Solution Manual forAccountingPrinciples 14th Edition byJerry J.
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Weygandt,Paul D.Kimmel All Chapters
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CompleteGuide A+ b
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, CHAPTER1 rb
Accounting in Action br br
LearningObjectives rb
1. Identifythe activities and users associated with accounting.
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2. Explain the building blocks of accounting: ethics, principles, and
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assumptions.
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3. State the accounting equation, and define its components.
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4. Analyze the effects of business transactions on the accounting equation.
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5. Describe the four financial statements and how they are prepared.
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*6. Explain thecareer opportunities in accounting.
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*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to
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material contained in the appendix to the chapter.
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, ANSWERS TO QUESTIONS br br
1. This is true. Virtually every organization and person in our society uses accounting
b r b r b r b r b r b r b r b r b r b r b r b r
information.
b r Businesses, investors, creditors, government agencies, and not-for-profit b r br br br br br br
organizations must use accounting information to operate effectively.
br br br b r br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br br br br br br br br
2. Accounting is the process of identifying, recording, and communicating the economic events of br b r br b r b r br br b r b r br br br
an organization to interested users of the information. The first activity of the accounting
b r b r br br br br br br br br br br br br
process is to identify economic events that are relevant to a particular business. Once
br b r br b r b r b r b r b r b r b r b r b r b r b r
identified and measured,
b r the events are recorded to provide a history of the financial b r b r b r br br br br br br br br br br
activities of the organization. Recording consists of keeping a chronological diary of these
br br br br br b r b r b r b r b r b r b r b r
b measured events in an orderly and systematic
r manner. The information is b r b r b r br b r b r b r b r b r b r
communicated through the preparation and distribution of accounting reports, the most
b r b r b r b r b r b r b r b r b r b r b r
common of which are called financial statements. A vital element in the communication
b r b r b r br b r br br br br br br br b r
process is the accountant’s ability and responsibility to analyze and interpret the
b r b r b r b r b r b r b r b r b r b r b r b r
b reported information.
r br
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers
br br br br br br br br br br br br br br br
and other decision makers. b r b r br br
(b) To assist management, managerial accounting provides internal reports. Examples include
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financial comparisons of operating alternatives, projections of income from new sales
b r b r br b r br b r br b r br br br
campaigns, and forecasts of cash needs for the next year.
b r br br br br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br b r br br br br br
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell owner- ship
br br br br br br br br br br br br br br br
shares of a company. b r br br br
(b) Creditorsuseaccountinginformation toevaluate therisks of granting credit or lending money. br br br br br br br br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br br br br b r br br
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore isjust
br br br br br br br br br br br br br br
b one part of the entire accounting process. Accounting, on the other hand, involves the entire
r br br br br br br br br br br br br br br
process of identifying, recording, and communicating economic events.
b r b r br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2022 balance
b r b r b r b r b r b r b r b r b r b r b r b r b r b r
sheet. This is true not only at the time the land is purchased, but also over the time
b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r
the land is held. In determining which measurement principle to use (historical cost or fair
b r b r b r b r b r b r br br br br br br br br br
value) companies weigh the factual nature of cost figures versus the relevance of fair value. In
br br b r br b r br br br br br br br br br br br
general, companies use historical cost. Only in situations where assets are actively traded do
br br b r br b r br br br br br br br br br br
companies apply the fair value principle.
br br br br br br
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br b r br br
7. The monetary unit assumption requires that only transaction data that can be expressed in terms
br br br br br br br br br br br br br br
of money be included in the accounting records. This assumption enables accounting to
b r b r br br br br br br br br br br br
quantify (measure) economic events.
br b r br br
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br b r br br
8. The economic entity assumption requires that the activities of the entity be kept separate and
br br br br br br br br br b r br br br br br
bdistinct from the activities of its owners and all other economic entities.
r br br br br br br br br br br br
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
, Questions Chapter 1 (Continued) br br br
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership,
b r b r b r br br b r b r b r b r b r b r b r
band r
(3) corporation. b r
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br b r br br br br br
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is represented
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by transferable shares of stock. This would allow Helen to raise money easily by selling a
b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r
part of her ownership in the company. Another advantage is that because holders of the
b r b r b r b r br br br br b r br br b r b r b r b r
shares (stockholders) enjoy limited liability; they are not personally liable for the debts of
br b r b r b r br b r br b r br br b r b r br b r
b the corporate entity. Also, because ownership can be transferred without dissolving the
r br br b r b r b r b r b r b r b r b r b r
corporation, the corporation enjoys an unlimited life.
b r b r b r br b r b r br
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br br br br br
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
br br br br br br br br br br
LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement
br br b r br b r br br br br br br br br br
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets. Put
br br br br br br br br br br br br br br
more simply, liabilities are existing debts and obligations. Owner’s equity is the
b r b r br b r br br br b r br b r br br
ownership claim on total assets. br b r br b r br
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses. br br br br br br br br br br
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
br br br br br br br br br br br
LO3 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
14. Yes, a business can enter into a transaction in which only the left side of the accounting
br br br br br br br br br br br br br br br br
equation is affected. An example would be a transaction where an increase in one asset is offset
br b r b r br br br br br br br br br br br br br br
by a decrease in another asset. An increase in the Equipment account which is offset by a decrease
br br br br b r br br br br br br br br br br br br br
inthe Cash account is a specific example.
br br br b r br br br
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
15. Business transactions are the economic events of the enterprise recorded by
br br br br br br br br b r br
accountantsbecause
br they affect the basic accounting equation. b r br br br br br
(a) The death of the owner of the company is not a business transaction as it does not affect
br br br br br br br br br br br br br br br br br
ofthe components of the basic accounting equation.
b r b r br br br br br
(b) Supplies purchased on account is a business transaction as it affects the basic br b r b r b r br br br br br br br br
accounting equation. br b r
(c) An employee being fired is not a business transaction as it does not affect any of
br br b r br br br b r br b r br br b r br br br br br b r br br br br br br br b r br
the components of the basic accounting equation.
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(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the
br br br br br br br br br br br br br br br br br
basic accounting equation. b r br br
LO4 BT: C Difficulty: Moderate TOT: 4 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
16. (a) Decrease assets and decrease owner’s equity. br br br br br
(b) Increase assets and decrease assets. br br br br
(c) Increase assets and increase owner’s equity. br br br br br
(d) Decrease assets and decrease liabilities. br br br br
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
br br br br br br br br br br
Weygandt,Paul D.Kimmel All Chapters
br br br br br br br
CompleteGuide A+ b
r br
, CHAPTER1 rb
Accounting in Action br br
LearningObjectives rb
1. Identifythe activities and users associated with accounting.
br br br br br br br
2. Explain the building blocks of accounting: ethics, principles, and
br br br br br br br br
assumptions.
b r
3. State the accounting equation, and define its components.
br br br br br br br
4. Analyze the effects of business transactions on the accounting equation.
br br br br br br br br br
5. Describe the four financial statements and how they are prepared.
br br br br br br br br br
*6. Explain thecareer opportunities in accounting.
br br br br br
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to
br b r br b r br b r br b r br br
material contained in the appendix to the chapter.
br b r br br br b r br br
, ANSWERS TO QUESTIONS br br
1. This is true. Virtually every organization and person in our society uses accounting
b r b r b r b r b r b r b r b r b r b r b r b r
information.
b r Businesses, investors, creditors, government agencies, and not-for-profit b r br br br br br br
organizations must use accounting information to operate effectively.
br br br b r br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br br br br br br br br
2. Accounting is the process of identifying, recording, and communicating the economic events of br b r br b r b r br br b r b r br br br
an organization to interested users of the information. The first activity of the accounting
b r b r br br br br br br br br br br br br
process is to identify economic events that are relevant to a particular business. Once
br b r br b r b r b r b r b r b r b r b r b r b r b r
identified and measured,
b r the events are recorded to provide a history of the financial b r b r b r br br br br br br br br br br
activities of the organization. Recording consists of keeping a chronological diary of these
br br br br br b r b r b r b r b r b r b r b r
b measured events in an orderly and systematic
r manner. The information is b r b r b r br b r b r b r b r b r b r
communicated through the preparation and distribution of accounting reports, the most
b r b r b r b r b r b r b r b r b r b r b r
common of which are called financial statements. A vital element in the communication
b r b r b r br b r br br br br br br br b r
process is the accountant’s ability and responsibility to analyze and interpret the
b r b r b r b r b r b r b r b r b r b r b r b r
b reported information.
r br
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers
br br br br br br br br br br br br br br br
and other decision makers. b r b r br br
(b) To assist management, managerial accounting provides internal reports. Examples include
br br br br br br br br br
financial comparisons of operating alternatives, projections of income from new sales
b r b r br b r br b r br b r br br br
campaigns, and forecasts of cash needs for the next year.
b r br br br br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br b r br br br br br
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell owner- ship
br br br br br br br br br br br br br br br
shares of a company. b r br br br
(b) Creditorsuseaccountinginformation toevaluate therisks of granting credit or lending money. br br br br br br br br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br br br br b r br br
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore isjust
br br br br br br br br br br br br br br
b one part of the entire accounting process. Accounting, on the other hand, involves the entire
r br br br br br br br br br br br br br br
process of identifying, recording, and communicating economic events.
b r b r br br br br br br
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2022 balance
b r b r b r b r b r b r b r b r b r b r b r b r b r b r
sheet. This is true not only at the time the land is purchased, but also over the time
b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r
the land is held. In determining which measurement principle to use (historical cost or fair
b r b r b r b r b r b r br br br br br br br br br
value) companies weigh the factual nature of cost figures versus the relevance of fair value. In
br br b r br b r br br br br br br br br br br br
general, companies use historical cost. Only in situations where assets are actively traded do
br br b r br b r br br br br br br br br br br
companies apply the fair value principle.
br br br br br br
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br b r br br
7. The monetary unit assumption requires that only transaction data that can be expressed in terms
br br br br br br br br br br br br br br
of money be included in the accounting records. This assumption enables accounting to
b r b r br br br br br br br br br br br
quantify (measure) economic events.
br b r br br
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br b r br br
8. The economic entity assumption requires that the activities of the entity be kept separate and
br br br br br br br br br b r br br br br br
bdistinct from the activities of its owners and all other economic entities.
r br br br br br br br br br br br
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
, Questions Chapter 1 (Continued) br br br
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership,
b r b r b r br br b r b r b r b r b r b r b r
band r
(3) corporation. b r
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br b r br br br br br
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is represented
br br br br br br br br br br br br br br br
by transferable shares of stock. This would allow Helen to raise money easily by selling a
b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r b r
part of her ownership in the company. Another advantage is that because holders of the
b r b r b r b r br br br br b r br br b r b r b r b r
shares (stockholders) enjoy limited liability; they are not personally liable for the debts of
br b r b r b r br b r br b r br br b r b r br b r
b the corporate entity. Also, because ownership can be transferred without dissolving the
r br br b r b r b r b r b r b r b r b r b r
corporation, the corporation enjoys an unlimited life.
b r b r b r br b r b r br
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
b r br b r br b r br br br br br br br br br
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
br br br br br br br br br br
LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement
br br b r br b r br br br br br br br br br
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets. Put
br br br br br br br br br br br br br br
more simply, liabilities are existing debts and obligations. Owner’s equity is the
b r b r br b r br br br b r br b r br br
ownership claim on total assets. br b r br b r br
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses. br br br br br br br br br br
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
br br br br br br br br br br br
LO3 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br br br br br
14. Yes, a business can enter into a transaction in which only the left side of the accounting
br br br br br br br br br br br br br br br br
equation is affected. An example would be a transaction where an increase in one asset is offset
br b r b r br br br br br br br br br br br br br br
by a decrease in another asset. An increase in the Equipment account which is offset by a decrease
br br br br b r br br br br br br br br br br br br br
inthe Cash account is a specific example.
br br br b r br br br
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
15. Business transactions are the economic events of the enterprise recorded by
br br br br br br br br b r br
accountantsbecause
br they affect the basic accounting equation. b r br br br br br
(a) The death of the owner of the company is not a business transaction as it does not affect
br br br br br br br br br br br br br br br br br
ofthe components of the basic accounting equation.
b r b r br br br br br
(b) Supplies purchased on account is a business transaction as it affects the basic br b r b r b r br br br br br br br br
accounting equation. br b r
(c) An employee being fired is not a business transaction as it does not affect any of
br br b r br br br b r br b r br br b r br br br br br b r br br br br br br br b r br
the components of the basic accounting equation.
br b r br br br br br
(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the
br br br br br br br br br br br br br br br br br
basic accounting equation. b r br br
LO4 BT: C Difficulty: Moderate TOT: 4 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
16. (a) Decrease assets and decrease owner’s equity. br br br br br
(b) Increase assets and decrease assets. br br br br
(c) Increase assets and increase owner’s equity. br br br br br
(d) Decrease assets and decrease liabilities. br br br br
LO4 BT: C Difficulty: Moderate TOT: 3 min. AACSB: None AICPA FC: Reporting
br br b r br b r br br b r br b r br br
