Solution Manual For Principles Of Corporate
Finance 14th Edition By Richard Brealey,
Stewart Myers, Franklin Allen
Solutions Manual 1-1 Chapter 1
.
, Chapter 1
Accounting in action
Assignment classification table
Brief Problems Problems
Study objectives Questions exercises Exercises set a set b
1. Identify the use and 1, 2, 3, 4, 1, 2 1 1 1
users of accounting 5
and the objective of
financial reporting.
2. Compare different 6, 7, 8, 9 3, 4, 10 2, 3, 7 2, 5, 2, 5, 11
forms of business
organizations and
explain how canadian
accounting standards
apply to these
organizations.
3. Describe the 10, 11, 12, 5, 6, 7, 8, 3, 4, 5, 6 3, 4, 6, 3, 4, 6, 7,
components of the 13, 14 9, 13, 14 7, 11 11
financial statements
and explain the
accounting equation.
4. Determine what events 15, 16 10 7, 8 5, 7, 8, 5, 7, 8, 11
are recognized in the 11
financial statements
and how the events are
measured.
5. Analyze the effects of 17, 18 11, 12, 13 9, 10, 11, 6, 7, 8,11 6, 7, 8,11
business transactions 12
on the accounting
equation.
6. Prepare financial 19, 20 14, 15, 16 13, 14, 7, 8, 9, 7, 8, 9,
statements. 17, 18 15, 16 10, 11 10, 11
Solutions Manual 1-2 Chapter 1
.
,Weygandt, Kieso, Kimmel, Trenholm, Kinnear, Barlow Accounting Principles, Sixth Canadian Edition
Answers to questions
1. Yes. Accounting is the financial information system that provides useful
financial information to every person who owns and uses economic
resources or otherwise engages in economic activity.
2. Understanding the basics of accounting is helpful for everyone. Studying
accounting allows you to learn how the world of business actually works.
Learning how to read and interpret financial information will provide you
with a valuable set of skills.
3. Internal users are those who plan, organize, and run businesses and include
managers, supervisors, directors, and company officers. External users work
for other organizations but have reasons to be interested in the company’s
financial position and performance, and include current or potential
investors (owners), and creditors.
Internal users may want answers to several types of questions. For
example, the finance department wants to know if there is enough cash to
pay the bills. The marketing department wants to know what price the
business should use in selling its products to maximize profits. The human
resources department wants to know how many people the business can
afford to hire. The production department wants to know which product
lines make the business the most profit.
External users may want answer to several types of questions. For example,
investors want to know if the company is earning enough to give them a
return on their investment. Creditors want to know if the company is able
to pay its debts as they come due. Labour unions want to know whether the
owners can afford to pay increased wages and benefits. Customers are
interested in whether a company will continue to honour its product
warranties and support its product lines. Taxing authorities want to know
whether the company respects the tax laws. Regulatory agencies want to
know whether the company is respecting established rules.
4. The main objective of financial reporting is to provide useful information to
investors and creditors (external users) to make decisions about a business.
Users may be potential investors who need to decide if they wish to invest
in the business or they may be creditors deciding if they wish to lend
money to the business. These users want to know if the business is running
successfully and can generate cash and earn a profit.
Solutions Manual 1-3 Chapter 1
.
, Weygandt, Kieso, Kimmel, Trenholm, Kinnear, Barlow Accounting Principles, Sixth Canadian Edition
Questions (continued)
5. Ethics is a fundamental business concept. If accountants do not have a high
ethical standard, the information they produce will not have any credibility.
Ethics are important to statement users because it provides them comfort
that the financial information they are using is credible and reliable.
6. A) a proprietorship is a private business with one owner who has
unlimited liability for the business. The proprietorship has a limited
life tied to the life of the owner. Proprietorships do not pay tax, the
owner does.
b) A partnership has essentially the same characteristics as a
proprietorship except that in a partnership, there is more than one
owner. A partnership need not be a private business, although it
usually is.
c) For corporations, the owners are one or more shareholders who enjoy
limited liability. The corporation pays income taxes and can have an
indefinite live since its ownership units, in the form of shares, are
easily transferred to other owners. Public corporations issue publicly
traded shares. That is, their shares are listed on canadian or other
stock exchanges.
d) Private corporations have essentially the same characteristics as public
corporations except that they do not issue publicly traded shares.
Solutions Manual 1-4 Chapter 1
.
Finance 14th Edition By Richard Brealey,
Stewart Myers, Franklin Allen
Solutions Manual 1-1 Chapter 1
.
, Chapter 1
Accounting in action
Assignment classification table
Brief Problems Problems
Study objectives Questions exercises Exercises set a set b
1. Identify the use and 1, 2, 3, 4, 1, 2 1 1 1
users of accounting 5
and the objective of
financial reporting.
2. Compare different 6, 7, 8, 9 3, 4, 10 2, 3, 7 2, 5, 2, 5, 11
forms of business
organizations and
explain how canadian
accounting standards
apply to these
organizations.
3. Describe the 10, 11, 12, 5, 6, 7, 8, 3, 4, 5, 6 3, 4, 6, 3, 4, 6, 7,
components of the 13, 14 9, 13, 14 7, 11 11
financial statements
and explain the
accounting equation.
4. Determine what events 15, 16 10 7, 8 5, 7, 8, 5, 7, 8, 11
are recognized in the 11
financial statements
and how the events are
measured.
5. Analyze the effects of 17, 18 11, 12, 13 9, 10, 11, 6, 7, 8,11 6, 7, 8,11
business transactions 12
on the accounting
equation.
6. Prepare financial 19, 20 14, 15, 16 13, 14, 7, 8, 9, 7, 8, 9,
statements. 17, 18 15, 16 10, 11 10, 11
Solutions Manual 1-2 Chapter 1
.
,Weygandt, Kieso, Kimmel, Trenholm, Kinnear, Barlow Accounting Principles, Sixth Canadian Edition
Answers to questions
1. Yes. Accounting is the financial information system that provides useful
financial information to every person who owns and uses economic
resources or otherwise engages in economic activity.
2. Understanding the basics of accounting is helpful for everyone. Studying
accounting allows you to learn how the world of business actually works.
Learning how to read and interpret financial information will provide you
with a valuable set of skills.
3. Internal users are those who plan, organize, and run businesses and include
managers, supervisors, directors, and company officers. External users work
for other organizations but have reasons to be interested in the company’s
financial position and performance, and include current or potential
investors (owners), and creditors.
Internal users may want answers to several types of questions. For
example, the finance department wants to know if there is enough cash to
pay the bills. The marketing department wants to know what price the
business should use in selling its products to maximize profits. The human
resources department wants to know how many people the business can
afford to hire. The production department wants to know which product
lines make the business the most profit.
External users may want answer to several types of questions. For example,
investors want to know if the company is earning enough to give them a
return on their investment. Creditors want to know if the company is able
to pay its debts as they come due. Labour unions want to know whether the
owners can afford to pay increased wages and benefits. Customers are
interested in whether a company will continue to honour its product
warranties and support its product lines. Taxing authorities want to know
whether the company respects the tax laws. Regulatory agencies want to
know whether the company is respecting established rules.
4. The main objective of financial reporting is to provide useful information to
investors and creditors (external users) to make decisions about a business.
Users may be potential investors who need to decide if they wish to invest
in the business or they may be creditors deciding if they wish to lend
money to the business. These users want to know if the business is running
successfully and can generate cash and earn a profit.
Solutions Manual 1-3 Chapter 1
.
, Weygandt, Kieso, Kimmel, Trenholm, Kinnear, Barlow Accounting Principles, Sixth Canadian Edition
Questions (continued)
5. Ethics is a fundamental business concept. If accountants do not have a high
ethical standard, the information they produce will not have any credibility.
Ethics are important to statement users because it provides them comfort
that the financial information they are using is credible and reliable.
6. A) a proprietorship is a private business with one owner who has
unlimited liability for the business. The proprietorship has a limited
life tied to the life of the owner. Proprietorships do not pay tax, the
owner does.
b) A partnership has essentially the same characteristics as a
proprietorship except that in a partnership, there is more than one
owner. A partnership need not be a private business, although it
usually is.
c) For corporations, the owners are one or more shareholders who enjoy
limited liability. The corporation pays income taxes and can have an
indefinite live since its ownership units, in the form of shares, are
easily transferred to other owners. Public corporations issue publicly
traded shares. That is, their shares are listed on canadian or other
stock exchanges.
d) Private corporations have essentially the same characteristics as public
corporations except that they do not issue publicly traded shares.
Solutions Manual 1-4 Chapter 1
.
