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 forms 6, 7, 8, 9 3, 4, 10 2, 3, 7 2, 5, 2, 5, 11
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 on 12
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 forms 6, 7, 8, 9 3, 4, 10 2, 3, 7 2, 5, 2, 5, 11
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 on 12
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
.
