SOLUTIONS
MANUAL:Accounting n
28th Edition, Carl S. Warren
n n n n
, CHAPTER 1 n
INTRODUCTION TO ACCOUNTING AND BUSINESS
n n n n
DISCUSSIONn QUESTIONS
1. n Somen usersn ofn accountingn informationn includen managers,n employees,n investors,n creditors
,ncustomers,nandnthengovernment.
2. Thenrolenofnaccountingnisntonprovideninformationnfornmanagersntonuseninnoperatingnthenbusiness.n
Innaddition,naccountingnprovidesninformationntonothersntonuseninnassessingntheneconomicnperfo
rmancenandnconditionnofnthenbusiness.
3. Thencorporatenformnallowsnthencompanyntonobtainnlargenamountsnofnresourcesnbynissuingnstock.n
Forn thisn reason,n mostn companiesn thatn requiren largen investmentsn inn property,n plant,n andn equipmentn
arenorganizednasncorporations.
4. No.nThenbusinessnentitynconceptnlimitsnthenrecordingnofneconomicndatantontransactionsndirectlyn
affectingnthenactivitiesnofnthenbusiness.nThenpaymentnofntheninterestnofn$4,500nisnanpersonalntr
ansactionnofnJoshnReillynandnshouldnnotnbenrecordednbynDispatchnDeliverynService.
5. Thenlandnshouldnbenrecordednatnitsncostnofn$167,500ntonReliablenRepairnService.nThisnisnconsistentn
withnthencostnconcept.
6. a.
No.nThenoffernofn$2,000,000nandnthenincreaseninnthenassessednvaluenshouldnnotnbenrecogn
izedninnthenaccountingnrecordsnbecausenlandnisnrecordednonnthencostnbasis.
b.
Cashn wouldn increasen byn $2,125,000,n landn wouldn decreasen byn $900,000,n andn owner’sn eq
uitynwouldnincreasenbyn$1,225,000.
7. Annaccountnreceivablenisnanclaimnagainstnancustomernforngoodsnornservicesnsold.nAnnaccountnpa
yablenisnannamountnowedntonancreditornforngoodsnornservicesnpurchased.nTherefore,nannaccountnre
ceivableninnthenrecordsnofnthensellernisnannaccountnpayableninnthenrecordsnofnthenpurchaser.
8. (b)n Thenbusinessnrealizednnetnincomenofn$91,000n($679,000n–n$588,000).
9. (a)n Thenbusinessnincurrednannetnlossnofn$75,000n($640,000n–n$715,000).
10. (a)n Netnincomenornnetnloss
(b) Owner’snequitynatnthenendnofnthenperiod
(c) Cashnatnthenendnofnthenperiod
, 1-1
©n2021nCengagenLearning,nInc.nMaynnotnbenscanned,ncopiednornduplicated,nornpostedntonanpubliclynaccessiblenwebsite,ninnwholenorninnpart
.
,
MANUAL:Accounting n
28th Edition, Carl S. Warren
n n n n
, CHAPTER 1 n
INTRODUCTION TO ACCOUNTING AND BUSINESS
n n n n
DISCUSSIONn QUESTIONS
1. n Somen usersn ofn accountingn informationn includen managers,n employees,n investors,n creditors
,ncustomers,nandnthengovernment.
2. Thenrolenofnaccountingnisntonprovideninformationnfornmanagersntonuseninnoperatingnthenbusiness.n
Innaddition,naccountingnprovidesninformationntonothersntonuseninnassessingntheneconomicnperfo
rmancenandnconditionnofnthenbusiness.
3. Thencorporatenformnallowsnthencompanyntonobtainnlargenamountsnofnresourcesnbynissuingnstock.n
Forn thisn reason,n mostn companiesn thatn requiren largen investmentsn inn property,n plant,n andn equipmentn
arenorganizednasncorporations.
4. No.nThenbusinessnentitynconceptnlimitsnthenrecordingnofneconomicndatantontransactionsndirectlyn
affectingnthenactivitiesnofnthenbusiness.nThenpaymentnofntheninterestnofn$4,500nisnanpersonalntr
ansactionnofnJoshnReillynandnshouldnnotnbenrecordednbynDispatchnDeliverynService.
5. Thenlandnshouldnbenrecordednatnitsncostnofn$167,500ntonReliablenRepairnService.nThisnisnconsistentn
withnthencostnconcept.
6. a.
No.nThenoffernofn$2,000,000nandnthenincreaseninnthenassessednvaluenshouldnnotnbenrecogn
izedninnthenaccountingnrecordsnbecausenlandnisnrecordednonnthencostnbasis.
b.
Cashn wouldn increasen byn $2,125,000,n landn wouldn decreasen byn $900,000,n andn owner’sn eq
uitynwouldnincreasenbyn$1,225,000.
7. Annaccountnreceivablenisnanclaimnagainstnancustomernforngoodsnornservicesnsold.nAnnaccountnpa
yablenisnannamountnowedntonancreditornforngoodsnornservicesnpurchased.nTherefore,nannaccountnre
ceivableninnthenrecordsnofnthensellernisnannaccountnpayableninnthenrecordsnofnthenpurchaser.
8. (b)n Thenbusinessnrealizednnetnincomenofn$91,000n($679,000n–n$588,000).
9. (a)n Thenbusinessnincurrednannetnlossnofn$75,000n($640,000n–n$715,000).
10. (a)n Netnincomenornnetnloss
(b) Owner’snequitynatnthenendnofnthenperiod
(c) Cashnatnthenendnofnthenperiod
, 1-1
©n2021nCengagenLearning,nInc.nMaynnotnbenscanned,ncopiednornduplicated,nornpostedntonanpubliclynaccessiblenwebsite,ninnwholenorninnpart
.
,
