Solution Manual for Accounting Principles 14th Edition by Jerry J.
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS W W
1. This W is W true. W Virtually W every W organization W and W person W in W our W society W uses W accounting W information.
W Businesses, Winvestors, Wcreditors, Wgovernment W agencies, Wand W not-for-profit W organizations W must Wuse
W accounting Winformation W to Woperate Weffectively.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W WAICPA WFC: WReporting
2. Accounting W is W the W process W of W identifying, W recording, W and W communicating W the W economic W events W of W an
W organization W to W interested W users W of W the W information. W The W first W activity W of W the W accounting W process W is W to
W identify W economic W events W that W are W relevant W to W a W particular W business. W Once W identified W and W measured,
W the W events W are W recorded W to W provide W a W history W of W the W financial W activities W of W the W organization. W Recording
W consists W of W keeping W a W chronological W diary W of W these W measured W events W in W an Worderly W and
W systematic W manner. W The W information W is W communicated W through W the W preparation W and W distribution W of
W accounting W reports, W the W most W common W of W which W are W called W financial W statements. W A W vital W element W in
W the W communication W process W is W the W accountant’s W ability W and W responsibility W to W analyze W and W interpret
W the W reported W information.
LO1 WBT: WC W Difficulty: WEasy W TOT: W4 Wmin. W AACSB: WNone W AICPA WFC: WReporting
3. (a) W Internal W users W are W those W who W plan, W organize, W and W run W the W business W and W therefore W are W officers W and
W other Wdecision Wmakers.
(b) To Wassist W management, W managerial Waccounting Wprovides W internal W reports. W Examples W include W financial
W comparisons Wof W operating Walternatives, W projections Wof W income Wfrom Wnew Wsales W campaigns, Wand
Wforecasts Wof W cash Wneeds Wfor Wthe Wnext Wyear.
LO1 W BT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
4. (a) WInvestors W(owners) Wuse Waccounting Winformation Wto Wmake Wdecisions Wto Wbuy, Whold, Wor Wsell Wowner- Wship
W shares W of W a Wcompany.
(b) Creditors Wuse Waccounting Winformation Wto Wevaluate Wthe Wrisks Wof Wgranting Wcredit Wor Wlending Wmoney.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
5. This Wis Wfalse. WBookkeeping Wusually Winvolves Wonly Wthe Wrecording Wof Weconomic Wevents Wand Wtherefore Wisjust
W one W part W of Wthe W entire W accounting Wprocess. W Accounting, W on Wthe W other W hand, W involves W the W entire W process
W of Widentifying, Wrecording, Wand W communicating Weconomic Wevents.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
6. Benton W Travel W Agency W should W report W the W land W at W $90,000 W on W its W December W 31, W 2022 W balance W sheet.
W This W is W true W not W only W at W the W time W the W land W is W purchased, W but W also W over W the W time W the W land W is
W held. W In W determining W which W measurement W principle W to W use W (historical W cost W or W fair W value) W companies
W weigh W the W factual W nature W of W cost W figures W versus W the W relevance W of W fair W value. W In W general, W companies
W use W historical W cost. WOnly Win Wsituations Wwhere Wassets Ware Wactively Wtraded Wdo W W companies Wapply Wthe Wfair
Wvalue Wprinciple.
LO2 W BT: WC W Difficulty: WEasy W TOT: W4 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
7. The Wmonetary W unit W assumption W requires W that W only W transaction W data W that W can W be W expressed Win Wterms W of
W money W be W included W in W the W accounting W records. W This W assumption W enables W accounting W to W quantify
W (measure) Weconomic Wevents.
LO2 W BT: WK W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
8. The Weconomic Wentity Wassumption Wrequires W Wthat Wthe Wactivities Wof W the Wentity Wbe Wkept W separate Wand W distinct
Wfrom Wthe Wactivities Wof W its Wowners Wand Wall Wother Weconomic Wentities.
LO2 WBT: WK W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
, Questions WChapter W1 W(Continued)
9. The W three W basic W forms W Wof W business W organizations W are: W (1) W proprietorship, W (2) W partnership, W and
(3) W corporation.
LO2 W BT: WK W Difficulty: WEasy W TOT:1 Wmin. W AACSB: WNone W WAICPA WFC: W Reporting
10. One W of W the W advantages W Helen W Rupp Wwould W enjoy W is W that W ownership W of W a Wcorporation W is W represented W by
W transferable W shares W of W stock. W This W would W allow W Helen W to W raise W money W easily W by W selling W a W part W of
W her W ownership W in W the W company. W Another W advantage W is W that W because W holders W of W the W shares
W (stockholders) W enjoy W limited Wliability; W they Ware W not Wpersonally Wliable W for W the Wdebts W of W the W corporate
Wentity. W Also, W because W ownership W can W be W transferred W without W dissolving W the W corporation, W the W corporation
Wenjoys W an W unlimited W life.
LO2 W BT: WK W Difficulty: WEasy W TOT: W4 Wmin. W WAACSB: WNone W WAICPA WFC: WReporting
11. The Wbasic Waccounting Wequation Wis WAssets W= WLiabilities W+ WOwner’s WEquity.
LO3 WBT: WK W Difficulty: WEasy W TOT: W1 Wmin. W WAACSB: WNone W WAICPA WFC: WMeasurement
12. (a) W Assets Ware Wresources W owned Wby W a Wbusiness. WLiabilities Ware Wcreditor Wclaims W against Wassets. WPut W more
W simply, W liabilities W are W existing W debts W and W obligations. W Owner’s W equity W is W the W ownership W claim W on
W total Wassets.
(b) Owner’s Wequity Wis Waffected Wby Wowner’s Winvestments, Wdrawings, Wrevenues, Wand Wexpenses.
LO3 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
13. The Wliabilities Ware: W(b) WAccounts Wpayable Wand W(g) WSalaries Wand Wwages Wpayable.
LO3 WBT: WC W Difficulty: WEasy W TOT: W1 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
14. Yes, W a W business W can W enter W into W a W transaction W in W which W only W the W left W side W of W the W accounting W equation
W is W affected. WAn W example Wwould W be W a Wtransaction W where W an W increase Win Wone Wasset W is W offset W by Wa
W decrease Win W another Wasset. WAn Wincrease Win Wthe WEquipment Waccount Wwhich Wis Woffset Wby Wa Wdecrease Winthe
WCash W account W is W a Wspecific Wexample.
LO4 WBT: WC W Difficulty: WModerate W TOT: W3 Wmin. W AACSB: WNone W AICPA WFC: WReporting
15. Business W transactions W are Wthe W economic W events W of W the Wenterprise W recorded W by Waccountantsbecause
W they Waffect W the Wbasic W accounting Wequation.
(a) The W death Wof W the W owner Wof W the Wcompany Wis Wnot W a Wbusiness W transaction W as Wit Wdoes Wnot Waffect
W ofthe W components Wof W the Wbasic Waccounting Wequation.
(b) Supplies W purchased W on W account W is W a W business W transaction W as W it W affects W the W basic W accounting
W equation.
(c) An W Wemployee W being W Wfired W Wis W Wnot W Wa W business W Wtransaction W Was W Wit W Wdoes W Wnot W Waffect
W any W of W W the W components Wof W the Wbasic Waccounting Wequation.
(d) A Wwithdrawal Wof Wcash Wby Wthe Wowner Wfrom Wthe Wbusiness Wis Wa Wbusiness Wtransaction Was Wit Waffects Wthe
W basic Waccounting Wequation.
LO4 WBT: WC W Difficulty: WModerate W TOT: W4 Wmin. W AACSB: WNone W AICPA WFC: WReporting
16. (a) Decrease Wassets Wand Wdecrease Wowner’s Wequity.
(b) Increase Wassets Wand Wdecrease Wassets.
(c) Increase Wassets Wand Wincrease Wowner’s Wequity.
(d) Decrease Wassets Wand Wdecrease Wliabilities.
LO4 WBT: WC W Difficulty: WModerate W TOT: W3 Wmin. W AACSB: WNone W AICPA WFC: WReporting
Weygandt, Paul D. Kimmel All Chapters
Complete Guide A+
, CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the activities and users associated with accounting.
2. Explain the building blocks of accounting: ethics, principles, and
assumptions.
3. State the accounting equation, and define its components.
4. Analyze the effects of business transactions on the accounting equation.
5. Describe the four financial statements and how they are prepared.
*6. Explain the career opportunities in accounting.
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material contained in the
appendix to the chapter.
, ANSWERS TO QUESTIONS W W
1. This W is W true. W Virtually W every W organization W and W person W in W our W society W uses W accounting W information.
W Businesses, Winvestors, Wcreditors, Wgovernment W agencies, Wand W not-for-profit W organizations W must Wuse
W accounting Winformation W to Woperate Weffectively.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W WAICPA WFC: WReporting
2. Accounting W is W the W process W of W identifying, W recording, W and W communicating W the W economic W events W of W an
W organization W to W interested W users W of W the W information. W The W first W activity W of W the W accounting W process W is W to
W identify W economic W events W that W are W relevant W to W a W particular W business. W Once W identified W and W measured,
W the W events W are W recorded W to W provide W a W history W of W the W financial W activities W of W the W organization. W Recording
W consists W of W keeping W a W chronological W diary W of W these W measured W events W in W an Worderly W and
W systematic W manner. W The W information W is W communicated W through W the W preparation W and W distribution W of
W accounting W reports, W the W most W common W of W which W are W called W financial W statements. W A W vital W element W in
W the W communication W process W is W the W accountant’s W ability W and W responsibility W to W analyze W and W interpret
W the W reported W information.
LO1 WBT: WC W Difficulty: WEasy W TOT: W4 Wmin. W AACSB: WNone W AICPA WFC: WReporting
3. (a) W Internal W users W are W those W who W plan, W organize, W and W run W the W business W and W therefore W are W officers W and
W other Wdecision Wmakers.
(b) To Wassist W management, W managerial Waccounting Wprovides W internal W reports. W Examples W include W financial
W comparisons Wof W operating Walternatives, W projections Wof W income Wfrom Wnew Wsales W campaigns, Wand
Wforecasts Wof W cash Wneeds Wfor Wthe Wnext Wyear.
LO1 W BT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
4. (a) WInvestors W(owners) Wuse Waccounting Winformation Wto Wmake Wdecisions Wto Wbuy, Whold, Wor Wsell Wowner- Wship
W shares W of W a Wcompany.
(b) Creditors Wuse Waccounting Winformation Wto Wevaluate Wthe Wrisks Wof Wgranting Wcredit Wor Wlending Wmoney.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
5. This Wis Wfalse. WBookkeeping Wusually Winvolves Wonly Wthe Wrecording Wof Weconomic Wevents Wand Wtherefore Wisjust
W one W part W of Wthe W entire W accounting Wprocess. W Accounting, W on Wthe W other W hand, W involves W the W entire W process
W of Widentifying, Wrecording, Wand W communicating Weconomic Wevents.
LO1 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
6. Benton W Travel W Agency W should W report W the W land W at W $90,000 W on W its W December W 31, W 2022 W balance W sheet.
W This W is W true W not W only W at W the W time W the W land W is W purchased, W but W also W over W the W time W the W land W is
W held. W In W determining W which W measurement W principle W to W use W (historical W cost W or W fair W value) W companies
W weigh W the W factual W nature W of W cost W figures W versus W the W relevance W of W fair W value. W In W general, W companies
W use W historical W cost. WOnly Win Wsituations Wwhere Wassets Ware Wactively Wtraded Wdo W W companies Wapply Wthe Wfair
Wvalue Wprinciple.
LO2 W BT: WC W Difficulty: WEasy W TOT: W4 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
7. The Wmonetary W unit W assumption W requires W that W only W transaction W data W that W can W be W expressed Win Wterms W of
W money W be W included W in W the W accounting W records. W This W assumption W enables W accounting W to W quantify
W (measure) Weconomic Wevents.
LO2 W BT: WK W Difficulty: WEasy W TOT: W2 Wmin. W WAACSB: WNone W AICPA WFC: WReporting
8. The Weconomic Wentity Wassumption Wrequires W Wthat Wthe Wactivities Wof W the Wentity Wbe Wkept W separate Wand W distinct
Wfrom Wthe Wactivities Wof W its Wowners Wand Wall Wother Weconomic Wentities.
LO2 WBT: WK W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
, Questions WChapter W1 W(Continued)
9. The W three W basic W forms W Wof W business W organizations W are: W (1) W proprietorship, W (2) W partnership, W and
(3) W corporation.
LO2 W BT: WK W Difficulty: WEasy W TOT:1 Wmin. W AACSB: WNone W WAICPA WFC: W Reporting
10. One W of W the W advantages W Helen W Rupp Wwould W enjoy W is W that W ownership W of W a Wcorporation W is W represented W by
W transferable W shares W of W stock. W This W would W allow W Helen W to W raise W money W easily W by W selling W a W part W of
W her W ownership W in W the W company. W Another W advantage W is W that W because W holders W of W the W shares
W (stockholders) W enjoy W limited Wliability; W they Ware W not Wpersonally Wliable W for W the Wdebts W of W the W corporate
Wentity. W Also, W because W ownership W can W be W transferred W without W dissolving W the W corporation, W the W corporation
Wenjoys W an W unlimited W life.
LO2 W BT: WK W Difficulty: WEasy W TOT: W4 Wmin. W WAACSB: WNone W WAICPA WFC: WReporting
11. The Wbasic Waccounting Wequation Wis WAssets W= WLiabilities W+ WOwner’s WEquity.
LO3 WBT: WK W Difficulty: WEasy W TOT: W1 Wmin. W WAACSB: WNone W WAICPA WFC: WMeasurement
12. (a) W Assets Ware Wresources W owned Wby W a Wbusiness. WLiabilities Ware Wcreditor Wclaims W against Wassets. WPut W more
W simply, W liabilities W are W existing W debts W and W obligations. W Owner’s W equity W is W the W ownership W claim W on
W total Wassets.
(b) Owner’s Wequity Wis Waffected Wby Wowner’s Winvestments, Wdrawings, Wrevenues, Wand Wexpenses.
LO3 WBT: WC W Difficulty: WEasy W TOT: W2 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
13. The Wliabilities Ware: W(b) WAccounts Wpayable Wand W(g) WSalaries Wand Wwages Wpayable.
LO3 WBT: WC W Difficulty: WEasy W TOT: W1 Wmin. W AACSB: WNone W WAICPA WFC: WReporting
14. Yes, W a W business W can W enter W into W a W transaction W in W which W only W the W left W side W of W the W accounting W equation
W is W affected. WAn W example Wwould W be W a Wtransaction W where W an W increase Win Wone Wasset W is W offset W by Wa
W decrease Win W another Wasset. WAn Wincrease Win Wthe WEquipment Waccount Wwhich Wis Woffset Wby Wa Wdecrease Winthe
WCash W account W is W a Wspecific Wexample.
LO4 WBT: WC W Difficulty: WModerate W TOT: W3 Wmin. W AACSB: WNone W AICPA WFC: WReporting
15. Business W transactions W are Wthe W economic W events W of W the Wenterprise W recorded W by Waccountantsbecause
W they Waffect W the Wbasic W accounting Wequation.
(a) The W death Wof W the W owner Wof W the Wcompany Wis Wnot W a Wbusiness W transaction W as Wit Wdoes Wnot Waffect
W ofthe W components Wof W the Wbasic Waccounting Wequation.
(b) Supplies W purchased W on W account W is W a W business W transaction W as W it W affects W the W basic W accounting
W equation.
(c) An W Wemployee W being W Wfired W Wis W Wnot W Wa W business W Wtransaction W Was W Wit W Wdoes W Wnot W Waffect
W any W of W W the W components Wof W the Wbasic Waccounting Wequation.
(d) A Wwithdrawal Wof Wcash Wby Wthe Wowner Wfrom Wthe Wbusiness Wis Wa Wbusiness Wtransaction Was Wit Waffects Wthe
W basic Waccounting Wequation.
LO4 WBT: WC W Difficulty: WModerate W TOT: W4 Wmin. W AACSB: WNone W AICPA WFC: WReporting
16. (a) Decrease Wassets Wand Wdecrease Wowner’s Wequity.
(b) Increase Wassets Wand Wdecrease Wassets.
(c) Increase Wassets Wand Wincrease Wowner’s Wequity.
(d) Decrease Wassets Wand Wdecrease Wliabilities.
LO4 WBT: WC W Difficulty: WModerate W TOT: W3 Wmin. W AACSB: WNone W AICPA WFC: WReporting
