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TEST BANK
, CHAPTER 1
INTRODUCTION TO
ACCOUNTING AND BUSINESS
DISCUSSION QUESTIONS
1. Some users of accounting information
include managers, employees, investors,
creditors, customers, and the government.
2. The role of accounting is to provide
information for managers to use in operating
the business. In addition, accounting
provides information to others to use in
assessing the economic performance and
condition of the business.
3. The corporate form allows the company to
obtain large amounts of resources by issuing
stock. For this reason, most companies that
require large investments in property, plant,
and equipment are organized as corporations.
4. No. The business entity concept limits the
recording of economic data to transactions
directly affecting the activities of the
, business. The payment of the interest of
$4,500 is a personal transaction of Josh
Reilly and should not be recorded by
Dispatch Delivery Service.
5. The land should be recorded at its cost of
$167,500 to Reliable Repair Service. This is
consistent with the cost concept.
6. a. No. The offer of $2,000,000 and the
increase in the assessed value should not be
recognized in the accounting records
because land is recorded on the cost
basis.
b. Cash would increase by $2,125,000, land
would decrease by $900,000, and owner’s
equity would increase by $1,225,000.
7. An account receivable is a claim against a
customer for goods or services sold. An
account payable is an amount owed to a
creditor for goods or services purchased.
Therefore, an account receivable in the
records of the seller is an account payable
in the records of the purchaser.
8. (b) The business realized net income of $91,000
($679,000 – $588,000).
, 9. (a) The business incurred a net loss of $75,000
($640,000 – $715,000).
10. (a) Net income or net loss
(b) Owner’s equity at the end of the period
(c) Cash at the end of the period
1-1
© 2021 Cengage Learning, Inc. May not be scanned,
copied or duplicated, or posted to a publicly accessible
TEST BANK
, CHAPTER 1
INTRODUCTION TO
ACCOUNTING AND BUSINESS
DISCUSSION QUESTIONS
1. Some users of accounting information
include managers, employees, investors,
creditors, customers, and the government.
2. The role of accounting is to provide
information for managers to use in operating
the business. In addition, accounting
provides information to others to use in
assessing the economic performance and
condition of the business.
3. The corporate form allows the company to
obtain large amounts of resources by issuing
stock. For this reason, most companies that
require large investments in property, plant,
and equipment are organized as corporations.
4. No. The business entity concept limits the
recording of economic data to transactions
directly affecting the activities of the
, business. The payment of the interest of
$4,500 is a personal transaction of Josh
Reilly and should not be recorded by
Dispatch Delivery Service.
5. The land should be recorded at its cost of
$167,500 to Reliable Repair Service. This is
consistent with the cost concept.
6. a. No. The offer of $2,000,000 and the
increase in the assessed value should not be
recognized in the accounting records
because land is recorded on the cost
basis.
b. Cash would increase by $2,125,000, land
would decrease by $900,000, and owner’s
equity would increase by $1,225,000.
7. An account receivable is a claim against a
customer for goods or services sold. An
account payable is an amount owed to a
creditor for goods or services purchased.
Therefore, an account receivable in the
records of the seller is an account payable
in the records of the purchaser.
8. (b) The business realized net income of $91,000
($679,000 – $588,000).
, 9. (a) The business incurred a net loss of $75,000
($640,000 – $715,000).
10. (a) Net income or net loss
(b) Owner’s equity at the end of the period
(c) Cash at the end of the period
1-1
© 2021 Cengage Learning, Inc. May not be scanned,
copied or duplicated, or posted to a publicly accessible
