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 n




INTRODUCTIONTOACCOUNTINGANDBUSINESS n n n n




DISCUSSION QUESTIONS n




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 n n n n n n n




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




1-1
© 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 n Introduction to Accounting and Business
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PRACTICE EXERCISES n




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 n n




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




OE = $353,000

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




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




= $414,200


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




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




OE = $288,000

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




OE = $98,000
OE on December 31, 20Y9
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= $190,000


PE 1-3A
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(2) Asset (Accounts Receivable) increases by $22,400;
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Owner’s Equity (Delivery Service Fees) increases by $22,400.
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(3) Liability(Accounts Payable) 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) decreases by $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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1-2
© 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 n Introduction to Accounting and Business n n n n




PE 1-3B
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(2) Owner’s Equity (Advertising Expense, increases) decreases by $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 (Accounts Payable) increases by $2,920.
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(4) Asset (Accounts Receivable) increases by $20,460;
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Owner’s Equity (Delivery Service Fees) increases by $20,460.
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(5) Asset (Cash) increases by $11,410;
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Asset (Accounts Receivable) decreases by $11,410.
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PE 1-4A
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Up-in-the-Air Travel Service n n




Income Statement n




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




Income Statement n




For the Year Ended August 31, 20Y4
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Fees earned n $899,600
Expenses:
Wages expense n $539,800
Office expense n 353,800
Miscellaneous expense n 14,400
Total expenses n 908,000
Net loss n $ (8,400)
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1-3
© 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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