SOLUTIONS
MANUAL:Accounting
28th Edition, Carl S. Warren
n nn nn nn nn
, CHAPTER 1 nn
INTRODUCTION TO ACCOUNTING AND BUSINESS
nn nn nn nn
DISCUSSION nnQUESTIONS
1. Some n n users n n of n n accounting n n information n n include n n managers, nn employees,
n n investors, n n creditors,ncustomers, nnand nnthe nngovernment.
2. The nnrole nnof nnaccounting nnis nnto nnprovide nninformation nnfor nnmanagers nnto nnuse nnin nnoperating
nnthe nnbusiness.nIn nn addition, nnaccounting nn provides nn information nnto nn others nn to nn use nnin
nnassessing nnthe nneconomic nn performance nnand nncondition nnof nnthe nnbusiness.
3. The nn corporate nn form nnallows nn the nncompany nn to nn obtain nnlarge nnamounts nnof nnresources nn by
nnissuing nn stock.nFor n n this n n reason, n n most n n companies n n that n n require n n large n n investments
n n in n n property, n n plant, n n and n n equipmentnare nnorganized nnas nncorporations.
4. No. nnThe nnbusiness nnentity nnconcept nnlimits nnthe nnrecording nnof nneconomic nndata nnto
nntransactions nndirectlyn affecting nnthe nnactivities nn of nn the nnbusiness. nn The nn payment nn of nn the
nninterest nn of nn $4,500 nn is nna nn personal nn transaction nnof nnJosh nnReilly nnand nnshould nnnot nnbe
nnrecorded nnby nnDispatch nnDelivery nnService.
5. The nnland nnshould nnbe nnrecorded nnat nnits nncost nnof nn$167,500 nnto nnReliable nnRepair nnService. nnThis
nnis nnconsistentnw ith nnthe nncost nnconcept.
6. a. No. nnThe nnoffer nnof nn$2,000,000 nnand nnthe nnincrease nnin nnthe nnassessed nnvalue nnshould nnnot nnbe
nnrecognizedni n nnthe nnaccounting nnrecords nnbecause nnland nnis nnrecorded nnon nnthe nncost
nnbasis.
b. Cash n n would n n increase n n by n n $2,125,000, n n land n n would n n decrease nn by nn $900,000,
n n and n n owner’s n n equitynwould nnincrease nnby nn$1,225,000.
7. An nnaccount nnreceivable nn is nna nnclaim nn against nn a nncustomer nnfor nn goods nn or nn services
nnsold. nn An nnaccount nn payable nnis nnan nnamount nnowed nnto nna nncreditor nnfor nngoods nnor nnservices
nnpurchased. nnTherefore, nnan nnaccountnr eceivable nnin nnthe nnrecords nnof nnthe nnseller nnis nnan
nnaccount nnpayable nnin nnthe nnrecords nnof nnthe nnpurchaser.
8. (b) n n The nnbusiness nnrealized nnnet nnincome nnof nn$91,000 nn($679,000 nn– nn$588,000).
9. (a) nn The nnbusiness nnincurred nna nnnet nnloss nnof nn$75,000 nn($640,000 nn– nn$715,000).
10. (a) n n Net nnincome nnor nnnet nnloss
(b) Owner’s nnequity nnat nnthe nnend nnof nnthe nnperiod
(c) Cash nnat nnthe nnend nnof nnthe nnperiod
, 1-1
© nn2021 nnCengage nnLearning, nnInc. nnMay nnnot nnbe nnscanned, nncopied nnor nnduplicated, nnor nnposted nnto nna nnpublicly nnaccessible
nnwebsite, nnin nnwhole nnor nnin nnpart.
,
MANUAL:Accounting
28th Edition, Carl S. Warren
n nn nn nn nn
, CHAPTER 1 nn
INTRODUCTION TO ACCOUNTING AND BUSINESS
nn nn nn nn
DISCUSSION nnQUESTIONS
1. Some n n users n n of n n accounting n n information n n include n n managers, nn employees,
n n investors, n n creditors,ncustomers, nnand nnthe nngovernment.
2. The nnrole nnof nnaccounting nnis nnto nnprovide nninformation nnfor nnmanagers nnto nnuse nnin nnoperating
nnthe nnbusiness.nIn nn addition, nnaccounting nn provides nn information nnto nn others nn to nn use nnin
nnassessing nnthe nneconomic nn performance nnand nncondition nnof nnthe nnbusiness.
3. The nn corporate nn form nnallows nn the nncompany nn to nn obtain nnlarge nnamounts nnof nnresources nn by
nnissuing nn stock.nFor n n this n n reason, n n most n n companies n n that n n require n n large n n investments
n n in n n property, n n plant, n n and n n equipmentnare nnorganized nnas nncorporations.
4. No. nnThe nnbusiness nnentity nnconcept nnlimits nnthe nnrecording nnof nneconomic nndata nnto
nntransactions nndirectlyn affecting nnthe nnactivities nn of nn the nnbusiness. nn The nn payment nn of nn the
nninterest nn of nn $4,500 nn is nna nn personal nn transaction nnof nnJosh nnReilly nnand nnshould nnnot nnbe
nnrecorded nnby nnDispatch nnDelivery nnService.
5. The nnland nnshould nnbe nnrecorded nnat nnits nncost nnof nn$167,500 nnto nnReliable nnRepair nnService. nnThis
nnis nnconsistentnw ith nnthe nncost nnconcept.
6. a. No. nnThe nnoffer nnof nn$2,000,000 nnand nnthe nnincrease nnin nnthe nnassessed nnvalue nnshould nnnot nnbe
nnrecognizedni n nnthe nnaccounting nnrecords nnbecause nnland nnis nnrecorded nnon nnthe nncost
nnbasis.
b. Cash n n would n n increase n n by n n $2,125,000, n n land n n would n n decrease nn by nn $900,000,
n n and n n owner’s n n equitynwould nnincrease nnby nn$1,225,000.
7. An nnaccount nnreceivable nn is nna nnclaim nn against nn a nncustomer nnfor nn goods nn or nn services
nnsold. nn An nnaccount nn payable nnis nnan nnamount nnowed nnto nna nncreditor nnfor nngoods nnor nnservices
nnpurchased. nnTherefore, nnan nnaccountnr eceivable nnin nnthe nnrecords nnof nnthe nnseller nnis nnan
nnaccount nnpayable nnin nnthe nnrecords nnof nnthe nnpurchaser.
8. (b) n n The nnbusiness nnrealized nnnet nnincome nnof nn$91,000 nn($679,000 nn– nn$588,000).
9. (a) nn The nnbusiness nnincurred nna nnnet nnloss nnof nn$75,000 nn($640,000 nn– nn$715,000).
10. (a) n n Net nnincome nnor nnnet nnloss
(b) Owner’s nnequity nnat nnthe nnend nnof nnthe nnperiod
(c) Cash nnat nnthe nnend nnof nnthe nnperiod
, 1-1
© nn2021 nnCengage nnLearning, nnInc. nnMay nnnot nnbe nnscanned, nncopied nnor nnduplicated, nnor nnposted nnto nna nnpublicly nnaccessible
nnwebsite, nnin nnwhole nnor nnin nnpart.
,
