Test Bank for solution manual for accounting 28th edition by carl s. warren christine jonick jennifer schneider

SOLUTIONS
MANUAL:Accounting
28th Edition, Carl S.Warren
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, CHAPTER 1 v




INTRODUCTIONTOACCOUNTINGANDBUSINESS v v v v




DISCUSSION QUESTIONS v




1. Some users of accounting information include managers, employees, investors, creditors,
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customers, and the government.
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2. The role of accounting is to provide information for managers to use in operating the business. In
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addition, accounting provides information to others to use in assessing the economic performance
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and condition of the business.
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3. The corporate form allows the company to obtain large amounts of resources by issuing stock.
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For this reason, most companies that require large investments in property, plant, and equipment are
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organized as corporations.
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4. No. The business entity concept limits the recording of economic data to transactions directly
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affecting the activities of the business. The payment of the interest of $4,500 is a personal
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transaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.
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5. The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is consistent with
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the cost concept.
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6. a. No. The offer of $2,000,000 and the increase in the assessed value should not be recognized in
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the accounting records because land is recorded on the cost basis.
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b. Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s equity
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would increase by $1,225,000.
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7. An account receivable is a claim against a customer for goods or services sold. An account payable is
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an amount owed to a creditor for goods or services purchased. Therefore, an account receivable in the
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records of the seller is an account payable in the records of the purchaser.
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8. (b) The business realized net income of $91,000 ($679,000 – $588,000).
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9. (a) The business incurred a net loss of $75,000 ($640,000 – $715,000).
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10. (a) Net income or net loss
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(b) Owner’s equity at the end of the period v v v v v v v




(c) Cash at the end of the period v v v v v v




1-1
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, CHAPTER 1 v Introduction to Accounting and Business
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PRACTICE EXERCISES v




PE 1-1A
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$597,000. Under the cost concept, the land should be recorded at the cost to Boulder Repair
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Service.
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PE 1-1B
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$369,500. Under the cost concept, the land should be recorded at the cost to
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Clementine Repair Service.
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PE 1-2A
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a. A = L + OE v v




$518,000 = $165,000 + OE v v




OE = $353,000

b. A = L + OE
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+$86,200 = +$25,000 + OE v v




OE = +$61,200
OE on December 31, 20Y9
v v v v = $353,000 + $61,200 v v




= $414,200


PE 1-2B
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a. A = L + OE v v




$382,000 = $94,000 + OE v v




OE = $288,000

b. A = L + OE
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–$63,000 v = +$35,000+ OE – v v v




OE = $98,000
OE on December 31, 20Y9
v v v v = $288,000 – $98,000 v v




= $190,000


PE 1-3A
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(2) Asset (Accounts Receivable) increases by $22,400;
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Owner’sEquity (Delivery ServiceFees) increases by $22,400.
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(3) Liability(AccountsPayable)decreasesby $4,100;
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Asset (Cash) decreases by $4,100.
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(4) Asset (Cash) increases by $14,700;
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Asset (Accounts Receivable) decreasesby $14,700.
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(5) Asset (Cash) decreases by $1,600;
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Owner’s Equity (Terry Young, Drawing) decreases by $1,600.
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© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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, CHAPTER 1 v Introduction to Accounting and Business v v v v




PE 1-3B
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(2) Owner’s Equity (Advertising Expense, increases) decreasesby $6,750;
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Asset (Cash) decreases by $6,750.
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(3) Asset (Supplies) increases by $2,920;
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Liability(AccountsPayable)increasesby $2,920.
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(4) Asset (Accounts Receivable) increases by $20,460;
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Owner’sEquity (Delivery ServiceFees) increases by $20,460.
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(5) Asset (Cash) increases by $11,410;
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Asset (Accounts Receivable) decreasesby $11,410.
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PE 1-4A
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Up-in-the-Air Travel Service v v




IncomeStatement v




For the Year Ended April 30, 20Y7
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Fees earned v $1,870,000
Expenses:
Wages expense v $1,115,000
Office expense v 343,000
Miscellaneous expense v 21,000
Total expenses v 1,479,000
Net income
v $ 391,000
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PE 1-4B
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Zenith Travel Service v v




IncomeStatement v




For the Year Ended August 31, 20Y4
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Fees earned v $899,600
Expenses:
Wages expense v $539,800
Office expense v 353,800
Miscellaneous expense v 14,400
Total expenses v 908,000
Net loss v $ (8,400)
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© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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