Solution Manual For
Financial Accounting Tools for Business Decision Making 7th Canadian Edition by Kimmel,
Weygandt, Kieso, Trenholm, Irvine, Burnley
Chapter 1-14
algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and technology. The primary goal of mathematics exams is to test students' understanding of mathematical
concepts, their problem-solving abilities
CHAPTER 1
THE PURPOSE AND USE OF FINANCIAL
STATEMENTS
LEARNING OBJECTIVES
1. Identify the uses and users of accounting information.
2. Describe the primary forms of business organization.
3. Explain the three main types of business activity.
4. Describe the purpose and content of each of the financial statements.
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES
AND BLOOM’S TAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
Questions
1. 1 K 6. 2 C 11. 3 C 16. 4 K 21. 4 C
2. 1 C 7. 2 C 12. 3 C 17. 4 AP 22. 4 C
3. 1 K 8. 2 C 13. 3 C 18. 4 C 23. 4 K
4. 1 C 9. 2 C 14. 3 C 19. 4 K
5. 1 C 10. 2 K 15. 4 K 20. 4 C
Brief Exercises
1. 1 C 3. 3 C 5. 4 AP 7. 4 K 9. 4 C
2. 2 K 4. 3 C 6. 4 AP 8. 4 K 10. 4 AN
Exercises
1. 1 C 4. 3 C 7. 4 AN 10. 4 AP 13. 4 AP
2. 2 C 5. 4 K 8. 4 AN 11. 4 AP 14. 4 AN
3. 3 K 6. 4 AP 9. 4 AP 12. 4 AP
Problems: Set A and B
1. 1 C 3. 3 C 5. 4 AP 7. 4 AP 9. 4 AN
2. 2 C 4. 4 K 6. 4 AN 8. 4 AN 10. 4 AN
Cases
1. 4 AN 3. 4 AN 5. 4 AN 7. 1,2,3,4 C
2. 4 AN 4. 1,2 C 6. 1 E
1-1
, Legend: The following abbreviations will appear throughout the solutions manual
file.
LO Learning objective
BT Bloom's Taxonomy
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: Level of difficulty
S Simple
M Moderate
C Complex
Time: Estimated time to prepare in minutes
AACSB Association to Advance Collegiate Schools of Business
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec. Thinking Reflective Thinking
CPA CM CPA Canada Competency
cpa-e001 Ethics Professional and Ethical Behaviour
cpa-e002 PS and DM Problem-Solving and Decision-Making
cpa-e003 Comm. Communication
cpa-e004 Self-Mgt. Self-Management
cpa-e005 Team & Lead Teamwork and Leadership
cpa-t001 Reporting Financial Reporting
cpa-t002
cpa-t003
cpa-t004 Audit Audit and Assurance
cpa-t005 Finance Finance
cpa-t006 Tax Taxation
algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and technology. The primary goal of
mathematics exams is to test students' understanding of mathematical concepts, their problem-solving abilities
1-2
, ANSWERS TO QUESTIONS
1. Accounting is the information system that identifies and records the
economic events of an organization, and then communicates them to a
wide variety of interested users.
LO 1 BT: K Difficulty: S TIME: 3 min. AACSB: None CPA: cpa-t001 CM: Reporting
2. (a) Internal users of accounting information work for the company and
include finance directors, marketing managers, human resource
personnel, production supervisors, and company officers. Internal
users have access to company information that is not available to
external users. algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and
technology. The primary goal of mathematics exams is to test students' understanding of mathematical concepts, their problem-solving
abilities
(b) Some external users may be individuals who are employees of the
company but are not directly involved in managing the company.
External users of accounting information generally do not work for the
company. The primary external users are investors, lenders, and
other creditors. Other external users include labour unions,
customers, the Canada Revenue Agency (CRA), and securities
commissions.
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
3. Internal users may want the following questions answered:
Is there enough cash to purchase a new piece of equipment?
What price should we sell our product for to cover costs and to
maximize net income?
How many employees can we afford to hire this year?
Which product line is the most profitable?
How much of a pay raise can the company afford to give me?
External users may want the following questions answered:
Is the company earning enough to give me my required return on
investment?
Will the company be able to repay its debts as the debts come due?
Will the company stay in business long enough to service the products
I buy from it?
LO 1 BT: K Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
1-3
, 4. Primary users of accounting information include investors, lenders, and
creditors. These external users need to make decisions concerning their
ongoing business relationship with the company. They need to be able to
assess the company’s performance and financial health because they
intend to start, continue, or discontinue having transactions with the
company. Other decision makers who have specific needs for certain
financial information, such as the amount of taxes paid by the company,
are not considered primary users. algebra. Mathematics is crucial in many industries, including engineering,
finance, data science, and technology. The primary goal of mathematics exams is to test students' understanding of mathematical concepts, their
problem-solving abilities
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
5. Decision makers rely on financial statement information and expect the
accounting information to have been prepared ethically. Without the
expectation of ethical behaviour, the information presented in the financial
statements would have no credibility for the users of the accounting
information. Without credibility, financial statement information would be
useless to financial statement users.
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None Ethics CPA: cpa-t001 CM: Reporting and Ethics
6. (a) Proprietorship: Proprietorships are easier to form (and dissolve) than
other types of business organizations. They are not taxed as separate
entities; rather, the proprietor pays personal income tax on the
company’s net income. Depending on the circumstances, this may be
an advantage or disadvantage.
Disadvantages of a proprietorship include unlimited liability (proprietors
are personally liable for all debts of the business) and difficulty in
obtaining financing compared to other forms of organization. In
addition, the life of the proprietorship is limited as it is dependent on the
willingness and capability of the proprietor to continue operations.
6. (continued)
(b) Partnership: Partnerships are easier to form (and dissolve) than a
corporation, although not as easy as a proprietorship. Similar to
proprietorships, partnerships are not taxed as separate entities. Instead,
the partners pay personal income tax on their share of income. Depending
on the circumstances, this may be an advantage or disadvantage.
Disadvantages of partnerships include unlimited liability (partners are
jointly and severally liable for all debts of the business) and difficulty in
obtaining financing compared to corporations. In addition, the life of a
partnership can be limited depending on the terms of the partnership
agreement and actions of the other partners.
(c) Private corporation: Advantages of a private corporation include limited
liability (shareholders not being personally liable for corporate debts),
1-4
Financial Accounting Tools for Business Decision Making 7th Canadian Edition by Kimmel,
Weygandt, Kieso, Trenholm, Irvine, Burnley
Chapter 1-14
algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and technology. The primary goal of mathematics exams is to test students' understanding of mathematical
concepts, their problem-solving abilities
CHAPTER 1
THE PURPOSE AND USE OF FINANCIAL
STATEMENTS
LEARNING OBJECTIVES
1. Identify the uses and users of accounting information.
2. Describe the primary forms of business organization.
3. Explain the three main types of business activity.
4. Describe the purpose and content of each of the financial statements.
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES
AND BLOOM’S TAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
Questions
1. 1 K 6. 2 C 11. 3 C 16. 4 K 21. 4 C
2. 1 C 7. 2 C 12. 3 C 17. 4 AP 22. 4 C
3. 1 K 8. 2 C 13. 3 C 18. 4 C 23. 4 K
4. 1 C 9. 2 C 14. 3 C 19. 4 K
5. 1 C 10. 2 K 15. 4 K 20. 4 C
Brief Exercises
1. 1 C 3. 3 C 5. 4 AP 7. 4 K 9. 4 C
2. 2 K 4. 3 C 6. 4 AP 8. 4 K 10. 4 AN
Exercises
1. 1 C 4. 3 C 7. 4 AN 10. 4 AP 13. 4 AP
2. 2 C 5. 4 K 8. 4 AN 11. 4 AP 14. 4 AN
3. 3 K 6. 4 AP 9. 4 AP 12. 4 AP
Problems: Set A and B
1. 1 C 3. 3 C 5. 4 AP 7. 4 AP 9. 4 AN
2. 2 C 4. 4 K 6. 4 AN 8. 4 AN 10. 4 AN
Cases
1. 4 AN 3. 4 AN 5. 4 AN 7. 1,2,3,4 C
2. 4 AN 4. 1,2 C 6. 1 E
1-1
, Legend: The following abbreviations will appear throughout the solutions manual
file.
LO Learning objective
BT Bloom's Taxonomy
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: Level of difficulty
S Simple
M Moderate
C Complex
Time: Estimated time to prepare in minutes
AACSB Association to Advance Collegiate Schools of Business
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec. Thinking Reflective Thinking
CPA CM CPA Canada Competency
cpa-e001 Ethics Professional and Ethical Behaviour
cpa-e002 PS and DM Problem-Solving and Decision-Making
cpa-e003 Comm. Communication
cpa-e004 Self-Mgt. Self-Management
cpa-e005 Team & Lead Teamwork and Leadership
cpa-t001 Reporting Financial Reporting
cpa-t002
cpa-t003
cpa-t004 Audit Audit and Assurance
cpa-t005 Finance Finance
cpa-t006 Tax Taxation
algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and technology. The primary goal of
mathematics exams is to test students' understanding of mathematical concepts, their problem-solving abilities
1-2
, ANSWERS TO QUESTIONS
1. Accounting is the information system that identifies and records the
economic events of an organization, and then communicates them to a
wide variety of interested users.
LO 1 BT: K Difficulty: S TIME: 3 min. AACSB: None CPA: cpa-t001 CM: Reporting
2. (a) Internal users of accounting information work for the company and
include finance directors, marketing managers, human resource
personnel, production supervisors, and company officers. Internal
users have access to company information that is not available to
external users. algebra. Mathematics is crucial in many industries, including engineering, finance, data science, and
technology. The primary goal of mathematics exams is to test students' understanding of mathematical concepts, their problem-solving
abilities
(b) Some external users may be individuals who are employees of the
company but are not directly involved in managing the company.
External users of accounting information generally do not work for the
company. The primary external users are investors, lenders, and
other creditors. Other external users include labour unions,
customers, the Canada Revenue Agency (CRA), and securities
commissions.
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
3. Internal users may want the following questions answered:
Is there enough cash to purchase a new piece of equipment?
What price should we sell our product for to cover costs and to
maximize net income?
How many employees can we afford to hire this year?
Which product line is the most profitable?
How much of a pay raise can the company afford to give me?
External users may want the following questions answered:
Is the company earning enough to give me my required return on
investment?
Will the company be able to repay its debts as the debts come due?
Will the company stay in business long enough to service the products
I buy from it?
LO 1 BT: K Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
1-3
, 4. Primary users of accounting information include investors, lenders, and
creditors. These external users need to make decisions concerning their
ongoing business relationship with the company. They need to be able to
assess the company’s performance and financial health because they
intend to start, continue, or discontinue having transactions with the
company. Other decision makers who have specific needs for certain
financial information, such as the amount of taxes paid by the company,
are not considered primary users. algebra. Mathematics is crucial in many industries, including engineering,
finance, data science, and technology. The primary goal of mathematics exams is to test students' understanding of mathematical concepts, their
problem-solving abilities
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
5. Decision makers rely on financial statement information and expect the
accounting information to have been prepared ethically. Without the
expectation of ethical behaviour, the information presented in the financial
statements would have no credibility for the users of the accounting
information. Without credibility, financial statement information would be
useless to financial statement users.
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None Ethics CPA: cpa-t001 CM: Reporting and Ethics
6. (a) Proprietorship: Proprietorships are easier to form (and dissolve) than
other types of business organizations. They are not taxed as separate
entities; rather, the proprietor pays personal income tax on the
company’s net income. Depending on the circumstances, this may be
an advantage or disadvantage.
Disadvantages of a proprietorship include unlimited liability (proprietors
are personally liable for all debts of the business) and difficulty in
obtaining financing compared to other forms of organization. In
addition, the life of the proprietorship is limited as it is dependent on the
willingness and capability of the proprietor to continue operations.
6. (continued)
(b) Partnership: Partnerships are easier to form (and dissolve) than a
corporation, although not as easy as a proprietorship. Similar to
proprietorships, partnerships are not taxed as separate entities. Instead,
the partners pay personal income tax on their share of income. Depending
on the circumstances, this may be an advantage or disadvantage.
Disadvantages of partnerships include unlimited liability (partners are
jointly and severally liable for all debts of the business) and difficulty in
obtaining financing compared to corporations. In addition, the life of a
partnership can be limited depending on the terms of the partnership
agreement and actions of the other partners.
(c) Private corporation: Advantages of a private corporation include limited
liability (shareholders not being personally liable for corporate debts),
1-4
