CHAPTER901
INTRODUCTION90TO90ACCOUNTING90AND90BUSINESS
DISCUSSION90QUESTIONS
1. Some90users90of90accounting90information90include90managers,90employees,90investors,90
creditors,90customers,90and90the90government.
2. The90role90of90accounting90is90to90provide90information90for90managers90to90use90in90operatin
g90the90business.9 0 In90addition,90accounting90provides90information90to90others90to90use90in9
0assessing90the90economic90performance90and90condition90of90the90business.
3. The9 0 corporate9 0 form9 0 allows9 0 the9 0 company9 0 to9 0 obtain9 0 large9 0 amounts9 0 of9 0 resources9
0 by9 0 issuing9 0 stock.90For90this90reason,90most90companies90that90require90large90investments90i
n90property,90plant,90and90equipment90are90organized90as90corporations.
4. No.90The90business90entity90concept90limits90the90recording90of90economic90data90to90transac
tions90directly90affecting90the90activities90of90the90business.90The90payment90of90the90interest
90of90$4,50090is90a90personal90transaction90of90Josh90Reilly90and90should90not90be90recorded9
0by90Dispatch90Delivery90Service.
5. The90land90should90be90recorded90at90its90cost90of90$167,50090to90Reliable90Repair90Service.90T
his90is90consistent9 0 with90the90cost90concept.
6. a.
No.90The90offer90of90$2,000,00090and90the90increase90in90the90assessed90value90should
90not90be90recognized9 0in90the90accounting90records90because90land90is90recorded90on90the
90cost90basis.
b.
Cash90would90increase90by90$2,125,000,90land90would90decrease90by90$900,000,90a
nd90owner’s90equity90would90increase90by90$1,225,000.
7. An90account90receivable90is90a90claim90against90a90customer90for90goods90or90services90sold.90
An90account90payable90is90an90amount90owed90to90a90creditor90for90goods90or90services90purch
ased.90Therefore,90an90account90receivable90in90the90records90of90the90seller90is90an90account90
payable90in90the90records90of90the90purchaser.
8. (b)9 0 The90 business90 realized90 net90 income90 of90 $91,00090 ($679,00090 –90 $588,000).
9. (a)9 0 9 0 The90 business90 incurred90 a90net90 loss90of90 $75,00090 ($640,00090–90 $715,000).
10. (a)9 0 9 0 Net90 income90or90net90 loss
(b) Owner’s90 equity90 at90 the90 end90 of90 the90 period
(c) Cash90 at90 the90 end90 of90 the90 period
1-1
©90 202190 Cengage90 Learning,90 Inc.90 May90 not90 be90 scanned,90 copied90 or90 duplicated,90 or90 posted90 to90 a90 publicly90
accessible90 website,90 in90 whole90 or90 in90 part.
, CHAPTER90 Introduction90to90Accounting90and90Busi
1 ness
PRACTICE90 EXERCISES
PE901-1A
$597,000.90Under90the90cost90concept,90the90land90should90be90recorded90at90the90cost90to
90Boulder90Repair90Service.
PE901-1B
$369,500.90Under90the90cost90concept,90the90land90should90be90recorded90at90the90
cost90to90Clementine90Repair90Service.
PE901-
2A
a. A = L9 0 +9 0 OE
$518,000 = $165,00090+90OE
OE = $353,000
b. A = L9 0 +9 0 OE
+$86,200 = +$25,00090+90OE
OE = +$61,200
OE90on90December9031,902 = $353,00090+90$61,2
0Y9 00
= $414,200
PE901-
2B
a. A = L9 0 +9 0 OE
$382,000 = $94,00090+90OE
OE = $288,000
b. A = L9 0 +9 0 OE
90– = +$35,00090+90OE90–
$63,000 = $98,000
OE = $288,00090–
OE90on90December9031,902 = 90$98,000
0Y9 $190,000
PE901-
3A
(2) Asset90(Accounts90Receivable)90increases90by90$22,400;
Owner’s90Equity90(Delivery90Service90Fees)90increases90by90$22,400.
(3) Liability90(Accounts90Payable)90decreases90by90$4
,100;90Asset90(Cash)90decreases90by90$4,100.
(4) Asset90(Cash)90increases90by90$14,700;
Asset90(Accounts90Receivable)90decreases90by90$14,700.
(5) Asset90(Cash)90decreases90by90$1,600;
1-2
©90202190Cengage90Learning,90Inc.90May90not90be90scanned,90copied90or90duplicated,90or90posted90to90a90publicly90acc
essible90website,90in90whole90or90in90part.
, CHAPTER90 Introduction90to90Accounting90and90Busi
Owner’s90Equity90(Terry
1 90Young,90Drawing)
ness 90decreases90by90$1,600.
PE901-
3B
1-1
©90 202190 Cengage90 Learning,90 Inc.90 May90 not90 be90 scanned,90 copied90 or90 duplicated,90 or90 posted90 to90 a90 publicly90
accessible90 website,90 in90 whole90 or90 in90 part.
,
INTRODUCTION90TO90ACCOUNTING90AND90BUSINESS
DISCUSSION90QUESTIONS
1. Some90users90of90accounting90information90include90managers,90employees,90investors,90
creditors,90customers,90and90the90government.
2. The90role90of90accounting90is90to90provide90information90for90managers90to90use90in90operatin
g90the90business.9 0 In90addition,90accounting90provides90information90to90others90to90use90in9
0assessing90the90economic90performance90and90condition90of90the90business.
3. The9 0 corporate9 0 form9 0 allows9 0 the9 0 company9 0 to9 0 obtain9 0 large9 0 amounts9 0 of9 0 resources9
0 by9 0 issuing9 0 stock.90For90this90reason,90most90companies90that90require90large90investments90i
n90property,90plant,90and90equipment90are90organized90as90corporations.
4. No.90The90business90entity90concept90limits90the90recording90of90economic90data90to90transac
tions90directly90affecting90the90activities90of90the90business.90The90payment90of90the90interest
90of90$4,50090is90a90personal90transaction90of90Josh90Reilly90and90should90not90be90recorded9
0by90Dispatch90Delivery90Service.
5. The90land90should90be90recorded90at90its90cost90of90$167,50090to90Reliable90Repair90Service.90T
his90is90consistent9 0 with90the90cost90concept.
6. a.
No.90The90offer90of90$2,000,00090and90the90increase90in90the90assessed90value90should
90not90be90recognized9 0in90the90accounting90records90because90land90is90recorded90on90the
90cost90basis.
b.
Cash90would90increase90by90$2,125,000,90land90would90decrease90by90$900,000,90a
nd90owner’s90equity90would90increase90by90$1,225,000.
7. An90account90receivable90is90a90claim90against90a90customer90for90goods90or90services90sold.90
An90account90payable90is90an90amount90owed90to90a90creditor90for90goods90or90services90purch
ased.90Therefore,90an90account90receivable90in90the90records90of90the90seller90is90an90account90
payable90in90the90records90of90the90purchaser.
8. (b)9 0 The90 business90 realized90 net90 income90 of90 $91,00090 ($679,00090 –90 $588,000).
9. (a)9 0 9 0 The90 business90 incurred90 a90net90 loss90of90 $75,00090 ($640,00090–90 $715,000).
10. (a)9 0 9 0 Net90 income90or90net90 loss
(b) Owner’s90 equity90 at90 the90 end90 of90 the90 period
(c) Cash90 at90 the90 end90 of90 the90 period
1-1
©90 202190 Cengage90 Learning,90 Inc.90 May90 not90 be90 scanned,90 copied90 or90 duplicated,90 or90 posted90 to90 a90 publicly90
accessible90 website,90 in90 whole90 or90 in90 part.
, CHAPTER90 Introduction90to90Accounting90and90Busi
1 ness
PRACTICE90 EXERCISES
PE901-1A
$597,000.90Under90the90cost90concept,90the90land90should90be90recorded90at90the90cost90to
90Boulder90Repair90Service.
PE901-1B
$369,500.90Under90the90cost90concept,90the90land90should90be90recorded90at90the90
cost90to90Clementine90Repair90Service.
PE901-
2A
a. A = L9 0 +9 0 OE
$518,000 = $165,00090+90OE
OE = $353,000
b. A = L9 0 +9 0 OE
+$86,200 = +$25,00090+90OE
OE = +$61,200
OE90on90December9031,902 = $353,00090+90$61,2
0Y9 00
= $414,200
PE901-
2B
a. A = L9 0 +9 0 OE
$382,000 = $94,00090+90OE
OE = $288,000
b. A = L9 0 +9 0 OE
90– = +$35,00090+90OE90–
$63,000 = $98,000
OE = $288,00090–
OE90on90December9031,902 = 90$98,000
0Y9 $190,000
PE901-
3A
(2) Asset90(Accounts90Receivable)90increases90by90$22,400;
Owner’s90Equity90(Delivery90Service90Fees)90increases90by90$22,400.
(3) Liability90(Accounts90Payable)90decreases90by90$4
,100;90Asset90(Cash)90decreases90by90$4,100.
(4) Asset90(Cash)90increases90by90$14,700;
Asset90(Accounts90Receivable)90decreases90by90$14,700.
(5) Asset90(Cash)90decreases90by90$1,600;
1-2
©90202190Cengage90Learning,90Inc.90May90not90be90scanned,90copied90or90duplicated,90or90posted90to90a90publicly90acc
essible90website,90in90whole90or90in90part.
, CHAPTER90 Introduction90to90Accounting90and90Busi
Owner’s90Equity90(Terry
1 90Young,90Drawing)
ness 90decreases90by90$1,600.
PE901-
3B
1-1
©90 202190 Cengage90 Learning,90 Inc.90 May90 not90 be90 scanned,90 copied90 or90 duplicated,90 or90 posted90 to90 a90 publicly90
accessible90 website,90 in90 whole90 or90 in90 part.
,
