1-1
, FULL j SOLUTION j MANUAL j FOR
Accounting jPrinciples j14th jEdition jby jJerry jJ. jWeygandt, jPaul
D. jKimmel, jJill jE. jMitchell
CHAPTER 1 j
Accounting jin jAction
Learning jObjectives
1. Identify jthe jactivities jand jusers jassociated jwith jaccounting.
2. Explain jthe jbuilding jblocks jof jaccounting: jethics, jprinciples,
jandjassumptions.
3. State jthe jaccounting jequation, jand jdefine jits jcomponents.
4. Analyze jthe jeffects jof jbusiness jtransactions jon jthe jaccounting jequation.
5. Describe jthe jfour jfinancial jstatements jand jhow jthey jare jprepared.
*6. Explain jthe jcareer jopportunities jin jaccounting.
*Note: j All j asterisked j Questions, j Brief j Exercises, j Exercises, j and j Problems j relate j to
j materialjcontained jin jthe jappendix j to jthe jchapter.
1-2
, ANSWERS jTO jQUESTIONS
1. This jis jtrue. jVirtually jevery jorganization jand jperson jin jour jsociety juses jaccounting jinformation.
jBusinesses, jinvestors, jcreditors, jgovernment jagencies, jand jnot-for-profit jorganizations jmust
juse jaccounting jinformation jto joperate jeffectively.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
2. Accounting jis jthe jprocess jof jidentifying, jrecording, jand j communicating j the jeconomic jevents
jof jan jorganization jto jinterested jusers jof jthe jinformation. jThe jfirst jactivity jof jthe jaccounting
jprocess jis jto jidentify jeconomic jevents jthat jare jrelevant jto ja jparticular jbusiness. jOnce
jidentified jand jmeasured, jthe jevents jare jrecorded jto jprovide ja jhistory jof jthe jfinancial jactivities
jof jthe jorganization. jRecording jconsists jof jkeeping ja jchronological jdiary jof jthese jmeasured
jevents jin jan jorderly jand jsystematic jmanner. jThe jinformation jis jcommunicated jthrough jthe
jpreparation jand jdistribution jof jaccounting j reports, j the j most j common j of j which jare
j called jfinancial jstatements. jA jvital jelement jin jthe jcommunication jprocess jis jthe jaccountant’s
jability jand jresponsibility jto janalyze jand jinterpret jthe jreported jinformation.
LO1 jBT: jC j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
3. (a) jInternal jusers jare jthose jwho jplan, jorganize, jand jrun jthe jbusiness jand jtherefore jare
jofficers jand jother jdecision jmakers.
(b) To jassist jmanagement, jmanagerial jaccounting jprovides jinternal jreports. jExamples
jinclude jfinancial jcomparisons jof joperating jalternatives, jprojections jof jincome jfrom jnew
jsales jcampaigns, jand jforecasts jof jcash jneeds jfor jthe jnext jyear.
LO1 j BT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
4. (a) jInvestors j(owners) juse jaccounting jinformation jto jmake jdecisions jto jbuy, jhold, jor jsell
jowner- jship jshares jof ja jcompany.
(b) Creditors juse jaccounting jinformation jto jevaluate jthe jrisks jof jgranting jcredit jor jlending jmoney.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
5. This jis jfalse. jBookkeeping jusually jinvolves jonly jthe jrecording jof jeconomic jevents jand jtherefore
jis jjust jone jpart jof jthe jentire jaccounting jprocess. jAccounting, jon jthe jother jhand, jinvolves jthe
jentire jprocess jof jidentifying, jrecording, jand jcommunicating jeconomic jevents.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
6. Benton jTravel jAgency jshould jreport jthe jland jat j$90,000 jon jits jDecember j31, j 2022 jbalance
jsheet. jThis jis jtrue jnot jonly jat jthe jtime jthe jland jis jpurchased, jbut jalso jover jthe jtime jthe jland
jis jheld. jIn jdetermining jwhich jmeasurement jprinciple jto juse j(historical jcost jor jfair jvalue)
jcompanies jweigh jthe jfactual jnature jof jcost jfigures jversus jthe jrelevance jof jfair jvalue. jIn
jgeneral, jcompanies juse jhistorical jcost. jOnly jin jsituations jwhere jassets jare jactively jtraded jdo
j companies japply jthe jfair jvalue jprinciple.
LO2 j BT: jC j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
7. The jmonetary junit jassumption jrequires jthat jonly jtransaction jdata jthat jcan jbe jexpressed jin
jterms jof jmoney jbe jincluded jin jthe jaccounting jrecords. jThis jassumption jenables jaccounting jto
jquantify j(measure) jeconomic jevents.
LO2 j BT: jK j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
8. The jeconomic jentity jassumption jrequires jthat jthe jactivities jof jthe jentity jbe jkept jseparate jand
jdistinct jfrom jthe jactivities jof j its jowners jand jall jother jeconomic jentities.
LO2 jBT: jK j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
1-3
, Questions jChapter j1 j(Continued)
9. The j three j basic j forms j of j business j organizations j are: j (1) j proprietorship, j (2)
j partnership, j and
(3) j corporation.
LO2 j BT: jK j Difficulty: jEasy j TOT:1 jmin. j AACSB: jNone j AICPA jFC: jReporting
10. One jof jthe jadvantages jHelen jRupp jwould jenjoy jis jthat jownership jof ja jcorporation jis
jrepresented jby jtransferable jshares jof jstock. jThis jwould jallow jHelen jto jraise jmoney jeasily jby
jselling ja jpart jof jher jownership jin jthe jcompany. jAnother jadvantage jis jthat jbecause jholders jof
jthe jshares j(stockholders) jenjoy jlimited jliability; jthey jare jnot jpersonally jliable jfor jthe jdebts jof
jthe jcorporate jentity. jAlso, jbecause jownership jcan jbe jtransferred jwithout jdissolving jthe
jcorporation, jthe jcorporationjenjoys jan junlimited jlife.
LO2 j BT: jK j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
11. The jbasic jaccounting jequation jis jAssets j= jLiabilities j+ jOwner’s jEquity.
LO3 jBT: jK j Difficulty: jEasy j TOT: j1 jmin. j AACSB: jNone j AICPA jFC: jMeasurement
12. (a) jAssets jare jresources jowned jby ja jbusiness. jLiabilities jare jcreditor jclaims jagainst jassets.
jPut jmore jsimply, jliabilities jare jexisting jdebts jand jobligations. jOwner’s jequity jis jthe
jownership jclaim jon jtotal jassets.
(b) Owner’s jequity jis jaffected jby jowner’s jinvestments, jdrawings, jrevenues, jand jexpenses.
LO3 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
13. The jliabilities jare: j(b) jAccounts jpayable jand j(g) jSalaries jand jwages jpayable.
LO3 jBT: jC j Difficulty: jEasy j TOT: j1 jmin. j AACSB: jNone j AICPA jFC: jReporting
14. Yes, ja jbusiness jcan jenter jinto ja jtransaction jin jwhich jonly jthe jleft jside jof jthe jaccounting
jequation jis jaffected. jAn jexample jwould jbe ja jtransaction jwhere jan jincrease jin jone jasset jis
joffset jby ja jdecrease jin janother jasset. jAn jincrease jin jthe jEquipment jaccount jwhich jis joffset
jby ja jdecrease jinjthe jCash jaccount jis ja jspecific jexample.
LO4 jBT: jC j Difficulty: jModerate j TOT: j3 jmin. j AACSB: jNone j AICPA jFC: jReporting
15. Business jtransactions jare jthe j economic jevents jof j the j enterprise j recorded j by
jaccountantsjbecause jthey jaffect jthe jbasic jaccounting jequation.
(a) The jdeath jof j the jowner jof jthe jcompany jis jnot ja jbusiness jtransaction jas jit jdoes jnot
jaffect j ofjthe jcomponents jof j the jbasic jaccounting jequation.
(b) Supplies j purchased j on j account j is j a j business j transaction j as j it j affects j the j basic
j accountingjequation.
(c) An j employee j being j fired j is j not j a j business j transaction j as j it j does j not j affect
jany j of j thejcomponents jof jthe jbasic jaccounting jequation.
(d) A jwithdrawal jof jcash jby jthe jowner jfrom jthe jbusiness jis ja jbusiness jtransaction jas jit jaffects
jthejbasic jaccounting jequation.
LO4 jBT: jC j Difficulty: jModerate j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
16. (a) Decrease jassets jand jdecrease jowner’s jequity.
(b) Increase jassets jand jdecrease jassets.
(c) Increase jassets jand jincrease jowner’s jequity.
(d) Decrease jassets jand jdecrease jliabilities.
LO4 jBT: jC j Difficulty: jModerate j TOT: j3 jmin. j AACSB: jNone j AICPA jFC: jReporting
1-4
, FULL j SOLUTION j MANUAL j FOR
Accounting jPrinciples j14th jEdition jby jJerry jJ. jWeygandt, jPaul
D. jKimmel, jJill jE. jMitchell
CHAPTER 1 j
Accounting jin jAction
Learning jObjectives
1. Identify jthe jactivities jand jusers jassociated jwith jaccounting.
2. Explain jthe jbuilding jblocks jof jaccounting: jethics, jprinciples,
jandjassumptions.
3. State jthe jaccounting jequation, jand jdefine jits jcomponents.
4. Analyze jthe jeffects jof jbusiness jtransactions jon jthe jaccounting jequation.
5. Describe jthe jfour jfinancial jstatements jand jhow jthey jare jprepared.
*6. Explain jthe jcareer jopportunities jin jaccounting.
*Note: j All j asterisked j Questions, j Brief j Exercises, j Exercises, j and j Problems j relate j to
j materialjcontained jin jthe jappendix j to jthe jchapter.
1-2
, ANSWERS jTO jQUESTIONS
1. This jis jtrue. jVirtually jevery jorganization jand jperson jin jour jsociety juses jaccounting jinformation.
jBusinesses, jinvestors, jcreditors, jgovernment jagencies, jand jnot-for-profit jorganizations jmust
juse jaccounting jinformation jto joperate jeffectively.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
2. Accounting jis jthe jprocess jof jidentifying, jrecording, jand j communicating j the jeconomic jevents
jof jan jorganization jto jinterested jusers jof jthe jinformation. jThe jfirst jactivity jof jthe jaccounting
jprocess jis jto jidentify jeconomic jevents jthat jare jrelevant jto ja jparticular jbusiness. jOnce
jidentified jand jmeasured, jthe jevents jare jrecorded jto jprovide ja jhistory jof jthe jfinancial jactivities
jof jthe jorganization. jRecording jconsists jof jkeeping ja jchronological jdiary jof jthese jmeasured
jevents jin jan jorderly jand jsystematic jmanner. jThe jinformation jis jcommunicated jthrough jthe
jpreparation jand jdistribution jof jaccounting j reports, j the j most j common j of j which jare
j called jfinancial jstatements. jA jvital jelement jin jthe jcommunication jprocess jis jthe jaccountant’s
jability jand jresponsibility jto janalyze jand jinterpret jthe jreported jinformation.
LO1 jBT: jC j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
3. (a) jInternal jusers jare jthose jwho jplan, jorganize, jand jrun jthe jbusiness jand jtherefore jare
jofficers jand jother jdecision jmakers.
(b) To jassist jmanagement, jmanagerial jaccounting jprovides jinternal jreports. jExamples
jinclude jfinancial jcomparisons jof joperating jalternatives, jprojections jof jincome jfrom jnew
jsales jcampaigns, jand jforecasts jof jcash jneeds jfor jthe jnext jyear.
LO1 j BT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
4. (a) jInvestors j(owners) juse jaccounting jinformation jto jmake jdecisions jto jbuy, jhold, jor jsell
jowner- jship jshares jof ja jcompany.
(b) Creditors juse jaccounting jinformation jto jevaluate jthe jrisks jof jgranting jcredit jor jlending jmoney.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
5. This jis jfalse. jBookkeeping jusually jinvolves jonly jthe jrecording jof jeconomic jevents jand jtherefore
jis jjust jone jpart jof jthe jentire jaccounting jprocess. jAccounting, jon jthe jother jhand, jinvolves jthe
jentire jprocess jof jidentifying, jrecording, jand jcommunicating jeconomic jevents.
LO1 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
6. Benton jTravel jAgency jshould jreport jthe jland jat j$90,000 jon jits jDecember j31, j 2022 jbalance
jsheet. jThis jis jtrue jnot jonly jat jthe jtime jthe jland jis jpurchased, jbut jalso jover jthe jtime jthe jland
jis jheld. jIn jdetermining jwhich jmeasurement jprinciple jto juse j(historical jcost jor jfair jvalue)
jcompanies jweigh jthe jfactual jnature jof jcost jfigures jversus jthe jrelevance jof jfair jvalue. jIn
jgeneral, jcompanies juse jhistorical jcost. jOnly jin jsituations jwhere jassets jare jactively jtraded jdo
j companies japply jthe jfair jvalue jprinciple.
LO2 j BT: jC j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
7. The jmonetary junit jassumption jrequires jthat jonly jtransaction jdata jthat jcan jbe jexpressed jin
jterms jof jmoney jbe jincluded jin jthe jaccounting jrecords. jThis jassumption jenables jaccounting jto
jquantify j(measure) jeconomic jevents.
LO2 j BT: jK j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
8. The jeconomic jentity jassumption jrequires jthat jthe jactivities jof jthe jentity jbe jkept jseparate jand
jdistinct jfrom jthe jactivities jof j its jowners jand jall jother jeconomic jentities.
LO2 jBT: jK j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
1-3
, Questions jChapter j1 j(Continued)
9. The j three j basic j forms j of j business j organizations j are: j (1) j proprietorship, j (2)
j partnership, j and
(3) j corporation.
LO2 j BT: jK j Difficulty: jEasy j TOT:1 jmin. j AACSB: jNone j AICPA jFC: jReporting
10. One jof jthe jadvantages jHelen jRupp jwould jenjoy jis jthat jownership jof ja jcorporation jis
jrepresented jby jtransferable jshares jof jstock. jThis jwould jallow jHelen jto jraise jmoney jeasily jby
jselling ja jpart jof jher jownership jin jthe jcompany. jAnother jadvantage jis jthat jbecause jholders jof
jthe jshares j(stockholders) jenjoy jlimited jliability; jthey jare jnot jpersonally jliable jfor jthe jdebts jof
jthe jcorporate jentity. jAlso, jbecause jownership jcan jbe jtransferred jwithout jdissolving jthe
jcorporation, jthe jcorporationjenjoys jan junlimited jlife.
LO2 j BT: jK j Difficulty: jEasy j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
11. The jbasic jaccounting jequation jis jAssets j= jLiabilities j+ jOwner’s jEquity.
LO3 jBT: jK j Difficulty: jEasy j TOT: j1 jmin. j AACSB: jNone j AICPA jFC: jMeasurement
12. (a) jAssets jare jresources jowned jby ja jbusiness. jLiabilities jare jcreditor jclaims jagainst jassets.
jPut jmore jsimply, jliabilities jare jexisting jdebts jand jobligations. jOwner’s jequity jis jthe
jownership jclaim jon jtotal jassets.
(b) Owner’s jequity jis jaffected jby jowner’s jinvestments, jdrawings, jrevenues, jand jexpenses.
LO3 jBT: jC j Difficulty: jEasy j TOT: j2 jmin. j AACSB: jNone j AICPA jFC: jReporting
13. The jliabilities jare: j(b) jAccounts jpayable jand j(g) jSalaries jand jwages jpayable.
LO3 jBT: jC j Difficulty: jEasy j TOT: j1 jmin. j AACSB: jNone j AICPA jFC: jReporting
14. Yes, ja jbusiness jcan jenter jinto ja jtransaction jin jwhich jonly jthe jleft jside jof jthe jaccounting
jequation jis jaffected. jAn jexample jwould jbe ja jtransaction jwhere jan jincrease jin jone jasset jis
joffset jby ja jdecrease jin janother jasset. jAn jincrease jin jthe jEquipment jaccount jwhich jis joffset
jby ja jdecrease jinjthe jCash jaccount jis ja jspecific jexample.
LO4 jBT: jC j Difficulty: jModerate j TOT: j3 jmin. j AACSB: jNone j AICPA jFC: jReporting
15. Business jtransactions jare jthe j economic jevents jof j the j enterprise j recorded j by
jaccountantsjbecause jthey jaffect jthe jbasic jaccounting jequation.
(a) The jdeath jof j the jowner jof jthe jcompany jis jnot ja jbusiness jtransaction jas jit jdoes jnot
jaffect j ofjthe jcomponents jof j the jbasic jaccounting jequation.
(b) Supplies j purchased j on j account j is j a j business j transaction j as j it j affects j the j basic
j accountingjequation.
(c) An j employee j being j fired j is j not j a j business j transaction j as j it j does j not j affect
jany j of j thejcomponents jof jthe jbasic jaccounting jequation.
(d) A jwithdrawal jof jcash jby jthe jowner jfrom jthe jbusiness jis ja jbusiness jtransaction jas jit jaffects
jthejbasic jaccounting jequation.
LO4 jBT: jC j Difficulty: jModerate j TOT: j4 jmin. j AACSB: jNone j AICPA jFC: jReporting
16. (a) Decrease jassets jand jdecrease jowner’s jequity.
(b) Increase jassets jand jdecrease jassets.
(c) Increase jassets jand jincrease jowner’s jequity.
(d) Decrease jassets jand jdecrease jliabilities.
LO4 jBT: jC j Difficulty: jModerate j TOT: j3 jmin. j AACSB: jNone j AICPA jFC: jReporting
1-4
