CHAPTER 1 Dr
INTRODUCTION TO ACCOUNTING AND BUSINESS Dr Dr Dr Dr
DISCUSSION DrQUESTIONS
1. Some Drusers Drof Draccounting Drinformation Drinclude Drmanagers, Dremployees, Drinvestors,
Drcreditors, Drcustomers, Drand Drthe Drgovernment.
2. The Drrole Drof Draccounting Dris Drto Drprovide Drinformation Drfor Drmanagers Drto Druse Drin Droperating
Drthe Drbusiness. D r In Draddition, Draccounting Drprovides Drinformation Drto Drothers Drto Druse Drin
Drassessing Drthe Dreconomic Drperformance Drand Drcondition Drof Drthe Drbusiness.
3. The D r corporate D r form D r allows D r the D r company D r to D r obtain D r large D r amounts D r of D r resources
D r by D r issuing D r stock. DrFor Drthis Drreason, Drmost Drcompanies Drthat Drrequire Drlarge Drinvestments Drin
Drproperty, Drplant, Drand Drequipment Drare Drorganized Dras Drcorporations.
4. No. DrThe Drbusiness Drentity Drconcept Drlimits Drthe Drrecording Drof Dreconomic Drdata Drto
Drtransactions Drdirectly Draffecting Drthe Dractivities Drof Drthe Drbusiness. DrThe Drpayment Drof Drthe
Drinterest Drof Dr$4,500 Dris Dra Drpersonal Drtransaction Drof DrJosh DrReilly Drand Drshould Drnot Drbe
Drrecorded Drby DrDispatch DrDelivery DrService.
5. The Drland Drshould Drbe Drrecorded Drat Drits Drcost Drof Dr$167,500 Drto DrReliable DrRepair DrService. DrThis
Dris Drconsistent D r with Drthe Drcost Drconcept.
6. a. No. DrThe Droffer Drof Dr$2,000,000 Drand Drthe Drincrease Drin Drthe Drassessed Drvalue Drshould Drnot Drbe
Drrecognized D r in Drthe Draccounting Drrecords Drbecause Drland Dris Drrecorded Dron Drthe Drcost
Drbasis.
b. Cash Drwould Drincrease Drby Dr$2,125,000, Drland Drwould Drdecrease Drby Dr$900,000, Drand
Drowner’s Drequity Drwould Drincrease Drby Dr$1,225,000.
7. An Draccount Drreceivable Dris Dra Drclaim Dragainst Dra Drcustomer Drfor Drgoods Dror Drservices Drsold. DrAn
Draccount Drpayable Dris Dran Dramount Drowed Drto Dra Drcreditor Drfor Drgoods Dror Drservices Drpurchased.
DrTherefore, Dran Draccount Drreceivable Drin Drthe Drrecords Drof Drthe Drseller Dris Dran Draccount Drpayable
Drin Drthe Drrecords Drof Drthe Drpurchaser.
8. (b) D r The Dr business Dr realized Dr net Dr income Dr of Dr $91,000 Dr ($679,000 Dr – Dr $588,000).
9. (a) D r Dr The Drbusiness Dr incurred Dr a Dr net Dr loss Dr of Dr$75,000 Dr ($640,000 Dr – Dr $715,000).
10. (a) D r D r Net Dr income Dror Dr net Dr loss
(b) Owner’s Dr equity Dr at Dr the Dr end Drof Dr the Dr period
(c) Cash Dr at Dr the Dr end Dr of Dr the Dr period
1-1
© Dr 2018 Dr Cengage Dr Learning. Dr All Dr Rights Dr Reserved. Dr May Dr not Dr be Dr scanned, Dr copied Dr or Dr duplicated, Dr or Dr posted Dr to Dr a Dr publicly
Dr accessible Dr website, Dr in Dr whole Dr or Dr in Dr part.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PRACTICE DrEXERCISES
PE Dr1-1A
$380,000. DrUnder Drthe Drcost Drconcept, Drthe Drland Drshould Drbe Drrecorded Drat Drthe Drcost Drto
DrClairemont DrRepair DrService.
PE Dr1-1B
$437,500. DrUnder Drthe Drcost Drconcept, Drthe Drland Drshould Drbe Drrecorded Drat Drthe Drcost Drto
DrHiggins DrRepair DrService.
PE Dr1-2A
a. A = L D r + D r OE
$675,000 = $215,000 Dr+ DrOE
OE = $460,000
b. A = L D r + D r OE
+$112,300 = +$32,000 Dr+ DrOE
OE = +$80,300
OE Dron DrDecember Dr31, = $460,000 Dr+ Dr$80,300
Dr2019
= $540,300
PE Dr1-2B
a. A = L D r + D r OE
$395,000 = $97,000 Dr+ DrOE
OE = $298,000
b. A = L D r + D r OE
– Dr = +$36,000 Dr+ DrOE Dr–
$65,000 = $101,000
OE = $298,000 Dr–
OE Dron DrDecember Dr31, = Dr$101,000
Dr2019 $197,000
PE Dr1-3A
(2) Asset Dr(Accounts DrReceivable) Drincreases Drby
Dr$13,750; DrRevenue Dr(Delivery DrService DrFees)
Drincreases Drby Dr$13,750.
(3) Liability Dr(Accounts DrPayable) Drdecreases Drby
Dr$2,500; DrAsset Dr(Cash) Drdecreases Drby Dr$2,500.
(4) Asset Dr(Cash) Drincreases Drby Dr$9,000;
Asset Dr(Accounts DrReceivable) Drdecreases Drby Dr$9,000.
(5) Asset Dr(Cash) Drdecreases Drby Dr$1,000;
Owner's DrEquity Dr(Jerome DrFoley, DrDrawing) Drdecreases Drby Dr$1,000.
1-2
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PE Dr1-
3B
(2) Expense Dr(Advertising DrExpense) Drincreases Drby
$4,850; DrAsset Dr(Cash) Drdecreases Drby Dr$4,850.
Dr
(3) Asset Dr(Supplies) Drincreases Drby Dr$2,100;
Liability Dr(Accounts DrPayable) Drincreases Drby Dr$2,100.
(4) Asset Dr(Accounts DrReceivable) Drincreases Drby
Dr$14,700; DrRevenue Dr(Delivery DrService DrFees)
Drincreases Drby Dr$14,700.
(5) Asset Dr(Cash) Drincreases Drby Dr$8,200;
Asset Dr(Accounts DrReceivable) Drdecreases Drby Dr$8,200.
PE Dr1-4A
ADVENTURE DrTRAVEL DrSERVICE
Income DrStatement
For Drthe DrYear DrEnded DrApril Dr30, Dr2019
Fees Drearned $2,180,000
Expenses:
Wages Drexpense $1,300,000
Office Drexpense 400,000
Miscellaneous Drexpense 25,000
Total Drexpenses 1,725,000
Net Drincome $ Dr D r 455,000
PE Dr1-4B
SENTINEL DrTRAVEL DrSERVICE
Income DrStatement
For Drthe DrYear DrEnded DrAugust Dr31, Dr2019
Fees Drearned $750,000
Expenses:
Wages Drexpense $450,000
Office Drexpense 295,000
Miscellaneous Drexpense 12,000
Total Drexpenses 757,000
Net Drloss $ Dr (7,000)
Dr
1-3
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PE Dr1-5A
ADVENTURE DrTRAVEL DrSERVICE
Statement Drof DrOwner’s DrEquity
DrFor Drthe DrYear DrEnded DrApril Dr30,
Dr2019
Jerome DrFoley, Drcapital, DrMay Dr1, Dr2018 $1,020,000
Additional Drinvestment Drby Drowner Drduring Dryear $ D r 60,000
Net Drincome Drfor Drthe Dryear 455,000
Withdrawals (40,000)
Increase Drin Drowner’s Drequity 475,000
Jerome DrFoley, Drcapital, DrApril Dr30, Dr2019 $1,495,000
PE Dr1-5B
SENTINEL DrTRAVEL DrSERVICE
Statement Drof DrOwner’s DrEquity
DrFor Drthe DrYear DrEnded DrAugust Dr31,
Dr2019
Barb DrSchroeder, Drcapital, DrSeptember Dr1, Dr2018 $380,000
Additional Drinvestment Drby Drowner Drduring Dryear $ Dr 36,000
Net Drloss Drfor Drthe Dryear (7,000)
Withdrawals (18,000)
Increase Drin Drowner’s Drequity 11,000
Barb DrSchroeder, Drcapital, DrAugust Dr31, Dr2019 $391,000
PE Dr1-6A
ADVENTURE DrTRAVEL DrSERVICE
Balance DrSheet
DrApril Dr30, Dr2019
Assets
Cash $ Dr
197,000
Dr
Accounts Drreceivable 485,000
Supplies 18,000
Land 900,000
Total Drassets $1,600,000
Liabilities
Accounts Drpayable $ Dr
Dr 105,000
Owner’s DrEquity
Jerome DrFoley, Drcapital 1,495,000
Total Drliabilities Drand Drowner’s Drequity $1,600,000
1-4
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
INTRODUCTION TO ACCOUNTING AND BUSINESS Dr Dr Dr Dr
DISCUSSION DrQUESTIONS
1. Some Drusers Drof Draccounting Drinformation Drinclude Drmanagers, Dremployees, Drinvestors,
Drcreditors, Drcustomers, Drand Drthe Drgovernment.
2. The Drrole Drof Draccounting Dris Drto Drprovide Drinformation Drfor Drmanagers Drto Druse Drin Droperating
Drthe Drbusiness. D r In Draddition, Draccounting Drprovides Drinformation Drto Drothers Drto Druse Drin
Drassessing Drthe Dreconomic Drperformance Drand Drcondition Drof Drthe Drbusiness.
3. The D r corporate D r form D r allows D r the D r company D r to D r obtain D r large D r amounts D r of D r resources
D r by D r issuing D r stock. DrFor Drthis Drreason, Drmost Drcompanies Drthat Drrequire Drlarge Drinvestments Drin
Drproperty, Drplant, Drand Drequipment Drare Drorganized Dras Drcorporations.
4. No. DrThe Drbusiness Drentity Drconcept Drlimits Drthe Drrecording Drof Dreconomic Drdata Drto
Drtransactions Drdirectly Draffecting Drthe Dractivities Drof Drthe Drbusiness. DrThe Drpayment Drof Drthe
Drinterest Drof Dr$4,500 Dris Dra Drpersonal Drtransaction Drof DrJosh DrReilly Drand Drshould Drnot Drbe
Drrecorded Drby DrDispatch DrDelivery DrService.
5. The Drland Drshould Drbe Drrecorded Drat Drits Drcost Drof Dr$167,500 Drto DrReliable DrRepair DrService. DrThis
Dris Drconsistent D r with Drthe Drcost Drconcept.
6. a. No. DrThe Droffer Drof Dr$2,000,000 Drand Drthe Drincrease Drin Drthe Drassessed Drvalue Drshould Drnot Drbe
Drrecognized D r in Drthe Draccounting Drrecords Drbecause Drland Dris Drrecorded Dron Drthe Drcost
Drbasis.
b. Cash Drwould Drincrease Drby Dr$2,125,000, Drland Drwould Drdecrease Drby Dr$900,000, Drand
Drowner’s Drequity Drwould Drincrease Drby Dr$1,225,000.
7. An Draccount Drreceivable Dris Dra Drclaim Dragainst Dra Drcustomer Drfor Drgoods Dror Drservices Drsold. DrAn
Draccount Drpayable Dris Dran Dramount Drowed Drto Dra Drcreditor Drfor Drgoods Dror Drservices Drpurchased.
DrTherefore, Dran Draccount Drreceivable Drin Drthe Drrecords Drof Drthe Drseller Dris Dran Draccount Drpayable
Drin Drthe Drrecords Drof Drthe Drpurchaser.
8. (b) D r The Dr business Dr realized Dr net Dr income Dr of Dr $91,000 Dr ($679,000 Dr – Dr $588,000).
9. (a) D r Dr The Drbusiness Dr incurred Dr a Dr net Dr loss Dr of Dr$75,000 Dr ($640,000 Dr – Dr $715,000).
10. (a) D r D r Net Dr income Dror Dr net Dr loss
(b) Owner’s Dr equity Dr at Dr the Dr end Drof Dr the Dr period
(c) Cash Dr at Dr the Dr end Dr of Dr the Dr period
1-1
© Dr 2018 Dr Cengage Dr Learning. Dr All Dr Rights Dr Reserved. Dr May Dr not Dr be Dr scanned, Dr copied Dr or Dr duplicated, Dr or Dr posted Dr to Dr a Dr publicly
Dr accessible Dr website, Dr in Dr whole Dr or Dr in Dr part.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PRACTICE DrEXERCISES
PE Dr1-1A
$380,000. DrUnder Drthe Drcost Drconcept, Drthe Drland Drshould Drbe Drrecorded Drat Drthe Drcost Drto
DrClairemont DrRepair DrService.
PE Dr1-1B
$437,500. DrUnder Drthe Drcost Drconcept, Drthe Drland Drshould Drbe Drrecorded Drat Drthe Drcost Drto
DrHiggins DrRepair DrService.
PE Dr1-2A
a. A = L D r + D r OE
$675,000 = $215,000 Dr+ DrOE
OE = $460,000
b. A = L D r + D r OE
+$112,300 = +$32,000 Dr+ DrOE
OE = +$80,300
OE Dron DrDecember Dr31, = $460,000 Dr+ Dr$80,300
Dr2019
= $540,300
PE Dr1-2B
a. A = L D r + D r OE
$395,000 = $97,000 Dr+ DrOE
OE = $298,000
b. A = L D r + D r OE
– Dr = +$36,000 Dr+ DrOE Dr–
$65,000 = $101,000
OE = $298,000 Dr–
OE Dron DrDecember Dr31, = Dr$101,000
Dr2019 $197,000
PE Dr1-3A
(2) Asset Dr(Accounts DrReceivable) Drincreases Drby
Dr$13,750; DrRevenue Dr(Delivery DrService DrFees)
Drincreases Drby Dr$13,750.
(3) Liability Dr(Accounts DrPayable) Drdecreases Drby
Dr$2,500; DrAsset Dr(Cash) Drdecreases Drby Dr$2,500.
(4) Asset Dr(Cash) Drincreases Drby Dr$9,000;
Asset Dr(Accounts DrReceivable) Drdecreases Drby Dr$9,000.
(5) Asset Dr(Cash) Drdecreases Drby Dr$1,000;
Owner's DrEquity Dr(Jerome DrFoley, DrDrawing) Drdecreases Drby Dr$1,000.
1-2
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PE Dr1-
3B
(2) Expense Dr(Advertising DrExpense) Drincreases Drby
$4,850; DrAsset Dr(Cash) Drdecreases Drby Dr$4,850.
Dr
(3) Asset Dr(Supplies) Drincreases Drby Dr$2,100;
Liability Dr(Accounts DrPayable) Drincreases Drby Dr$2,100.
(4) Asset Dr(Accounts DrReceivable) Drincreases Drby
Dr$14,700; DrRevenue Dr(Delivery DrService DrFees)
Drincreases Drby Dr$14,700.
(5) Asset Dr(Cash) Drincreases Drby Dr$8,200;
Asset Dr(Accounts DrReceivable) Drdecreases Drby Dr$8,200.
PE Dr1-4A
ADVENTURE DrTRAVEL DrSERVICE
Income DrStatement
For Drthe DrYear DrEnded DrApril Dr30, Dr2019
Fees Drearned $2,180,000
Expenses:
Wages Drexpense $1,300,000
Office Drexpense 400,000
Miscellaneous Drexpense 25,000
Total Drexpenses 1,725,000
Net Drincome $ Dr D r 455,000
PE Dr1-4B
SENTINEL DrTRAVEL DrSERVICE
Income DrStatement
For Drthe DrYear DrEnded DrAugust Dr31, Dr2019
Fees Drearned $750,000
Expenses:
Wages Drexpense $450,000
Office Drexpense 295,000
Miscellaneous Drexpense 12,000
Total Drexpenses 757,000
Net Drloss $ Dr (7,000)
Dr
1-3
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
, CHAPTER Introduction Drto DrAccounting Drand
Dr1 DrBusiness
PE Dr1-5A
ADVENTURE DrTRAVEL DrSERVICE
Statement Drof DrOwner’s DrEquity
DrFor Drthe DrYear DrEnded DrApril Dr30,
Dr2019
Jerome DrFoley, Drcapital, DrMay Dr1, Dr2018 $1,020,000
Additional Drinvestment Drby Drowner Drduring Dryear $ D r 60,000
Net Drincome Drfor Drthe Dryear 455,000
Withdrawals (40,000)
Increase Drin Drowner’s Drequity 475,000
Jerome DrFoley, Drcapital, DrApril Dr30, Dr2019 $1,495,000
PE Dr1-5B
SENTINEL DrTRAVEL DrSERVICE
Statement Drof DrOwner’s DrEquity
DrFor Drthe DrYear DrEnded DrAugust Dr31,
Dr2019
Barb DrSchroeder, Drcapital, DrSeptember Dr1, Dr2018 $380,000
Additional Drinvestment Drby Drowner Drduring Dryear $ Dr 36,000
Net Drloss Drfor Drthe Dryear (7,000)
Withdrawals (18,000)
Increase Drin Drowner’s Drequity 11,000
Barb DrSchroeder, Drcapital, DrAugust Dr31, Dr2019 $391,000
PE Dr1-6A
ADVENTURE DrTRAVEL DrSERVICE
Balance DrSheet
DrApril Dr30, Dr2019
Assets
Cash $ Dr
197,000
Dr
Accounts Drreceivable 485,000
Supplies 18,000
Land 900,000
Total Drassets $1,600,000
Liabilities
Accounts Drpayable $ Dr
Dr 105,000
Owner’s DrEquity
Jerome DrFoley, Drcapital 1,495,000
Total Drliabilities Drand Drowner’s Drequity $1,600,000
1-4
© Dr2018 DrCengage DrLearning. DrAll DrRights DrReserved. DrMay Drnot Drbe Drscanned, Drcopied Dror Drduplicated, Dror Drposted Drto Dra Drpublicly Draccessible
Drwebsite, Drin Drwhole Dror Drin Drpart.
