,ACCESS Test Bank for Survey of Accounting 10th Edition Warren
n n n n n n n n n
CHAPTER 1 n
THE ROLE OF ACCOUNTING IN BUSINESS
n n n n n
CLASS DISCUSSION QUESTIONS
n n
1. Thenobjectivenof nmost nbusinesses nisnto nmaximizenprof its. nProfit nis nthendiff erencenbetweenn th
enamounts nreceived nf romncustomers nf orngoods nornservices nprovided nand nthenamounts n paid n
f orntheninputs nused nto nprovidenthosengoods nornservices.
2. Anmanuf acturing nbusinessnchanges nbasic ninputs ninto nproductsnthat narensoldnto ncustomers.nIn
ncontrast, nanmerchandising nbusiness npurchases nproducts ninnanform nthat ncannbensold nto ncust
omers nwithout nany nadditionalnchanges. nExamplesnof nmanuf acturing nbusinesses nincludenAlc
oa, nBoeing, nCaterpillar, nand nDownChemical. nExamples nof nmerchandising nbusinesses ninclud
enBest nBuy, nMacy’s, nTarget, nand nWalmart.
3. Anmanuf acturing nbusiness nchanges nbasicninputs ninto nproductsnthat narensold nto ncustomers. nA
nservicenbusiness nprovides nservices nrathernthannproducts nto ncustomers. nAnrestaurant, nsuchn
as nMcDonald’s, nhas ncharacteristics nof nbothnanmanuf acturing nand nanservicenbusiness ninnthat n
McDonald’sntakes nrawninputs, nsuchnas ncheese, nf ish, nandnbeef , nand nprocessesnthemninto npro
ducts nfornconsumptionnby nits ncustomers. nAtnthensamentime, nMcDonald’s nprovides nservices no
f nwaiting nonnits ncustomers.
4. Thencorporatenf ormnallows nthencompany nto nobtainnlargenamounts nof nresources nby nissuing nst
ock. nInnaddition, ninnancorporation, nthenstockholders’nliability nto ncreditors nfornthendebtsnofnthenc
ompany nis nlimited nto ntheirninvestment ninnthencorporation. nFornthesenreasons, nmost nlargencom
panies nthat nrequirenlargeninvestments ninnproperty, nplant, nand nequipment narenorganized nas nc
orporations.
5. eBay nservices nits ncustomers nby nmaintaining nanWeb-
based ncommunity ninnwhichnbuyers nand nsellers narenbrought ntogetherninnanneff icient nformat nton
browse, nbuy,nand nsellnitems nsuchnas ncollectibles, nautomobiles,nhigh-
end nornpremiumnart npieces, njewelry, nconsumernelectronics, nand nanhost nof npracticalnand nmisc
ellaneous nitems.
6. No. nThenstakeholders nwithinnangroup ndonnotnalways nsharenthensameninterests. nFornexample,
nbankers narenprimarily nconcerned nabout nthenability nof nthenbusiness ntonrepay nits ndebt, nincludin
g ninterest. nInncontrast, nstockholders narenmorenconcerned nabout nthenlong-
termnprof itability nof nthenbusiness, nthenbusiness’snability nto npay ndividends, nand nthenf uturenapp
reciationnof ntheirnstock.
7. Examples nofnf inancing nactivities nfornSouthwest nAirlines ncouldnincludenissuing nstock, nborrowi
ng nf romnbanks,nand npayingndividends. nExamples nof ninvesting nactivitiesncould nincludenpurcha
sing nnewnaircraf t, nacquiring nnewnterminalnf acilities, nand nupgrading nits ncomputerized nreservat
ionnsystems. nExamples nofnoperating nactivities ncould nincludentransporting npassengers nand nf r
eight.
8. Thenrolenofnaccounting nis nto nprovideninf ormationnfornmanagers nto nuseninnoperating nthenbusin
ess. nInnaddition, naccounting nprovides ninformationnto nothernstakeholders ntonuseninnassessing n
theneconomic nperf ormancenand nconditionnof nthenbusiness.
1
©n 2024 nCengagenLearning.n AllnRightsnReserved.nMay ed,n or nposted nton an publicly naccessiblenwebsite,nin nwholenor ninnpart
.
, ACCESS Test Bank for Survey of Accounting 10th Edition Warren
n n n n n n n n n
CLASS DISCUSSION QUESTIONS (Continued)
n n n
9. Thenincomenstatement npresents nansummary nof nthenrevenues nand nexpenses nof nanbusiness nforn
anspecif icnperiod nof ntime. nThenstatement nof nstockholders’nequitynindicates nthenchanges ninnretai
ned nearnings nthat nhavenoccurred novernanspecif ic nperiod nof ntime. nThenbalancensheet npresents na
nlisting nof nthenassets, nliabilities,nand nstockholders’ nequitynof nanbusiness nasnof nanspecif ic ndate. nT
henstatement nofncashnf lows npresents nansummary nof nthencashnreceipts nandncashnpayments nof nan
business nentity nf ornanspecif ic nperiod nof ntime.
10. Target nreported nnet nincomenof n$6,946nmillionn($106,005nmillionn–n$99,059nmillion).
11. Netnincomenornnet nlossnwillnappearnonnthenincomenstatement nand nthenstatement nof nstockholder
s’nequity.nThen Retained nEarnings nand nCommonnStocknbalances nat nthenend nof nthenperiodnwillna
ppearnonnthenstatement nof nstockholders’nequity nand nthenbalancensheet. nFinally, nthenCashnbalan
cenat nthenend nof nthenperiod nwillnappearnonnthenbalancensheet nand nthenstatement nof ncashnflows.
12. No. nThenbusiness nentity nconceptnlimits nthenrecording nof neconomicndatanto ntransactions ndirectlyn
aff ecting nthenactivities nofnthenbusiness.nThenpayment nof ntheninterest nof n$6,000nis nanpersonalntra
nsactionnof nBilly nJessop nand nshould nnot nbenrecorded nby nValley nDelivery nService.
13. Thenland nshould nbenrecordednatnits ncostnof n$110,000nto nWoknRepairnService. nThis nis nconsistent
nwithnthencost nconcept.
14. No. nThenoff ernofn$975,000nand nthenincreaseninnthenassessed nvaluenshould nnotnbenrecognized ni
nnthenaccounting nrecords. nThis nis nconsistent nwithnthencost nconcept.
2
©n 2024 nCengagenLearning.nAlln Rightsn Reserved.nMay nnotn bensc d n to n anpubliclynaccessiblenwebsite,ninnwholenor ninnpart
a .
, ACCESS Test Bank for
n n n Survey of Accounting
n n 10th Edition Warren
n n
EXERCISES
E1–1
1. service 6.n merchandising 11.n manufacturing
2. merchandising 7.n manufacturing 12.n service
3. manufacturing 8.n manufacturing 13.n service
4. manufacturing 9.n service 14.n service
5. service 10.n manufacturing 15.n merchandising
E1–2
(innmillions)
BestnBuy: $17,504n–n14,484n=n$3,020
Gamestop: $3,499n–n1,897n=n$1,602
E1–3
(innmillions)
Apple: $351,002n–n$287,912n=n$63,090
Microsoft: $333,779n–n$191,791n=n$141,988
E1–4
a. $295,500n+n$475,000n=n$770,500
b. $1,110,000n–n$737,500n=n$372,500
c. $3,350,000n–n$1,050,000n=n$2,300,000
E1–5
a. $59,268n–n$41,190n=n$18,078
b. $53,811n–n$12,827n=n$40,984
c. $152,969n+n$91,891n=n$244,860
E1–6
Itnwouldnbenincorrectntonsaynthenbusinessnhadnincurrednannetnlossnofn$10,000.nThenexces
snofnthendividendsnovernthennetnincomenfornthenperiodnisnandecreaseninnthenamountnofnret
ainednearningsninnthenbusiness.
3
©n 2024nCengagenLearning.nAllnRightsnReserved.nMa ted,n or npostednto nanpubliclynaccessiblenwebsite,ninnwholenor ninnpar
y t.
n n n n n n n n n
CHAPTER 1 n
THE ROLE OF ACCOUNTING IN BUSINESS
n n n n n
CLASS DISCUSSION QUESTIONS
n n
1. Thenobjectivenof nmost nbusinesses nisnto nmaximizenprof its. nProfit nis nthendiff erencenbetweenn th
enamounts nreceived nf romncustomers nf orngoods nornservices nprovided nand nthenamounts n paid n
f orntheninputs nused nto nprovidenthosengoods nornservices.
2. Anmanuf acturing nbusinessnchanges nbasic ninputs ninto nproductsnthat narensoldnto ncustomers.nIn
ncontrast, nanmerchandising nbusiness npurchases nproducts ninnanform nthat ncannbensold nto ncust
omers nwithout nany nadditionalnchanges. nExamplesnof nmanuf acturing nbusinesses nincludenAlc
oa, nBoeing, nCaterpillar, nand nDownChemical. nExamples nof nmerchandising nbusinesses ninclud
enBest nBuy, nMacy’s, nTarget, nand nWalmart.
3. Anmanuf acturing nbusiness nchanges nbasicninputs ninto nproductsnthat narensold nto ncustomers. nA
nservicenbusiness nprovides nservices nrathernthannproducts nto ncustomers. nAnrestaurant, nsuchn
as nMcDonald’s, nhas ncharacteristics nof nbothnanmanuf acturing nand nanservicenbusiness ninnthat n
McDonald’sntakes nrawninputs, nsuchnas ncheese, nf ish, nandnbeef , nand nprocessesnthemninto npro
ducts nfornconsumptionnby nits ncustomers. nAtnthensamentime, nMcDonald’s nprovides nservices no
f nwaiting nonnits ncustomers.
4. Thencorporatenf ormnallows nthencompany nto nobtainnlargenamounts nof nresources nby nissuing nst
ock. nInnaddition, ninnancorporation, nthenstockholders’nliability nto ncreditors nfornthendebtsnofnthenc
ompany nis nlimited nto ntheirninvestment ninnthencorporation. nFornthesenreasons, nmost nlargencom
panies nthat nrequirenlargeninvestments ninnproperty, nplant, nand nequipment narenorganized nas nc
orporations.
5. eBay nservices nits ncustomers nby nmaintaining nanWeb-
based ncommunity ninnwhichnbuyers nand nsellers narenbrought ntogetherninnanneff icient nformat nton
browse, nbuy,nand nsellnitems nsuchnas ncollectibles, nautomobiles,nhigh-
end nornpremiumnart npieces, njewelry, nconsumernelectronics, nand nanhost nof npracticalnand nmisc
ellaneous nitems.
6. No. nThenstakeholders nwithinnangroup ndonnotnalways nsharenthensameninterests. nFornexample,
nbankers narenprimarily nconcerned nabout nthenability nof nthenbusiness ntonrepay nits ndebt, nincludin
g ninterest. nInncontrast, nstockholders narenmorenconcerned nabout nthenlong-
termnprof itability nof nthenbusiness, nthenbusiness’snability nto npay ndividends, nand nthenf uturenapp
reciationnof ntheirnstock.
7. Examples nofnf inancing nactivities nfornSouthwest nAirlines ncouldnincludenissuing nstock, nborrowi
ng nf romnbanks,nand npayingndividends. nExamples nof ninvesting nactivitiesncould nincludenpurcha
sing nnewnaircraf t, nacquiring nnewnterminalnf acilities, nand nupgrading nits ncomputerized nreservat
ionnsystems. nExamples nofnoperating nactivities ncould nincludentransporting npassengers nand nf r
eight.
8. Thenrolenofnaccounting nis nto nprovideninf ormationnfornmanagers nto nuseninnoperating nthenbusin
ess. nInnaddition, naccounting nprovides ninformationnto nothernstakeholders ntonuseninnassessing n
theneconomic nperf ormancenand nconditionnof nthenbusiness.
1
©n 2024 nCengagenLearning.n AllnRightsnReserved.nMay ed,n or nposted nton an publicly naccessiblenwebsite,nin nwholenor ninnpart
.
, ACCESS Test Bank for Survey of Accounting 10th Edition Warren
n n n n n n n n n
CLASS DISCUSSION QUESTIONS (Continued)
n n n
9. Thenincomenstatement npresents nansummary nof nthenrevenues nand nexpenses nof nanbusiness nforn
anspecif icnperiod nof ntime. nThenstatement nof nstockholders’nequitynindicates nthenchanges ninnretai
ned nearnings nthat nhavenoccurred novernanspecif ic nperiod nof ntime. nThenbalancensheet npresents na
nlisting nof nthenassets, nliabilities,nand nstockholders’ nequitynof nanbusiness nasnof nanspecif ic ndate. nT
henstatement nofncashnf lows npresents nansummary nof nthencashnreceipts nandncashnpayments nof nan
business nentity nf ornanspecif ic nperiod nof ntime.
10. Target nreported nnet nincomenof n$6,946nmillionn($106,005nmillionn–n$99,059nmillion).
11. Netnincomenornnet nlossnwillnappearnonnthenincomenstatement nand nthenstatement nof nstockholder
s’nequity.nThen Retained nEarnings nand nCommonnStocknbalances nat nthenend nof nthenperiodnwillna
ppearnonnthenstatement nof nstockholders’nequity nand nthenbalancensheet. nFinally, nthenCashnbalan
cenat nthenend nof nthenperiod nwillnappearnonnthenbalancensheet nand nthenstatement nof ncashnflows.
12. No. nThenbusiness nentity nconceptnlimits nthenrecording nof neconomicndatanto ntransactions ndirectlyn
aff ecting nthenactivities nofnthenbusiness.nThenpayment nof ntheninterest nof n$6,000nis nanpersonalntra
nsactionnof nBilly nJessop nand nshould nnot nbenrecorded nby nValley nDelivery nService.
13. Thenland nshould nbenrecordednatnits ncostnof n$110,000nto nWoknRepairnService. nThis nis nconsistent
nwithnthencost nconcept.
14. No. nThenoff ernofn$975,000nand nthenincreaseninnthenassessed nvaluenshould nnotnbenrecognized ni
nnthenaccounting nrecords. nThis nis nconsistent nwithnthencost nconcept.
2
©n 2024 nCengagenLearning.nAlln Rightsn Reserved.nMay nnotn bensc d n to n anpubliclynaccessiblenwebsite,ninnwholenor ninnpart
a .
, ACCESS Test Bank for
n n n Survey of Accounting
n n 10th Edition Warren
n n
EXERCISES
E1–1
1. service 6.n merchandising 11.n manufacturing
2. merchandising 7.n manufacturing 12.n service
3. manufacturing 8.n manufacturing 13.n service
4. manufacturing 9.n service 14.n service
5. service 10.n manufacturing 15.n merchandising
E1–2
(innmillions)
BestnBuy: $17,504n–n14,484n=n$3,020
Gamestop: $3,499n–n1,897n=n$1,602
E1–3
(innmillions)
Apple: $351,002n–n$287,912n=n$63,090
Microsoft: $333,779n–n$191,791n=n$141,988
E1–4
a. $295,500n+n$475,000n=n$770,500
b. $1,110,000n–n$737,500n=n$372,500
c. $3,350,000n–n$1,050,000n=n$2,300,000
E1–5
a. $59,268n–n$41,190n=n$18,078
b. $53,811n–n$12,827n=n$40,984
c. $152,969n+n$91,891n=n$244,860
E1–6
Itnwouldnbenincorrectntonsaynthenbusinessnhadnincurrednannetnlossnofn$10,000.nThenexces
snofnthendividendsnovernthennetnincomenfornthenperiodnisnandecreaseninnthenamountnofnret
ainednearningsninnthenbusiness.
3
©n 2024nCengagenLearning.nAllnRightsnReserved.nMa ted,n or npostednto nanpubliclynaccessiblenwebsite,ninnwholenor ninnpar
y t.
