TEST BANK
n
, CHAPTER n1
INTRODUCTION nTO nACCOUNTING nAND
n BUSINESS nDISCUSSION nQUESTIONS
1. Some nusers nof naccounting ninformation ninclude nmanagers, nemployees,
ninvestors, ncreditors, ncustomers, nand nthe ngovernment.
2. The nrole nof naccounting nis nto nprovide ninformation nfor nmanagers nto nuse nin
noperating nthe nbusiness. n In naddition, naccounting n provides ninformation nto
nothers nto nuse nin nassessing nthe neconomic nperformance nand ncondition nof nthe
nbusiness.
3. The n corporate nform n allows n the n company nto n obtain nlarge n amounts n of nresources
n by n issuing n stock. nFor nthis nreason, nmost ncompanies nthat nrequire nlarge ninvestments
nin nproperty, nplant, nand nequipment nare norganized nas ncorporations.
4. No. nThe nbusiness nentity nconcept nlimits nthe nrecording nof neconomic ndata nto
ntransactions ndirectly naffecting nthe nactivities nof nthe n business. nThe n payment nof
nthe ninterest nof n$4,500 nis na n personal ntransaction nof nJosh n Reilly nand nshould
nnot n be nrecorded nby nDispatch nDelivery nService.
5. The nland nshould nbe nrecorded nat nits ncost nof n$167,500 nto nReliable nRepair nService.
nThis nis nconsistent nwith nthe ncost nconcept.
6. a. No. nThe noffer nof n$2,000,000 nand nthe nincrease nin nthe nassessed nvalue nshould nnot
nbe nrecognized n in nthe naccounting nrecords n because nland nis nrecorded non nthe
ncost n basis.
b. Cash nwould nincrease nby n$2,125,000, nland nwould ndecrease nby n$900,000, nand
nowner’s nequity nwould nincrease nby n$1,225,000.
7. An naccount nreceivable nis na nclaim nagainst na ncustomer nfor ngoods nor nservices
nsold. nAn naccount npayable nis nan namount nowed nto na ncreditor nfor ngoods nor
nservices npurchased. nTherefore, nan naccount nreceivable nin nthe nrecords nof nthe nseller
nis nan naccount npayable nin nthe nrecords nof nthe npurchaser.
8. (b) n The nbusiness n realized nnet nincome n of n$91,000 n ($679,000 n – n$588,000).
9. (a) n The nbusiness nincurred na n net n loss n of n $75,000 n ($640,000 n – n$715,000).
10. (a) n Net nincome nor nnet nloss
(b) Owner’s n equity nat nthe nend nof nthe nperiod
(c) Cash nat nthe nend nof nthe nperiod
, 1-1
© n2021 nCengage nLearning, nInc. nMay nnot nbe nscanned, ncopied nor nduplicated, nor nposted n to na npublicly naccessible nwebsite, nin n whole nor nin
npart.
,
n
, CHAPTER n1
INTRODUCTION nTO nACCOUNTING nAND
n BUSINESS nDISCUSSION nQUESTIONS
1. Some nusers nof naccounting ninformation ninclude nmanagers, nemployees,
ninvestors, ncreditors, ncustomers, nand nthe ngovernment.
2. The nrole nof naccounting nis nto nprovide ninformation nfor nmanagers nto nuse nin
noperating nthe nbusiness. n In naddition, naccounting n provides ninformation nto
nothers nto nuse nin nassessing nthe neconomic nperformance nand ncondition nof nthe
nbusiness.
3. The n corporate nform n allows n the n company nto n obtain nlarge n amounts n of nresources
n by n issuing n stock. nFor nthis nreason, nmost ncompanies nthat nrequire nlarge ninvestments
nin nproperty, nplant, nand nequipment nare norganized nas ncorporations.
4. No. nThe nbusiness nentity nconcept nlimits nthe nrecording nof neconomic ndata nto
ntransactions ndirectly naffecting nthe nactivities nof nthe n business. nThe n payment nof
nthe ninterest nof n$4,500 nis na n personal ntransaction nof nJosh n Reilly nand nshould
nnot n be nrecorded nby nDispatch nDelivery nService.
5. The nland nshould nbe nrecorded nat nits ncost nof n$167,500 nto nReliable nRepair nService.
nThis nis nconsistent nwith nthe ncost nconcept.
6. a. No. nThe noffer nof n$2,000,000 nand nthe nincrease nin nthe nassessed nvalue nshould nnot
nbe nrecognized n in nthe naccounting nrecords n because nland nis nrecorded non nthe
ncost n basis.
b. Cash nwould nincrease nby n$2,125,000, nland nwould ndecrease nby n$900,000, nand
nowner’s nequity nwould nincrease nby n$1,225,000.
7. An naccount nreceivable nis na nclaim nagainst na ncustomer nfor ngoods nor nservices
nsold. nAn naccount npayable nis nan namount nowed nto na ncreditor nfor ngoods nor
nservices npurchased. nTherefore, nan naccount nreceivable nin nthe nrecords nof nthe nseller
nis nan naccount npayable nin nthe nrecords nof nthe npurchaser.
8. (b) n The nbusiness n realized nnet nincome n of n$91,000 n ($679,000 n – n$588,000).
9. (a) n The nbusiness nincurred na n net n loss n of n $75,000 n ($640,000 n – n$715,000).
10. (a) n Net nincome nor nnet nloss
(b) Owner’s n equity nat nthe nend nof nthe nperiod
(c) Cash nat nthe nend nof nthe nperiod
, 1-1
© n2021 nCengage nLearning, nInc. nMay nnot nbe nscanned, ncopied nor nduplicated, nor nposted n to na npublicly naccessible nwebsite, nin n whole nor nin
npart.
,
