Chapter 01 9ce
Kimmel, Weygandt, Kieso, Trenholm, Irvine, Burnley Financial Accounting, Ninth Canadian Edition
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.
(b) Some external users may be individuals who are employees of the
company but are not directly involved in managing the company. As
a result, they do not have access to much information. External users
of accounting information generally do not work for the company. The
primary external users are investors and 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
Solutions Manual 1-3 Chapter 1
, Kimmel, Weygandt, Kieso, Trenholm, Irvine, Burnley Financial Accounting, Ninth Canadian Edition
4. Primary users of accounting information include investors 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.
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. Descriptive data analytic provides information about what happened. On
the other hand, predictive data analytics helps the organization look into
the future and gives some visibility into what is likely to happen. Predictive
data analytics is of the most use to management
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None Ethics CPA: cpa-t001 CM: Reporting and Ethics
7. (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.
Solutions Manual 1-4 Chapter 1
Kimmel, Weygandt, Kieso, Trenholm, Irvine, Burnley Financial Accounting, Ninth Canadian Edition
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.
(b) Some external users may be individuals who are employees of the
company but are not directly involved in managing the company. As
a result, they do not have access to much information. External users
of accounting information generally do not work for the company. The
primary external users are investors and 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
Solutions Manual 1-3 Chapter 1
, Kimmel, Weygandt, Kieso, Trenholm, Irvine, Burnley Financial Accounting, Ninth Canadian Edition
4. Primary users of accounting information include investors 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.
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. Descriptive data analytic provides information about what happened. On
the other hand, predictive data analytics helps the organization look into
the future and gives some visibility into what is likely to happen. Predictive
data analytics is of the most use to management
LO 1 BT: C Difficulty: M TIME: 5 min. AACSB: None Ethics CPA: cpa-t001 CM: Reporting and Ethics
7. (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.
Solutions Manual 1-4 Chapter 1
