Solution Manual For
Fundamental Accounting Principles, 25th Edition,
John Wild
Chapter 1-26
Chapter 1
Accounting in Business
QUICK STUDIES
Quick Study 1-1 (10 minutes)
1. f Artificial Intelligence
2. c Recording
3. h Recordkeeping (bookkeeping)
Quick Study 1-2 (10 minutes)
a. External user g. External user
b. External user h. External user
c. External user i. Internal user
d. External user j. External user
e. Internal user k. External user
f. External user l. External user
Quick Study 1-3 (10 minutes)
1. Opportunity 4. Opportunity
2. Pressure 5. Pressure
3. Rationalization 6. Rationalization
Quick Study 1-4 (5 minutes)
1. Principle 3. Assumption
2. Assumption 4. Principle
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-5 (10 minutes)
Attribute Present Proprietorship Partnership Corporation LLC
1. Business taxed no no yes no
2. Limited liability no no yes yes
3. Legal entity no no yes yes
Quick Study 1-6 (10 minutes)
1. Revenue recognition principle
2. Measurement (cost) principle
3. Business entity assumption
Quick Study 1-7 (5 minutes)
Assets = Liabilities + Equity
$700,000 (a) $280,000 $420,000
$500,000 (b) $250,000 (b) $250,000
Quick Study 1-8 (10 minutes)
1.
Assets = Liabilities + Equity
$75,000 (a) $35,000 $40,000
(b) $95,000 $25,000 $70,000
$85,000 $20,000 (c) $65,000
2.
+ Owner, - Owner,
Assets = Liabilities + Revenues - Expenses
Capital Withdrawals
$40,000 $16,000 $20,000 $ 0 (a) $12,000 $ 8,000
$80,000 $32,000 $44,000 (b) $2,000 $24,000 $18,000
0
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-9 (5 minutes)
a. Increase
b. Decrease
c. Increase
d. Decrease
Quick Study 1-10 (15 minutes)
Assets = Liabilities + Equity
Accounts Accounts Owner, Owner,
Cash + = + - + Revenues - Expenses
Recble. Payable Capital Withdrawals
(a) $5,500 = $5,500
Consulting
(b) + $4,000 = + 4,000
Commission
Bal. 5,500 + 4,000 = + 9,500
(c) -1,400 = - $1,400
Wages
Bal. 4,100 + 4,000 = + 9,500 - 1,400
(d) +1,000 + - 1,000 = -
Bal. 5,100 + 3,000 = + 9,500 - 1,400
(e) -700 + = - 700
Cleaning
Bal. $4,400 + $3,000 = + $9,500 - $2,100
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-11 (15 minutes)
Assets = Liabilities + Equity
Owner,
Accts. Owner,
Cash + Supplies + Equip. + Land = + - With- + Rev. - Exp.
Pay. Capital
drawals
(a) $15,000 = $15,000
(b) -500 + $500 =
Bal. 14,500 + 500 = + 15,000
(c) + $10,000 = 10,000
Bal. 14,500 + 500 + 10,000 = + 25,000
(d) + 200 = +$200
Bal. 14,500 + 700 + 10,000 = 200 + 25,000
(e) -9,000 + $9,000 =
Bal. $5,500 + $700 + $10,000 + $9,000 = $200 + $25,000
Quick Study 1-12 (10 minutes)
a. Balance sheet e. Balance sheet
b. Statement of cash flows f. Statement of cash flows
c. Balance sheet g. Income statement
d. Income statement h. Balance sheet
2
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-13 (5 minutes)
1. Expenses 4. Withdrawals 7. Expenses
2. Revenues 5. Expenses 8. Revenues
3. Expenses 6. Revenues
Quick study 1-14 (5 minutes)
1. Assets 3. Assets 5. Assets
2. Liabilities 4. Liabilities 6. Assets
Quick Study 1-15 (15 minutes)
HAWKIN
Income Statement
For Month Ended December 31
Revenues
Services revenue ................................ $16,000
Expenses
Wages expense ................................... $8,000
Rent expense....................................... 1,500
Utilities expense.................................. 700
Total expenses .................................... 10,200
Net income .................................................. $ 5,800
Quick Study 1-16 (15 minutes)
HAWKIN
Statement of Owner‘s Equity
For Month Ended December 31
Hawkin, Capital, December 1 .......................... $10,900
Add: Investments by owner ....................... 0
Net income ......................................... 5,800
16,700
Less: Withdrawals by owner ...................... (1,000)
Hawkin, Capital, December 31 ........................ $15,700
3
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-17 (15 minutes)
HAWKIN
Balance Sheet
December 31
Assets Liabilities
Cash ............................... $ 5,100 Accounts payable ................. $ 6,000
Accounts receivable .... 600
Supplies ........................ 2,000 Equity
Equipment ..................... 14,000 Hawkin, Capital ..................... 15,700
Total assets ................... $21,700 Total liabilities and equity .... $21,700
Quick Study 1-18 (15 minutes)
STUDIO ONE
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers .................................. $23,500
Cash paid for expenditures ........................................ (6,000)
Net cash provided by operating activities ................ 17,500
Cash flows from investing activities
Cash paid for equipment ............................................ (3,000)
Cash paid for truck ...................................................... (22,000)
Net cash used by investing activities ....................... (25,000)
Cash flows from financing activities
Cash investments by owner ....................................... 11,000
Cash withdrawals by owner ....................................... (2,000)
Net cash provided by financing activities ................ 9,000
Net increase in cash.................................................... $ 1,500
Cash balance, December 1 ......................................... 1,000
Cash balance, December 31 ....................................... $ 2,500
4
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-19 (10 minutes)
1. Investing activities 5. Operating activities
2. Investing activities 6. Operating activities
3. Operating activities 7. Operating activities
4. Operating activities 8. Financing activities
Quick Study 1-20 (5 minutes)
Improve
Explanation: Deutsche Auto‘s return on assets increased in each of the years
shown, which is a positive result. It suggests the company is more effectively
using its assets to generate net income.
Quick Study 1-21 (10 minutes)
a.
Net income $8 billion
Return on assets = Average total assets = $42 billion = 19.0%
b. Better
Explanation: The company‘s 19.0% return on assets exceeds the 11.0%
return of its competitor. This is a positive result. It suggests the company
is more effectively using its assets to generate net income in comparison
to its competitor.
5
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
, EXERCISES
Exercise 1-1 (10 minutes)
1. Communicating 5. Communicating
2. Communicating 6. Identifying
3. Recording 7. Identifying
4. Recording 8. Recording
Exercise 1-2 (20 minutes)
Part A.
1. Internal user 5. Internal user
2. External user 6. External user
3. Internal user 7. Internal user
4. External user
Part B.
1. Internal user 5. Internal user
2. Internal user 6. External user
3. External user 7. Internal user
4. External user 8. Internal user
Exercise 1-3 (10 minutes)
1. Managerial accounting 5. Tax accounting
2. Financial accounting 6. Tax accounting
3. Managerial accounting 7. Financial accounting
4. Managerial accounting 8. Financial accounting
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Exercise 1-4 (10 minutes)
1. A. Audit
2. G. Net income
3. D. FASB
4. F. Public accountants
5. C. Ethics
Exercise 1-5 (20 minutes)
1. E. Audit
2. D. Internal controls
3. C. Prevention
4. B. Fraud triangle
5. A. Ethics
Exercise 1-6 (10 minutes)
a. Corporation e. Corporation
b. Partnership f. Sole proprietorship
c. Sole proprietorship g. Corporation
d. Sole proprietorship h. Limited liability company
2
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
, Exercise 1-7 (10 minutes)
Principle or Assumption
a. Full disclosure principle
b. Going-concern assumption
c. Expense recognition (matching) principle
d. Business entity assumption
e. Revenue recognition principle
f. Measurement (cost) principle
Exercise 1-8 (15 minutes)
a. $10,000 recorded for truck.
Explanation: Accounting information is based on the measurement (cost)
principle. This means for recording the asset‘s amount, it makes no
difference that the seller was asking a higher price or that the owner
believes the vehicle is worth more.
b. Revenue recorded by month:
May: $1,000
June: $0
July: $0
Explanation: Revenue recognition principle dictates that revenue is
recognized when services are provided to customers, and not
necessarily when customers pay for the services. In this case, all work
was performed in May. Therefore, the revenue for this work is recorded
in May.
Exercise 1-9 (10 minutes)
Assets = Liabilities + Equity
(a) $ 65,000 = $ 20,000 + $45,000
$100,000 = $ 34,000 + (b) $66,000
$154,000 = (c) $114,000 + $40,000
3
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
Fundamental Accounting Principles, 25th Edition,
John Wild
Chapter 1-26
Chapter 1
Accounting in Business
QUICK STUDIES
Quick Study 1-1 (10 minutes)
1. f Artificial Intelligence
2. c Recording
3. h Recordkeeping (bookkeeping)
Quick Study 1-2 (10 minutes)
a. External user g. External user
b. External user h. External user
c. External user i. Internal user
d. External user j. External user
e. Internal user k. External user
f. External user l. External user
Quick Study 1-3 (10 minutes)
1. Opportunity 4. Opportunity
2. Pressure 5. Pressure
3. Rationalization 6. Rationalization
Quick Study 1-4 (5 minutes)
1. Principle 3. Assumption
2. Assumption 4. Principle
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-5 (10 minutes)
Attribute Present Proprietorship Partnership Corporation LLC
1. Business taxed no no yes no
2. Limited liability no no yes yes
3. Legal entity no no yes yes
Quick Study 1-6 (10 minutes)
1. Revenue recognition principle
2. Measurement (cost) principle
3. Business entity assumption
Quick Study 1-7 (5 minutes)
Assets = Liabilities + Equity
$700,000 (a) $280,000 $420,000
$500,000 (b) $250,000 (b) $250,000
Quick Study 1-8 (10 minutes)
1.
Assets = Liabilities + Equity
$75,000 (a) $35,000 $40,000
(b) $95,000 $25,000 $70,000
$85,000 $20,000 (c) $65,000
2.
+ Owner, - Owner,
Assets = Liabilities + Revenues - Expenses
Capital Withdrawals
$40,000 $16,000 $20,000 $ 0 (a) $12,000 $ 8,000
$80,000 $32,000 $44,000 (b) $2,000 $24,000 $18,000
0
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-9 (5 minutes)
a. Increase
b. Decrease
c. Increase
d. Decrease
Quick Study 1-10 (15 minutes)
Assets = Liabilities + Equity
Accounts Accounts Owner, Owner,
Cash + = + - + Revenues - Expenses
Recble. Payable Capital Withdrawals
(a) $5,500 = $5,500
Consulting
(b) + $4,000 = + 4,000
Commission
Bal. 5,500 + 4,000 = + 9,500
(c) -1,400 = - $1,400
Wages
Bal. 4,100 + 4,000 = + 9,500 - 1,400
(d) +1,000 + - 1,000 = -
Bal. 5,100 + 3,000 = + 9,500 - 1,400
(e) -700 + = - 700
Cleaning
Bal. $4,400 + $3,000 = + $9,500 - $2,100
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-11 (15 minutes)
Assets = Liabilities + Equity
Owner,
Accts. Owner,
Cash + Supplies + Equip. + Land = + - With- + Rev. - Exp.
Pay. Capital
drawals
(a) $15,000 = $15,000
(b) -500 + $500 =
Bal. 14,500 + 500 = + 15,000
(c) + $10,000 = 10,000
Bal. 14,500 + 500 + 10,000 = + 25,000
(d) + 200 = +$200
Bal. 14,500 + 700 + 10,000 = 200 + 25,000
(e) -9,000 + $9,000 =
Bal. $5,500 + $700 + $10,000 + $9,000 = $200 + $25,000
Quick Study 1-12 (10 minutes)
a. Balance sheet e. Balance sheet
b. Statement of cash flows f. Statement of cash flows
c. Balance sheet g. Income statement
d. Income statement h. Balance sheet
2
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-13 (5 minutes)
1. Expenses 4. Withdrawals 7. Expenses
2. Revenues 5. Expenses 8. Revenues
3. Expenses 6. Revenues
Quick study 1-14 (5 minutes)
1. Assets 3. Assets 5. Assets
2. Liabilities 4. Liabilities 6. Assets
Quick Study 1-15 (15 minutes)
HAWKIN
Income Statement
For Month Ended December 31
Revenues
Services revenue ................................ $16,000
Expenses
Wages expense ................................... $8,000
Rent expense....................................... 1,500
Utilities expense.................................. 700
Total expenses .................................... 10,200
Net income .................................................. $ 5,800
Quick Study 1-16 (15 minutes)
HAWKIN
Statement of Owner‘s Equity
For Month Ended December 31
Hawkin, Capital, December 1 .......................... $10,900
Add: Investments by owner ....................... 0
Net income ......................................... 5,800
16,700
Less: Withdrawals by owner ...................... (1,000)
Hawkin, Capital, December 31 ........................ $15,700
3
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-17 (15 minutes)
HAWKIN
Balance Sheet
December 31
Assets Liabilities
Cash ............................... $ 5,100 Accounts payable ................. $ 6,000
Accounts receivable .... 600
Supplies ........................ 2,000 Equity
Equipment ..................... 14,000 Hawkin, Capital ..................... 15,700
Total assets ................... $21,700 Total liabilities and equity .... $21,700
Quick Study 1-18 (15 minutes)
STUDIO ONE
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers .................................. $23,500
Cash paid for expenditures ........................................ (6,000)
Net cash provided by operating activities ................ 17,500
Cash flows from investing activities
Cash paid for equipment ............................................ (3,000)
Cash paid for truck ...................................................... (22,000)
Net cash used by investing activities ....................... (25,000)
Cash flows from financing activities
Cash investments by owner ....................................... 11,000
Cash withdrawals by owner ....................................... (2,000)
Net cash provided by financing activities ................ 9,000
Net increase in cash.................................................... $ 1,500
Cash balance, December 1 ......................................... 1,000
Cash balance, December 31 ....................................... $ 2,500
4
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Quick Study 1-19 (10 minutes)
1. Investing activities 5. Operating activities
2. Investing activities 6. Operating activities
3. Operating activities 7. Operating activities
4. Operating activities 8. Financing activities
Quick Study 1-20 (5 minutes)
Improve
Explanation: Deutsche Auto‘s return on assets increased in each of the years
shown, which is a positive result. It suggests the company is more effectively
using its assets to generate net income.
Quick Study 1-21 (10 minutes)
a.
Net income $8 billion
Return on assets = Average total assets = $42 billion = 19.0%
b. Better
Explanation: The company‘s 19.0% return on assets exceeds the 11.0%
return of its competitor. This is a positive result. It suggests the company
is more effectively using its assets to generate net income in comparison
to its competitor.
5
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
, EXERCISES
Exercise 1-1 (10 minutes)
1. Communicating 5. Communicating
2. Communicating 6. Identifying
3. Recording 7. Identifying
4. Recording 8. Recording
Exercise 1-2 (20 minutes)
Part A.
1. Internal user 5. Internal user
2. External user 6. External user
3. Internal user 7. Internal user
4. External user
Part B.
1. Internal user 5. Internal user
2. Internal user 6. External user
3. External user 7. Internal user
4. External user 8. Internal user
Exercise 1-3 (10 minutes)
1. Managerial accounting 5. Tax accounting
2. Financial accounting 6. Tax accounting
3. Managerial accounting 7. Financial accounting
4. Managerial accounting 8. Financial accounting
1
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
,Exercise 1-4 (10 minutes)
1. A. Audit
2. G. Net income
3. D. FASB
4. F. Public accountants
5. C. Ethics
Exercise 1-5 (20 minutes)
1. E. Audit
2. D. Internal controls
3. C. Prevention
4. B. Fraud triangle
5. A. Ethics
Exercise 1-6 (10 minutes)
a. Corporation e. Corporation
b. Partnership f. Sole proprietorship
c. Sole proprietorship g. Corporation
d. Sole proprietorship h. Limited liability company
2
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
, Exercise 1-7 (10 minutes)
Principle or Assumption
a. Full disclosure principle
b. Going-concern assumption
c. Expense recognition (matching) principle
d. Business entity assumption
e. Revenue recognition principle
f. Measurement (cost) principle
Exercise 1-8 (15 minutes)
a. $10,000 recorded for truck.
Explanation: Accounting information is based on the measurement (cost)
principle. This means for recording the asset‘s amount, it makes no
difference that the seller was asking a higher price or that the owner
believes the vehicle is worth more.
b. Revenue recorded by month:
May: $1,000
June: $0
July: $0
Explanation: Revenue recognition principle dictates that revenue is
recognized when services are provided to customers, and not
necessarily when customers pay for the services. In this case, all work
was performed in May. Therefore, the revenue for this work is recorded
in May.
Exercise 1-9 (10 minutes)
Assets = Liabilities + Equity
(a) $ 65,000 = $ 20,000 + $45,000
$100,000 = $ 34,000 + (b) $66,000
$154,000 = (c) $114,000 + $40,000
3
Copyright © 2021 by McGraw Hill.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill.
