $100 is not a valid assumption.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
However, he should be allocated money for any business expenses during the weekend. Paul sho
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
uld also ask his employer for additional compensation for working during his non scheduled time.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
The important point is that accountants need to be seen as being ethical and should not do unet
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
hical activities. 2p
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All
Rights2pReserved
4-1
, SOLUTIONS TO CLASSROOM DEMONSTRATION EXERCISES
2p 2p 2p 2p
CDE1. a. A CDE4. $24,000 ($12,000 + $12,000)
2p 2p 2p CDE8. a. IS
b. A b. BS
c. L CDE5. c. J. Penny, Capital
2p 2p c. BS
d. A d. Advertising Expense 2p d. BS
e. OE f. Taxi Fees Earned
2p 2p e. IS
f. A g. J. Penny, Withdrawls
2p 2p f. IS
g. OE
h. BS
CDE2. a. Liabilities and or 2p 2p CDE6. c. Accounts Payable 2p
b. Assets d. Grooming Fees Earned 2p 2p CDE9 a. OE
c. Accounts Payable 2p b. BS
c. BS
d. IS
CDE3. a. I CDE7. a.
b. S b.
d.
CDE10.
1. Balance Sheet 2p
2. Assets
3. Liabilities
4. Accounting Equation 2p
5. Accounts Payable 2p
6. Service
7. Owner’s Equity2p
8. Accounts Receivable2p
9. Transaction
10. Creditor
SOLUTIONS TO EXERCISES—SET A 2p 2p 2p
E1-1A.
a. $15,000
2p ($19,000 − $4,000) 2p 2p
b. $15,000
2p ($ 6,000 + $9,000)
2p 2p 2p
c. $ 6,000
2p 2p ($10,000 − $4,000) 2p 2p
E1-2A.
1. Service 6. Service
2. Merchandise 7. Service
3. Service 8. Manufacturer
4. Merchandise 9. Manufacturer
5. Merchandise 10. Merchandise
E1-3A.
1-3A 2p Solutions
1. 2 p B
2. 2 p B
3. 2 p B
4. 2 p A
5. 2 p D
6. 2 p D
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, 7. 2 p D
8. 2 p B
9. 2 p C
10.
2 p A
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All
Rights2pReserved
4-1
All
Rights2pReserved
4-1
,1
Accounting Concepts and Procedur 2p 2p 2p
es: An Introduction
2p 2p
ANSWERS TO DISCUSSION QUESTIONS AND CRITICA 2p 2p 2p 2p 2p
L THINKING/ETHICAL CASE 2p 2p
1. The functions of accounting are to analyze, record, classify, summarize, report and inter
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
pret information.
2p
2. Sole proprietorship—one owner, unlimited liability; easy to form Partnership—
2p 2p 2p 2p 2p 2p 2p 2p
two or more owners; unlimited liability, easy to form Corporation—
2p 2p 2p 2p 2p 2p 2p 2p 2p
one or more shareholders; limited liability; more difficult to form.
2p 2p 2p 2p 2p 2p 2p 2p 2p
3. Service, merchandising, or manufacturing.
2p 2p 2p
4. The objective of accounting is to provide relevant, timely information for user decision making.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
Accountants must behave in an ethical manner so that the information they provide will be trus
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
tworthy and, therefore, useful for all decisions. Ethics are moral principles that guide the conduc
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
t of individuals. Sometimes business managers and accountants behave in an unethical manner.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
5. The three elements of the basic accounting equation are assets, liabilities, owner’s equity.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
6. Capital is the owner’s current investment or equity in the assets of a business. It is one subdivision of
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
owner’s equity. 2p
7. True. The sum of the left side of the equation must equal the sum of the right side of the equation.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
8. False. It is the income statement that tells how well the company has performed.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
9. False. Revenue is a subdivision of owner’s equity.
2p 2p 2p 2p 2p 2p 2p
10. Owner’s equity is subdivided into Capital, Withdrawals, Revenue, and Expenses.
2p 2p 2p 2p 2p 2p 2p 2p 2p
11. False. It is a subdivision of owner’s equity.
2p 2p 2p 2p 2p 2p 2p
12. Reject. As expenses increase and revenue remains the same, owner’s equity decreases.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
13. Revenue less Expenses; an income statement shows performance—profit or loss for the period.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
14. False. It calculates ending capital.
2p 2p 2p 2p
15. The question in this case is whether Paul should be allowed to ―pad‖ his expense account with
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
an additional $100 of expenses. Paul should be allowed to charge only those items that are busin
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
ess related. Paul’s argument that he is entitled to an additional $100 is not a valid assumption.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
However, he should be allocated money for any business expenses during the weekend. Paul sho
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
uld also ask his employer for additional compensation for working during his non scheduled time.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
The important point is that accountants need to be seen as being ethical and should not do unet
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2p
hical activities. 2p
©2p20212pPearson2pCanada2p
All
Rights2pReserved
4-1
, SOLUTIONS TO CLASSROOM DEMONSTRATION EXERCISES
2p 2p 2p 2p
CDE1. a. A CDE4. $24,000 ($12,000 + $12,000)
2p 2p 2p CDE8. a. IS
b. A b. BS
c. L CDE5. c. J. Penny, Capital
2p 2p c. BS
d. A d. Advertising Expense 2p d. BS
e. OE f. Taxi Fees Earned
2p 2p e. IS
f. A g. J. Penny, Withdrawls
2p 2p f. IS
g. OE
h. BS
CDE2. a. Liabilities and or 2p 2p CDE6. c. Accounts Payable 2p
b. Assets d. Grooming Fees Earned 2p 2p CDE9 a. OE
c. Accounts Payable 2p b. BS
c. BS
d. IS
CDE3. a. I CDE7. a.
b. S b.
d.
CDE10.
1. Balance Sheet 2p
2. Assets
3. Liabilities
4. Accounting Equation 2p
5. Accounts Payable 2p
6. Service
7. Owner’s Equity2p
8. Accounts Receivable2p
9. Transaction
10. Creditor
SOLUTIONS TO EXERCISES—SET A 2p 2p 2p
E1-1A.
a. $15,000
2p ($19,000 − $4,000) 2p 2p
b. $15,000
2p ($ 6,000 + $9,000)
2p 2p 2p
c. $ 6,000
2p 2p ($10,000 − $4,000) 2p 2p
E1-2A.
1. Service 6. Service
2. Merchandise 7. Service
3. Service 8. Manufacturer
4. Merchandise 9. Manufacturer
5. Merchandise 10. Merchandise
E1-3A.
1-3A 2p Solutions
1. 2 p B
2. 2 p B
3. 2 p B
4. 2 p A
5. 2 p D
6. 2 p D
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4-1
, 7. 2 p D
8. 2 p B
9. 2 p C
10.
2 p A
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4-1
