Created by: Irfan Ali
SOLUTION MANUAL FOR ACCOUNTING 28TH EDITION BY
CARL S WARREN CHRISTINE JONICK JENNIFER
SCHNEIDER A++
CHAPTER 1
INTRODUCTION TO ACCOUNTING AND BUSINESS
DISCUSSION QUESTIONS
1. Some users of accounting information include managers, employees,
investors, creditors, customers, and the government.
2. The role of accounting is to provide information for managers to use in operating
the business. In addition, accounting provides information to others to use in
assessing the economic performance and condition of the business.
3. The corporate form allows the company to obtain large amounts of resources by
issuing stock. For this reason, most companies that require large investments in
property, plant, and equipment are organized as corporations.
4. No. The business entity concept limits the recording of economic data to
transactions directly affecting the activities of the business. The payment of the
interest of $4,500 is a personal transaction of Josh Reilly and should not be
recorded by Dispatch Delivery Service.
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This
is consistent with the cost concept.
6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be
recognized in the accounting records because land is recorded on the cost basis.
b. Cash would increase by $2,125,000, land would decrease by $900,000, and
owner’s equitywould increase by $1,225,000.
7. An account receivable is a claim against a customer for goods or services sold.
An account payable is an amount owed to a creditor for goods or services
purchased. Therefore, an account receivable in the records of the seller is an
,Created by: Irfan Ali
account payable in the records of the purchaser.
8. (b) The business realized net income of $91,000 ($679,000 – $588,000).
9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000).
10. (a) Net income or net loss
(b) Owner’s equity at the end of the period
(c) Cash at the end of the period
PE 1-1A
PRACTICE EXERCISES
$597,000. Under the cost concept, the land should be recorded at the cost to Boulder
Repair Service.
PE 1-1B
$369,500. Under the cost concept, the land should be recorded at the cost toClementine
Repair Service.
PE 1-2A
a. A = L + OE
$518,000 = $165,000 + OE
OE = $353,000
b. A = L + OE
+$86,200 = +$25,000 + OE
OE = +$61,200
OE on December 31, 20Y9 = $353,000 + $61,200
= $414,200
PE 1-2B
,Created by: Irfan Ali
a. A = L + OE
$382,000 = $94,000 + OE
OE = $288,000
b. A = L + OE
–$63,000 = +$35,000 + OE
OE = –$98,000
OE on December 31, 20Y9 = $288,000 – $98,000
= $190,000
PE 1-3A
(2) Asset (Accounts Receivable) increases by $22,400;
Owner’s Equity (Delivery Service Fees) increases by $22,400.
(3) Liability (Accounts Payable) decreases by $4,100;
Asset (Cash) decreases by $4,100.
(4) Asset (Cash) increases by $14,700;
Asset (Accounts Receivable) decreases by $14,700.
(5) Asset (Cash) decreases by $1,600;
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
(2) Owner’s Equity (Advertising Expense, increases) decreases by $6,750;
Asset (Cash) decreases by $6,750.
(3) Asset (Supplies) increases by $2,920;
Liability (Accounts Payable) increases by $2,920.
(4) Asset (Accounts Receivable) increases by $20,460;
Owner’s Equity (Delivery Service Fees) increases by $20,460.
(5) Asset (Cash) increases by $11,410;
Asset (Accounts Receivable) decreases by $11,410.
PE 1-4A
, Created by: Irfan Ali
Up-in-the-Air Travel Service
Income Statement
For the Year Ended April 30, 20Y7
Fees earned $1,870,000
Expenses:
Wages expense $1,115,000
Office expense 343,000
Miscellaneous expense 21,000
Total expenses 1,479,000
Net income $ 391,000
PE 1-4B
Zenith Travel Service
Income Statement
For the Year Ended August 31, 20Y4
Fees earned $899,600
Expenses:
Wages expense $539,800
Office expense 353,800
Miscellaneous expense 14,400
Total expenses 908,000
Net loss $ (8,400)
SOLUTION MANUAL FOR ACCOUNTING 28TH EDITION BY
CARL S WARREN CHRISTINE JONICK JENNIFER
SCHNEIDER A++
CHAPTER 1
INTRODUCTION TO ACCOUNTING AND BUSINESS
DISCUSSION QUESTIONS
1. Some users of accounting information include managers, employees,
investors, creditors, customers, and the government.
2. The role of accounting is to provide information for managers to use in operating
the business. In addition, accounting provides information to others to use in
assessing the economic performance and condition of the business.
3. The corporate form allows the company to obtain large amounts of resources by
issuing stock. For this reason, most companies that require large investments in
property, plant, and equipment are organized as corporations.
4. No. The business entity concept limits the recording of economic data to
transactions directly affecting the activities of the business. The payment of the
interest of $4,500 is a personal transaction of Josh Reilly and should not be
recorded by Dispatch Delivery Service.
5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This
is consistent with the cost concept.
6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be
recognized in the accounting records because land is recorded on the cost basis.
b. Cash would increase by $2,125,000, land would decrease by $900,000, and
owner’s equitywould increase by $1,225,000.
7. An account receivable is a claim against a customer for goods or services sold.
An account payable is an amount owed to a creditor for goods or services
purchased. Therefore, an account receivable in the records of the seller is an
,Created by: Irfan Ali
account payable in the records of the purchaser.
8. (b) The business realized net income of $91,000 ($679,000 – $588,000).
9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000).
10. (a) Net income or net loss
(b) Owner’s equity at the end of the period
(c) Cash at the end of the period
PE 1-1A
PRACTICE EXERCISES
$597,000. Under the cost concept, the land should be recorded at the cost to Boulder
Repair Service.
PE 1-1B
$369,500. Under the cost concept, the land should be recorded at the cost toClementine
Repair Service.
PE 1-2A
a. A = L + OE
$518,000 = $165,000 + OE
OE = $353,000
b. A = L + OE
+$86,200 = +$25,000 + OE
OE = +$61,200
OE on December 31, 20Y9 = $353,000 + $61,200
= $414,200
PE 1-2B
,Created by: Irfan Ali
a. A = L + OE
$382,000 = $94,000 + OE
OE = $288,000
b. A = L + OE
–$63,000 = +$35,000 + OE
OE = –$98,000
OE on December 31, 20Y9 = $288,000 – $98,000
= $190,000
PE 1-3A
(2) Asset (Accounts Receivable) increases by $22,400;
Owner’s Equity (Delivery Service Fees) increases by $22,400.
(3) Liability (Accounts Payable) decreases by $4,100;
Asset (Cash) decreases by $4,100.
(4) Asset (Cash) increases by $14,700;
Asset (Accounts Receivable) decreases by $14,700.
(5) Asset (Cash) decreases by $1,600;
Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
(2) Owner’s Equity (Advertising Expense, increases) decreases by $6,750;
Asset (Cash) decreases by $6,750.
(3) Asset (Supplies) increases by $2,920;
Liability (Accounts Payable) increases by $2,920.
(4) Asset (Accounts Receivable) increases by $20,460;
Owner’s Equity (Delivery Service Fees) increases by $20,460.
(5) Asset (Cash) increases by $11,410;
Asset (Accounts Receivable) decreases by $11,410.
PE 1-4A
, Created by: Irfan Ali
Up-in-the-Air Travel Service
Income Statement
For the Year Ended April 30, 20Y7
Fees earned $1,870,000
Expenses:
Wages expense $1,115,000
Office expense 343,000
Miscellaneous expense 21,000
Total expenses 1,479,000
Net income $ 391,000
PE 1-4B
Zenith Travel Service
Income Statement
For the Year Ended August 31, 20Y4
Fees earned $899,600
Expenses:
Wages expense $539,800
Office expense 353,800
Miscellaneous expense 14,400
Total expenses 908,000
Net loss $ (8,400)
