SM Accounting 27th Edition by Carl Warren | Textbook Solutions & Guide

CHAPTERj1
INTRODUCTIONjTOjACCOUNTINGjANDjBUSINESS

DISCUSSIONjQUESTIONS

1. Somejusersjofjaccountingjinformationjincludejmanagers,jemployees,jinvestors,jcreditors,jcus
tomers,jandjthejgovernment.
2. Thejrolejofjaccountingjisjtojprovidejinformationjforjmanagersjtojusejinjoperatingjthejbusiness.j Inja
ddition,jaccountingjprovidesjinformationjtojothersjtojusejinjassessingjthejeconomicjperformanceja
ndjconditionjofjthejbusiness.
3. Thej corporatej formj allowsj thej companyj toj obtainj largej amountsj ofj resourcesj byj issuingj stock.jF
orjthisjreason,jmostjcompaniesjthatjrequirejlargejinvestmentsjinjproperty,jplant,jandjequipmentjarejor
ganizedjasjcorporations.
4. No.jThejbusinessjentityjconceptjlimitsjthejrecordingjofjeconomicjdatajtojtransactionsjdirectlyjaffe
ctingjthejactivitiesjofjthejbusiness.jThejpaymentjofjthejinterestjofj$4,500jisjajpersonaljtransactionj
ofjJoshjReillyjandjshouldjnotjbejrecordedjbyjDispatchjDeliveryjService.
5. Thejlandjshouldjbejrecordedjatjitsjcostjofj$167,500jtojReliablejRepairjService.jThisjisjconsistentj with
jthejcostjconcept.

6. a.
No.jThejofferjofj$2,000,000jandjthejincreasejinjthejassessedjvaluejshouldjnotjbejrecognized
j injthejaccountingjrecordsjbecausejlandjisjrecordedjonjthejcostjbasis.
b.
Cashjwouldjincreasejbyj$2,125,000,jlandjwouldjdecreasejbyj$900,000,jandjowner’sjequi
tyjwouldjincreasejbyj$1,225,000.
7. Anjaccountjreceivablejisjajclaimjagainstjajcustomerjforjgoodsjorjservicesjsold.jAnjaccountjpayableji
sjanjamountjowedjtojajcreditorjforjgoodsjorjservicesjpurchased.jTherefore,janjaccountjreceivablejinj
thejrecordsjofjthejsellerjisjanjaccountjpayablejinjthejrecordsjofjthejpurchaser.
8. (b)j Thej businessj realizedj netj incomej ofj $91,000j ($679,000j –j $588,000).
9. (a)j j Thej businessj incurredj aj netj lossj ofj $75,000j ($640,000j –j $715,000).
10. (a)j j Netj incomejorj netj loss
(b) Owner’sj equityj atj thej endj ofj thej period
(c) Cashj atj thej endj ofj thej period




1-1
©j2018jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejscanned,jcopiedjorjduplicated,jorjpostedjtojajpubliclyjaccessiblejwebsite,jinjwholejorjinjpart
.

, CHAPTERj1 IntroductionjtojAccountingjandjBusiness


PRACTICEjEXERCISES
PEj1-1A
$380,000.jUnderjthejcostjconcept,jthejlandjshouldjbejrecordedjatjthejcostjtojClairemontjRepa
irjService.


PEj1-1B
$437,500.jUnderjthejcostjconcept,jthejlandjshouldjbejrecordedjatjthejcostjtojHigginsjRepairjS
ervice.


PEj1-2A
a. A = Lj +j OE
$675,000 = $215,000j+jOE
OE = $460,000

b. A = Lj +j OE
+$112,300 = +$32,000j+jOE
OE = +$80,300
OEjonjDecemberj31,j2019 = $460,000j+j$80,300
= $540,300


PEj1-2B
a. A = Lj +j OE
$395,000 = $97,000j+jOE
OE = $298,000

b. A = Lj +j OE
= j– +$36,000j+jOEj–
$65,000 = $101,000
OE = $298,000j–j$101,000
OEjonjDecemberj31,j2019 = $197,000


PEj1-3A
(2) Assetj(AccountsjReceivable)jincreasesjbyj$13,750;jRe
venuej(DeliveryjServicejFees)jincreasesjbyj$13,750.
(3) Liabilityj(AccountsjPayable)jdecreasesjbyj$2,500;j
Assetj(Cash)jdecreasesjbyj$2,500.
(4) Assetj(Cash)jincreasesjbyj$9,000;
Assetj(AccountsjReceivable)jdecreasesjbyj$9,000.
(5) Assetj(Cash)jdecreasesjbyj$1,000;
Owner'sjEquityj(JeromejFoley,jDrawing)jdecreasesjbyj$1,000.



1-2
©j2018jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejscanned,jcopiedjorjduplicated,jorjpostedjtojajpubliclyjaccessiblejwebsite,jinjwholejorjinjpart.

, CHAPTERj1 IntroductionjtojAccountingjandjBusiness


PEj1-3B
(2) Expensej(AdvertisingjExpense)jincreasesjbyj$4,850;j
Assetj(Cash)jdecreasesjbyj$4,850.
(3) Assetj(Supplies)jincreasesjbyj$2,100;
Liabilityj(AccountsjPayable)jincreasesjbyj$2,100.
(4) Assetj(AccountsjReceivable)jincreasesjbyj$14,700;jRe
venuej(DeliveryjServicejFees)jincreasesjbyj$14,700.
(5) Assetj(Cash)jincreasesjbyj$8,200;
Assetj(AccountsjReceivable)jdecreasesjbyj$8,200.


PEj1-4A
ADVENTUREjTRAVELjSERVICE
IncomejStatement
ForjthejYearjEndedjAprilj30,j2019
Feesjearned $2,180,000
Expenses:
Wagesjexpense $1,300,000
Officejexpense 400,000
Miscellaneousjexpense 25,000
Totaljexpenses 1,725,000
Netjincome $j j 455,000



PEj1-4B
SENTINELjTRAVELjSERVICE
IncomejStatement
ForjthejYearjEndedjAugustj31,j2019
Feesjearned $750,000
Expenses:
Wagesjexpense $450,000
Officejexpense 295,000
Miscellaneousjexpense 12,000
Totaljexpenses 757,000
Netjloss $j j (7,000)




1-3
©j2018jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejscanned,jcopiedjorjduplicated,jorjpostedjtojajpubliclyjaccessiblejwebsite,jinjwholejorjinjpar
t.

, CHAPTERj1 IntroductionjtojAccountingjandjBusiness


PEj1-5A
ADVENTUREjTRAVELjSERVICE
StatementjofjOwner’sjEquityjFor
jthejYearjEndedjAprilj30,j2019

JeromejFoley,jcapital,jMayj1,j2018 $1,020,000
Additionaljinvestmentjbyjownerjduringjyear $j 60,000
Netjincomejforjthejyear 455,000
Withdrawals (40,000)
Increasejinjowner’sjequity 475,000
JeromejFoley,jcapital,jAprilj30,j2019 $1,495,000



PEj1-5B
SENTINELjTRAVELjSERVICE
StatementjofjOwner’sjEquityjForj
thejYearjEndedjAugustj31,j2019
BarbjSchroeder,jcapital,jSeptemberj1,j2018 $380,000
Additionaljinvestmentjbyjownerjduringjyear $j 36,000
Netjlossjforjthejyear (7,000)
Withdrawals (18,000)
Increasejinjowner’sjequity 11,000
BarbjSchroeder,jcapital,jAugustj31,j2019 $391,000



PEj1-6A
ADVENTUREjTRAVELjSERVICE
BalancejSheetjApri
lj30,j2019
Assets
Cash $j j 197,000
Accountsjreceivable 485,000
Supplies 18,000
Land 900,000
Totaljassets $1,600,000
Liabilities
Accountsjpayable $j j 105,000
Owner’sjEquity
JeromejFoley,jcapital 1,495,000
Totaljliabilitiesjandjowner’sjequity $1,600,000




1-4
©j2018jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejscanned,jcopiedjorjduplicated,jorjpostedjtojajpubliclyjaccessiblejwebsite,jinjwholejorjinjpar
t.