©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
,1
Accounting Concepts and Procedur km km km
es: An Introduction
km km
ANSWERS TO DISCUSSION QUESTIONS AND CRITIC km km km km km
AL THINKING/ETHICAL CASE km km
1. The functions of accounting are to analyze, record, classify, summarize, report and in
km km km km km km km km km km km km
terpret information.
km
2. Sole proprietorship—one owner, unlimited liability; easy to form Partnership—
km km km km km km km km
two or more owners; unlimited liability, easy to form Corporation—
km km km km km km km km km
one or more shareholders; limited liability; more difficult to form.
km km km km km km km km km
3. Service, merchandising, or manufacturing.
km km km
4. The objective of accounting is to provide relevant, timely information for user decision maki
km km km km km km km km km km km km km
ng. Accountants must behave in an ethical manner so that the information they provide will
km km km km km km km km km km km km km km k
mbe trustworthy and, therefore, useful for all decisions. Ethics are moral principles that guide
km km km km km km km km km km km km km km
the conduct of individuals. Sometimes business managers and accountants behave in an unet
km km km km km km km km km km km km
hical manner.
km
5. The three elements of the basic accounting equation are assets, liabilities, owner’s equity.
km km km km km km km km km km km km
6. Capital is the owner’s current investment or equity in the assets of a business. It is one subdivision of
km km km km km km km km km km km km km km km km km km
owner’s equity. km
7. True. The sum of the left side of the equation must equal the sum of the right side of the equation.
km km km km km km km km km km km km km km km km km km km km
8. False. It is the income statement that tells how well the company has performed.
km km km km km km km km km km km km km
9. False. Revenue is a subdivision of owner’s equity.
km km km km km km km
10. Owner’s equity is subdivided into Capital, Withdrawals, Revenue, and Expenses.
km km km km km km km km km
11. False. It is a subdivision of owner’s equity.
km km km km km km km
12. Reject. As expenses increase and revenue remains the same, owner’s equity decreases.
km km km km km km km km km km km
13. Revenue less Expenses; an income statement shows performance—profit or loss for the period.
km km km km km km km km km km km km
14. False. It calculates ending capital.
km km km km
15. The question in this case is whether Paul should be allowed to ―pad‖ his expense account
km km km km km km km km km km km km km km km km
with an additional $100 of expenses. Paul should be allowed to charge only those items that
km km km km km km km km km km km km km km km km
are business related. Paul’s argument that he is entitled to an additional $100 is not a valid
km km km km km km km km km km km km km km km km km
assumption. However, he should be allocated money for any business expenses during the wee
km km km km km km km km km km km km km
kend. Paul should also ask his employer for additional compensation for working during his n
km km km km km km km km km km km km km km
on scheduled time. The important point is that accountants need to be seen as being ethical a
km km km km km km km km km km km km km km km km
nd should not do unethical activities.
km km km km km
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
, SOLUTIONS TO CLASSROOM DEMONSTRATION EXERCISES
km km km km
CDE1. a. A CDE4. $24,000 ($12,000 + $12,000
km km km CDE8. a. IS
b. A ) b. BS
c. L CDE5. c. J. Penny, Capital
km km c. BS
d. A d. Advertising Expense km d. BS
e. OE f. Taxi Fees Earned
km km e. IS
f. A g. J. Penny, Withdrawls
km km f. IS
g. OE
h. BS
CDE2. a. Liabilities and or km km CDE6. c. Accounts Payable
km
b. Assets d. Grooming Fees Earne
km km CDE9 a. OE
d b. BS
c. Accounts Payable km
c. BS
d. IS
CDE3. a. I CDE7. a.
b. S b.
d.
CDE10.
1. Balance Sheet
km
2. Assets
3. Liabilities
4. Accounting Equation km
5. Accounts Payable
km
6. Service
7. Owner’s Equitykm
8. Accounts Receivable
km
9. Transaction
10. Creditor
SOLUTIONS TO EXERCISES—SET A km km km
E1-1A.
a. km $15,000 ($19,000 − $4,000)km km
b. km $15,000 ($ 6,000 + $9,000)
km km km
c. $ 6,000
km km ($10,000 − $4,000)km km
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 km Solutions
1. k m B
2. k m B
3. k m B
4. k m A
5. k m D
6. k m D
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
, 7. k m D
8. k m B
9. k m C
10.
k m A
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
All
RightskmReserve
d 4-1
,1
Accounting Concepts and Procedur km km km
es: An Introduction
km km
ANSWERS TO DISCUSSION QUESTIONS AND CRITIC km km km km km
AL THINKING/ETHICAL CASE km km
1. The functions of accounting are to analyze, record, classify, summarize, report and in
km km km km km km km km km km km km
terpret information.
km
2. Sole proprietorship—one owner, unlimited liability; easy to form Partnership—
km km km km km km km km
two or more owners; unlimited liability, easy to form Corporation—
km km km km km km km km km
one or more shareholders; limited liability; more difficult to form.
km km km km km km km km km
3. Service, merchandising, or manufacturing.
km km km
4. The objective of accounting is to provide relevant, timely information for user decision maki
km km km km km km km km km km km km km
ng. Accountants must behave in an ethical manner so that the information they provide will
km km km km km km km km km km km km km km k
mbe trustworthy and, therefore, useful for all decisions. Ethics are moral principles that guide
km km km km km km km km km km km km km km
the conduct of individuals. Sometimes business managers and accountants behave in an unet
km km km km km km km km km km km km
hical manner.
km
5. The three elements of the basic accounting equation are assets, liabilities, owner’s equity.
km km km km km km km km km km km km
6. Capital is the owner’s current investment or equity in the assets of a business. It is one subdivision of
km km km km km km km km km km km km km km km km km km
owner’s equity. km
7. True. The sum of the left side of the equation must equal the sum of the right side of the equation.
km km km km km km km km km km km km km km km km km km km km
8. False. It is the income statement that tells how well the company has performed.
km km km km km km km km km km km km km
9. False. Revenue is a subdivision of owner’s equity.
km km km km km km km
10. Owner’s equity is subdivided into Capital, Withdrawals, Revenue, and Expenses.
km km km km km km km km km
11. False. It is a subdivision of owner’s equity.
km km km km km km km
12. Reject. As expenses increase and revenue remains the same, owner’s equity decreases.
km km km km km km km km km km km
13. Revenue less Expenses; an income statement shows performance—profit or loss for the period.
km km km km km km km km km km km km
14. False. It calculates ending capital.
km km km km
15. The question in this case is whether Paul should be allowed to ―pad‖ his expense account
km km km km km km km km km km km km km km km km
with an additional $100 of expenses. Paul should be allowed to charge only those items that
km km km km km km km km km km km km km km km km
are business related. Paul’s argument that he is entitled to an additional $100 is not a valid
km km km km km km km km km km km km km km km km km
assumption. However, he should be allocated money for any business expenses during the wee
km km km km km km km km km km km km km
kend. Paul should also ask his employer for additional compensation for working during his n
km km km km km km km km km km km km km km
on scheduled time. The important point is that accountants need to be seen as being ethical a
km km km km km km km km km km km km km km km km
nd should not do unethical activities.
km km km km km
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
, SOLUTIONS TO CLASSROOM DEMONSTRATION EXERCISES
km km km km
CDE1. a. A CDE4. $24,000 ($12,000 + $12,000
km km km CDE8. a. IS
b. A ) b. BS
c. L CDE5. c. J. Penny, Capital
km km c. BS
d. A d. Advertising Expense km d. BS
e. OE f. Taxi Fees Earned
km km e. IS
f. A g. J. Penny, Withdrawls
km km f. IS
g. OE
h. BS
CDE2. a. Liabilities and or km km CDE6. c. Accounts Payable
km
b. Assets d. Grooming Fees Earne
km km CDE9 a. OE
d b. BS
c. Accounts Payable km
c. BS
d. IS
CDE3. a. I CDE7. a.
b. S b.
d.
CDE10.
1. Balance Sheet
km
2. Assets
3. Liabilities
4. Accounting Equation km
5. Accounts Payable
km
6. Service
7. Owner’s Equitykm
8. Accounts Receivable
km
9. Transaction
10. Creditor
SOLUTIONS TO EXERCISES—SET A km km km
E1-1A.
a. km $15,000 ($19,000 − $4,000)km km
b. km $15,000 ($ 6,000 + $9,000)
km km km
c. $ 6,000
km km ($10,000 − $4,000)km km
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 km Solutions
1. k m B
2. k m B
3. k m B
4. k m A
5. k m D
6. k m D
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
, 7. k m D
8. k m B
9. k m C
10.
k m A
©km2021kmPearsonkmCanadakm
All
RightskmReserve
d 4-1
