1-1
©GK 2021GK CengageGK Learning,GK Inc.GK MayGK notGK beGK scanned,GK copiedGK orGK duplicated,GK orGK postedGK toGK aGK publiclyGK accessibleGK
website,GK inGK wholeGK orGK inGK part.
, CHAPTER 1 GK
INTRODUCTION TO ACCOUNTING AND BUSINESS GK GK GK GK
DISCUSSION QUESTIONS GK
1. Some users of accounting information include managers, employees, investors, credi
GK GK GK GK GK GK GK GK GK
tors, customers, and the government.
GK GK GK GK
2. The role of accounting is to provide information for managers to use in operating the
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
business. In addition, accounting provides information to others to use in assessing th
G K GK GK GK GK GK GK GK GK GK GK GK
e economic performance and condition of the business.
GK GK GK GK GK GK GK
3. The corporate form allows the company to obtain large amounts of resources by i
GK GK GK GK GK GK GK GK GK GK GK GK GK
ssuing stock. For this reason, most companies that require large investments in property,
GK GK GK GK GK GK GK GK GK GK GK GK G
Kplant, and equipment are organized as corporations.
GK GK GK GK GK GK
4. No. The business entity concept limits the recording of economic data to transactions
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directly affecting the activities of the business. The payment of the interest of $4,500
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
is a personal transaction of Josh Reilly and should not be recorded by Dispatch Deliv
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
ery Service.
GK
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
consistent with the cost concept. G K GK GK GK
6. a.
No. The offer of $2,000,000 and the increase in the assessed value should not b
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
e recognized in the accounting records because land is recorded on the cost basis.
GK G K GK GK GK GK GK GK GK GK GK GK GK
b.
Cash would increase by $2,125,000, land would decrease by $900,000, and o
GK GK GK GK GK GK GK GK GK GK GK
wner’s equity would increase by $1,225,000.
GK GK GK GK GK
7. An account receivable is a claim against a customer for goods or services sold. An acc
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
ount payable is an amount owed to a creditor for goods or services purchased. Therefor
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
e, an account receivable in the records of the seller is an account payable in the record
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
s of the purchaser.
GK GK GK
8. (b) G K The business realized net income of $91,000 ($679,000 – $588,000).
GK GK GK GK GK GK GK GK GK
9. (a) GKGK The business incurred a net loss of $75,000 ($640,000 – $715,000).
GK GK GK GK GK GK GK GK GK GK
10. (a) Net income or net loss
GKGK GK GK GK GK
(b) Owner’s equity at the end of the period GK GK GK GK GK GK GK
(c) Cash at the end of the period
GK GK GK GK GK GK
1-2
©GK2021GKCengageGKLearning, GKInc. GKMayGKnotGKbeGKscanned, GKcopiedGKorGKduplicated, GKorGKpostedGKtoGKaGKpubliclyGKaccessibleGKwebs
ite,GKinGKwholeGKorGKinGKpart.
, CHAPTER GK Introduction to Accounting and Busine
GK GK GK GK
1 ss
PE 1- GK PRACTICE EXERCISES GK
3B
PE 1-1A
GK
$597,000. Under the cost concept, the land should be recorded at the cost to Bould
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
er Repair Service.
GK GK
PE 1-1B
GK
$369,500. Under the cost concept, the land should be recorded at the cost t
GK GK GK GK GK GK GK GK GK GK GK GK GK
o Clementine Repair Service.
GK GK GK
PE 1- GK
2A
a. A = L + OE G K G K
$518,000 = $165,000 + OE GK GK
OE = $353,000
b. A = L + OE G K G K
+$86,200 = +$25,000 + OE GK GK
OE = +$61,200
OE on December 31, 20
GK GK GK GK = $353,000 + $61,20 GK GK
Y9 0
= $414,200
PE 1- GK
2B
a. A = L + OE G K G K
$382,000 = $94,000 + OE GK GK
OE = $288,000
b. A = L + OE
G K G K
– GK = +$35,000 + OE – GK GK GK
$63,000 = $98,000
OE = $288,000 – GK
OE on December 31, 20Y
GK GK GK GK = $98,000
GK
9 $190,000
PE 1- GK
3A
(2) Asset (Accounts Receivable) increases by $22,400;
GK GK GK GK GK
Owner’s Equity (Delivery Service Fees) increases by $22,400.
GK GK GK GK GK GK GK
(3) Liability (Accounts Payable) decreases by $4,10
GK GK GK GK GK
0; Asset (Cash) decreases by $4,100.
GK GK GK GK GK
(4) Asset (Cash) increases by $14,700;
GK GK GK GK
Asset (Accounts Receivable) decreases by $14,700.
GK GK GK GK GK
(5) Asset (Cash) decreases by $1,600;
GK GK GK GK
1-1
©GK 2021GK CengageGK Learning,GK Inc.GK MayGK notGK beGK scanned,GK copiedGK orGK duplicated,GK orGK postedGK toGK aGK publiclyGK accessibleGK
website,GK inGK wholeGK orGK inGK part.
, CHAPTER GK Introduction to Accounting and Busine
GK GK GK GK
Owner’s Equity
1 (Terry Young,
GK ss Drawing) decreases by $1,600.
GK GK GK GK GK GK
1-4
©GK2021GKCengageGKLearning, GKInc. GKMayGKnotGKbeGKscanned, GKcopiedGKorGKduplicated, GKorGKpostedGKtoGKaGKpubliclyGKaccessibleGKwebs
ite,GKinGKwholeGKorGKinGKpart.
©GK 2021GK CengageGK Learning,GK Inc.GK MayGK notGK beGK scanned,GK copiedGK orGK duplicated,GK orGK postedGK toGK aGK publiclyGK accessibleGK
website,GK inGK wholeGK orGK inGK part.
, CHAPTER 1 GK
INTRODUCTION TO ACCOUNTING AND BUSINESS GK GK GK GK
DISCUSSION QUESTIONS GK
1. Some users of accounting information include managers, employees, investors, credi
GK GK GK GK GK GK GK GK GK
tors, customers, and the government.
GK GK GK GK
2. The role of accounting is to provide information for managers to use in operating the
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
business. In addition, accounting provides information to others to use in assessing th
G K GK GK GK GK GK GK GK GK GK GK GK
e economic performance and condition of the business.
GK GK GK GK GK GK GK
3. The corporate form allows the company to obtain large amounts of resources by i
GK GK GK GK GK GK GK GK GK GK GK GK GK
ssuing stock. For this reason, most companies that require large investments in property,
GK GK GK GK GK GK GK GK GK GK GK GK G
Kplant, and equipment are organized as corporations.
GK GK GK GK GK GK
4. No. The business entity concept limits the recording of economic data to transactions
GK GK GK GK GK GK GK GK GK GK GK GK GK
directly affecting the activities of the business. The payment of the interest of $4,500
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
is a personal transaction of Josh Reilly and should not be recorded by Dispatch Deliv
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
ery Service.
GK
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
consistent with the cost concept. G K GK GK GK
6. a.
No. The offer of $2,000,000 and the increase in the assessed value should not b
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
e recognized in the accounting records because land is recorded on the cost basis.
GK G K GK GK GK GK GK GK GK GK GK GK GK
b.
Cash would increase by $2,125,000, land would decrease by $900,000, and o
GK GK GK GK GK GK GK GK GK GK GK
wner’s equity would increase by $1,225,000.
GK GK GK GK GK
7. An account receivable is a claim against a customer for goods or services sold. An acc
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
ount payable is an amount owed to a creditor for goods or services purchased. Therefor
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
e, an account receivable in the records of the seller is an account payable in the record
GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK GK
s of the purchaser.
GK GK GK
8. (b) G K The business realized net income of $91,000 ($679,000 – $588,000).
GK GK GK GK GK GK GK GK GK
9. (a) GKGK The business incurred a net loss of $75,000 ($640,000 – $715,000).
GK GK GK GK GK GK GK GK GK GK
10. (a) Net income or net loss
GKGK GK GK GK GK
(b) Owner’s equity at the end of the period GK GK GK GK GK GK GK
(c) Cash at the end of the period
GK GK GK GK GK GK
1-2
©GK2021GKCengageGKLearning, GKInc. GKMayGKnotGKbeGKscanned, GKcopiedGKorGKduplicated, GKorGKpostedGKtoGKaGKpubliclyGKaccessibleGKwebs
ite,GKinGKwholeGKorGKinGKpart.
, CHAPTER GK Introduction to Accounting and Busine
GK GK GK GK
1 ss
PE 1- GK PRACTICE EXERCISES GK
3B
PE 1-1A
GK
$597,000. Under the cost concept, the land should be recorded at the cost to Bould
GK GK GK GK GK GK GK GK GK GK GK GK GK GK
er Repair Service.
GK GK
PE 1-1B
GK
$369,500. Under the cost concept, the land should be recorded at the cost t
GK GK GK GK GK GK GK GK GK GK GK GK GK
o Clementine Repair Service.
GK GK GK
PE 1- GK
2A
a. A = L + OE G K G K
$518,000 = $165,000 + OE GK GK
OE = $353,000
b. A = L + OE G K G K
+$86,200 = +$25,000 + OE GK GK
OE = +$61,200
OE on December 31, 20
GK GK GK GK = $353,000 + $61,20 GK GK
Y9 0
= $414,200
PE 1- GK
2B
a. A = L + OE G K G K
$382,000 = $94,000 + OE GK GK
OE = $288,000
b. A = L + OE
G K G K
– GK = +$35,000 + OE – GK GK GK
$63,000 = $98,000
OE = $288,000 – GK
OE on December 31, 20Y
GK GK GK GK = $98,000
GK
9 $190,000
PE 1- GK
3A
(2) Asset (Accounts Receivable) increases by $22,400;
GK GK GK GK GK
Owner’s Equity (Delivery Service Fees) increases by $22,400.
GK GK GK GK GK GK GK
(3) Liability (Accounts Payable) decreases by $4,10
GK GK GK GK GK
0; Asset (Cash) decreases by $4,100.
GK GK GK GK GK
(4) Asset (Cash) increases by $14,700;
GK GK GK GK
Asset (Accounts Receivable) decreases by $14,700.
GK GK GK GK GK
(5) Asset (Cash) decreases by $1,600;
GK GK GK GK
1-1
©GK 2021GK CengageGK Learning,GK Inc.GK MayGK notGK beGK scanned,GK copiedGK orGK duplicated,GK orGK postedGK toGK aGK publiclyGK accessibleGK
website,GK inGK wholeGK orGK inGK part.
, CHAPTER GK Introduction to Accounting and Busine
GK GK GK GK
Owner’s Equity
1 (Terry Young,
GK ss Drawing) decreases by $1,600.
GK GK GK GK GK GK
1-4
©GK2021GKCengageGKLearning, GKInc. GKMayGKnotGKbeGKscanned, GKcopiedGKorGKduplicated, GKorGKpostedGKtoGKaGKpubliclyGKaccessibleGKwebs
ite,GKinGKwholeGKorGKinGKpart.
