Accounting: Tools for Business Decision Making
– 8th Edition
ST
SOLUTION
UV
MANUAL
IA
_A
Paul D. Kimmel, Jerry J. Weygandt & Jill E. Mitchell
PP
Complete Solution Manual for Instructors and
RO
Students
VE
© Paul D. Kimmel, Jerry J. Weygandt & Jill E. Mitchell
All rights reserved. Reproduction or distribution without permission is prohibited.
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©MEDGEEK
, Solutions Manual For Accounting Tools for Business
Decisions Making, 8e Paul Kimmel, Jerry Weygandt,
Jill Mitchell
ST
CHAPTER 1
UV
Introduction to Financial Statements
Learning Objectives
IA
1. Identify the forms of business organization and the uses of accounting information.
2. Explain the three principal types of business activity.
3. Describe the four financial statements and how they are prepared.
*4. Explain the career opportunities in accounting.
_A
PP
RO
VE
D?
??
, ANSWERS TO QUESTIONS
ST
1. The three basic forms of business organizations are (1) sole proprietorship, (2) partnership, and
(3) corporation.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
UV
2. Advantages of a corporation are limited liability (stockholders not being personally liable for cor-
porate debts), easy transferability of ownership, and ease of raising funds. Disadvantages of a
corporation are increased taxation and government regulations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
IA
3. Proprietorships and partnerships receive favorable tax treatment compared to corporations and are
easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships
and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and
difficulty in obtaining financing compared to corporations.
_A
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
4. Yes. Companies can choose one of the hybrid business forms, limited liability corporations
(LLCs) or subchapter S corporations, which combine the tax advantages of partnerships with the
limited liability of corporations.
PP
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment, or pay
taxes without receiving, using, or dispensing financial information. Accounting provides financial
information to interested users through the preparation and distribution of financial statements.
RO
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
6. Internal users are managers who plan, organize, and run a business. To assist management,
accounting provides timely internal reports. Examples include financial comparisons of operating
alternatives, projections of income from new sales campaigns, forecasts of cash needs for the
VE
next year, and financial statements.
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
7. External users are those outside the business who have either a present or potential direct
financial interest (investors and creditors) or an indirect financial interest (taxing authorities, regu-
D?
latory agencies, labor unions, customers, and economic planners).
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
8. The four most common types of data analytics and the basic question each addresses are:
??
Descriptive (What happened?), Diagnostic (Why did it happen?), Predictive (What is likely to
happen?), and Prescriptive (What should we do about it?).
LO 1 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Analysis and Interpretation
, Questions Chapter 1 (Continued)
9. The three types of business activities are financing activities, investing activities, and operating
activities. Financing activities include borrowing money and selling shares of stock. Investing
ST
activities include the purchase and sale of property, plant, and equipment. Operating activities
include selling goods, performing services, and purchasing inventory.
LO 2 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
UV
10. (a) Income statement. (d) Balance sheet.
(b) Balance sheet. (e) Balance sheet.
(c) Income statement. (f) Balance sheet.
LO 3 BT: K Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
IA
11. When a company pays dividends, it reduces the amount of assets available to pay creditors.
Therefore, banks and other creditors monitor dividend payments to ensure they do not put a
company’s ability to make debt payments at risk.
_A
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Anallysis and Interpretation
12. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
from revenues. In addition, net income appears in the retained earnings statement—it is shown as
an addition to the beginning-of-period retained earnings. Indirectly, the net income of a company
PP
is also included in the balance sheet. It is included in the retained earnings account which appears
in the stockholders’ equity section of the balance sheet.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
RO
13. The primary purpose of the statement of cash flows is to provide financial information about the
cash receipts and cash payments of a business for a specific period of time.
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
14. The three categories of the statement of cash flows are operating activities, investing activities,
VE
and financing activities. The categories were chosen because they represent the three principal
types of business activities.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
D?
15. Retained earnings is the net income retained in a corporation. Retained earnings is increased by
net income and is decreased by dividends and a net loss.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
16. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
??
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
– 8th Edition
ST
SOLUTION
UV
MANUAL
IA
_A
Paul D. Kimmel, Jerry J. Weygandt & Jill E. Mitchell
PP
Complete Solution Manual for Instructors and
RO
Students
VE
© Paul D. Kimmel, Jerry J. Weygandt & Jill E. Mitchell
All rights reserved. Reproduction or distribution without permission is prohibited.
D?
??
©MEDGEEK
, Solutions Manual For Accounting Tools for Business
Decisions Making, 8e Paul Kimmel, Jerry Weygandt,
Jill Mitchell
ST
CHAPTER 1
UV
Introduction to Financial Statements
Learning Objectives
IA
1. Identify the forms of business organization and the uses of accounting information.
2. Explain the three principal types of business activity.
3. Describe the four financial statements and how they are prepared.
*4. Explain the career opportunities in accounting.
_A
PP
RO
VE
D?
??
, ANSWERS TO QUESTIONS
ST
1. The three basic forms of business organizations are (1) sole proprietorship, (2) partnership, and
(3) corporation.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
UV
2. Advantages of a corporation are limited liability (stockholders not being personally liable for cor-
porate debts), easy transferability of ownership, and ease of raising funds. Disadvantages of a
corporation are increased taxation and government regulations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
IA
3. Proprietorships and partnerships receive favorable tax treatment compared to corporations and are
easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships
and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and
difficulty in obtaining financing compared to corporations.
_A
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
4. Yes. Companies can choose one of the hybrid business forms, limited liability corporations
(LLCs) or subchapter S corporations, which combine the tax advantages of partnerships with the
limited liability of corporations.
PP
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment, or pay
taxes without receiving, using, or dispensing financial information. Accounting provides financial
information to interested users through the preparation and distribution of financial statements.
RO
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
6. Internal users are managers who plan, organize, and run a business. To assist management,
accounting provides timely internal reports. Examples include financial comparisons of operating
alternatives, projections of income from new sales campaigns, forecasts of cash needs for the
VE
next year, and financial statements.
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
7. External users are those outside the business who have either a present or potential direct
financial interest (investors and creditors) or an indirect financial interest (taxing authorities, regu-
D?
latory agencies, labor unions, customers, and economic planners).
LO 1 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
8. The four most common types of data analytics and the basic question each addresses are:
??
Descriptive (What happened?), Diagnostic (Why did it happen?), Predictive (What is likely to
happen?), and Prescriptive (What should we do about it?).
LO 1 BT: K Difficulty: E TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Analysis and Interpretation
, Questions Chapter 1 (Continued)
9. The three types of business activities are financing activities, investing activities, and operating
activities. Financing activities include borrowing money and selling shares of stock. Investing
ST
activities include the purchase and sale of property, plant, and equipment. Operating activities
include selling goods, performing services, and purchasing inventory.
LO 2 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
UV
10. (a) Income statement. (d) Balance sheet.
(b) Balance sheet. (e) Balance sheet.
(c) Income statement. (f) Balance sheet.
LO 3 BT: K Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Reporting
IA
11. When a company pays dividends, it reduces the amount of assets available to pay creditors.
Therefore, banks and other creditors monitor dividend payments to ensure they do not put a
company’s ability to make debt payments at risk.
_A
LO 3 BT: C Difficulty: M TOT: 2 min. AACSB: Knowledge AICPA AC: Measurement Anallysis and Interpretation
12. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
from revenues. In addition, net income appears in the retained earnings statement—it is shown as
an addition to the beginning-of-period retained earnings. Indirectly, the net income of a company
PP
is also included in the balance sheet. It is included in the retained earnings account which appears
in the stockholders’ equity section of the balance sheet.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
RO
13. The primary purpose of the statement of cash flows is to provide financial information about the
cash receipts and cash payments of a business for a specific period of time.
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
14. The three categories of the statement of cash flows are operating activities, investing activities,
VE
and financing activities. The categories were chosen because they represent the three principal
types of business activities.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
D?
15. Retained earnings is the net income retained in a corporation. Retained earnings is increased by
net income and is decreased by dividends and a net loss.
LO 3 BT: C Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
16. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
??
LO 3 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA AC: Reporting
