CreatedmBy:mAmSolutio
n
Solution Manual for Financial Accounting Tools For Business Dec
m m m m m m m m
ision Making 10th Edition Paul D. Kimmel, Jerry J. Weygandt,Jill
m m m m m m m m m m
E. Mitchell Latest A+ 2024
m m m m m
CHAPTER 1 m
Introduction to Financial Statements
m m m
LearningmObjectives
1. Identifymthemformsmofmbusinessmorganizationmandmthemusesmofmaccountingminformation.
2. Explainmthemthreemprincipalmtypesmofmbusinessmactivity.
3. Describemthemfourmfinancialmstatementsmandmhowmtheymaremprepared.
*4. Explainmthemcareermopportunitiesminmaccounting.
ANSWERS TO QUESTIONSm m
1. Themthreembasicmformsmofmbusinessmorganizationsmarem(1)msolemproprietorship,m(
2)mpartnership,mand
(3)mcorporation.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
2. Advantagesmofmamcorporationmaremlimitedmliabilitym(stockholdersmnotmbeingmpersonallymlia
blemformcor-
m poratemdebts),measymtransferabilitymofmownership,mandmeasemofmraisingmfunds.mDisadvantagesmofmam
corporationmaremincreasedmtaxationmandmgovernmentmregulations.
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,CreatedmBy:mAmSolutio
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LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
3. Proprietorshipsmandmpartnershipsmreceivemfavorablemtaxmtreatmentmcomparedmtomcorporati
onsmandmaremeasiermtomformmthanmcorporations.mTheymaremalsomownermcontrolled.mDisadvantagesmo
fmproprietorshipsmandmpartnershipsmaremunlimitedmliabilitym(proprietors/partnersmarempersonallymlia
blemformallmdebts)mandmdifficultyminmobtainingmfinancingmcomparedmtomcorporations.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
4. Yes.mCompaniesmcanmchoosemonemofmthemhybridmbusinessmforms,mlimitedmliability
m corporationsm(LLCs)mormsubchaptermSmcorporations,mwhichmcombinemthemtaxmadvantages
m ofmpartnershipsmwithmthemlimitedmliabilitymofmcorporations.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
5. Yes.mAmpersonmcannotmearnmamliving,mspendmmoney,mbuymonmcredit,mmakemanminvestment,
m ormpaymtaxesmwithoutmreceiving,musing,mormdispensingmfinancialminformation.mAccountingmprovi
desmfinancialminformationmtominterestedmusersmthroughmthempreparationmandmdistributionmofmfinan
cialmstatements.
LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
6. Internalmusersmaremmanagersmwhomplan,morganize,mandmrunmambusiness.mTomassi
stmmanagement,maccountingmprovidesmtimelyminternalmreports.mExamplesmincludemfina
ncialmcomparisonsmofmoperating
alternatives,mprojectionsmofmincomemfrommnewmsalesmcampaigns,mforecastsmofmcashmneedsmformt
hemnextmyear,mandmfinancialmstatements.
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,CreatedmBy:mAmSolutio
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LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
7. Externalmusersmaremthosemoutsidemthembusinessmwhomhavemeithermampresentmormpotentialmdir
ectmfinancialminterestm(investorsmandmcreditors)mormanmindirectmfinancialminterestm(taxingmauthoritie
s,mregu-mlatorymagencies,mlabormunions,mcustomers,mandmeconomicmplanners).
LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
8. Themfourmmostmcommonmtypesmofmdatamanalyticsmandmthembasicmquestionmeachmaddressesma
re:mDescriptivem(Whatmhappened?),mDiagnosticm(Whymdidmitmhappen?),mPredictivem(Whatmismlikely
m tomhappen?),mandmPrescriptivem(Whatmshouldmwemdomaboutmit?).
LOm1mBT:mKmDifficulty:mEmTOT:m2mmin.mAACSB:mnowledgemAICPAmAC:mMeasurementmAnaly
sismandmInterpretation
QuestionsmChapterm1m(Continued)
9. Themthreemtypesmofmbusinessmactivitiesmaremfinancingmactivities,minvestingmactivities,man
dmoperatingmactivities.mFinancingmactivitiesmincludemborrowingmmoneymandmsellingmsharesmofmst
ock.mInvestingmactivitiesmincludemthempurchasemandmsalemofmproperty,mplant,mandmequipment.mOp
eratingmactivitiesmincludemsellingmgoods,mperformingmservices,mandmpurchasingminventory.
LOm2mBT:mCmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
10. (a)m Incomemstatement. (d) Balancemsheet.
(b) Balancemsheet.m(e) Balancemsheet.
(c) Incomemstatement. (f) Balancemsheet.
LOm3mBT:mKmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
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, CreatedmBy:mAmSolutio
n
11. Whenmamcompanympaysmdividends,mitmreducesmthemamountmofmassetsmavailablemtompaymcre
ditors.mTherefore,mbanksmandmothermcreditorsmmonitormdividendmpaymentsmtomensuremtheymdomnotm
putmamcompany’smabilitymtommakemdebtmpaymentsmatmrisk.
LOm3mBT:mCmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgem AICPAmAC:mMeasurem
entmAnallysismandmInterpretation
12. Yes.mNetmincomemdoesmappearmonmthemincomemstatement—
itmismthemresultmofmsubtractingmexpensesmfrommrevenues.mInmaddition,mnetmincomemappearsminmthemre
tainedmearningsmstatement—itmismshownmasmanmadditionmtomthembeginning-of-
periodmretainedmearnings.mIndirectly,mthemnetmincomemofmamcompanymismalsomincludedminmthembalanc
emsheet.mItmismincludedminmthemretainedmearningsmaccountmwhichmappearsminmthemstockholders’mequi
tymsectionmofmthembalancemsheet.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
13. Themprimarympurposemofmthemstatementmofmcashmflowsmismtomprovidemfinancialminformati
onmaboutmthemcashmreceiptsmandmcashmpaymentsmofmambusinessmformamspecificmperiodmofmtime.
LOm3mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
14. Themthreemcategoriesmofmthemstatementmofmcashmflowsmaremoperatingmactivities,minvesting
m activities,mandmfinancingmactivities.mThemcategoriesmweremchosenmbecausemtheymrepresentmthemth
reemprincipalmtypesmofmbusinessmactivities.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
15. Retainedmearningsmismthemnetmincomemretainedminmamcorporation.mRetainedmearnings
m ismincreasedmbymnetmincomemandmismdecreasedmbymdividendsmandmamnetmloss.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
16. ThembasicmaccountingmequationmismAssetsm=mLiabilitiesm+mStockholders’mEquity.
https://www.stuvia.com/user/asolution
n
Solution Manual for Financial Accounting Tools For Business Dec
m m m m m m m m
ision Making 10th Edition Paul D. Kimmel, Jerry J. Weygandt,Jill
m m m m m m m m m m
E. Mitchell Latest A+ 2024
m m m m m
CHAPTER 1 m
Introduction to Financial Statements
m m m
LearningmObjectives
1. Identifymthemformsmofmbusinessmorganizationmandmthemusesmofmaccountingminformation.
2. Explainmthemthreemprincipalmtypesmofmbusinessmactivity.
3. Describemthemfourmfinancialmstatementsmandmhowmtheymaremprepared.
*4. Explainmthemcareermopportunitiesminmaccounting.
ANSWERS TO QUESTIONSm m
1. Themthreembasicmformsmofmbusinessmorganizationsmarem(1)msolemproprietorship,m(
2)mpartnership,mand
(3)mcorporation.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
2. Advantagesmofmamcorporationmaremlimitedmliabilitym(stockholdersmnotmbeingmpersonallymlia
blemformcor-
m poratemdebts),measymtransferabilitymofmownership,mandmeasemofmraisingmfunds.mDisadvantagesmofmam
corporationmaremincreasedmtaxationmandmgovernmentmregulations.
https://www.stuvia.com/user/asolution
,CreatedmBy:mAmSolutio
n
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
3. Proprietorshipsmandmpartnershipsmreceivemfavorablemtaxmtreatmentmcomparedmtomcorporati
onsmandmaremeasiermtomformmthanmcorporations.mTheymaremalsomownermcontrolled.mDisadvantagesmo
fmproprietorshipsmandmpartnershipsmaremunlimitedmliabilitym(proprietors/partnersmarempersonallymlia
blemformallmdebts)mandmdifficultyminmobtainingmfinancingmcomparedmtomcorporations.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
4. Yes.mCompaniesmcanmchoosemonemofmthemhybridmbusinessmforms,mlimitedmliability
m corporationsm(LLCs)mormsubchaptermSmcorporations,mwhichmcombinemthemtaxmadvantages
m ofmpartnershipsmwithmthemlimitedmliabilitymofmcorporations.
LOm1mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmBC:mGovernan
cemPerspective
5. Yes.mAmpersonmcannotmearnmamliving,mspendmmoney,mbuymonmcredit,mmakemanminvestment,
m ormpaymtaxesmwithoutmreceiving,musing,mormdispensingmfinancialminformation.mAccountingmprovi
desmfinancialminformationmtominterestedmusersmthroughmthempreparationmandmdistributionmofmfinan
cialmstatements.
LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
6. Internalmusersmaremmanagersmwhomplan,morganize,mandmrunmambusiness.mTomassi
stmmanagement,maccountingmprovidesmtimelyminternalmreports.mExamplesmincludemfina
ncialmcomparisonsmofmoperating
alternatives,mprojectionsmofmincomemfrommnewmsalesmcampaigns,mforecastsmofmcashmneedsmformt
hemnextmyear,mandmfinancialmstatements.
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,CreatedmBy:mAmSolutio
n
LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
7. Externalmusersmaremthosemoutsidemthembusinessmwhomhavemeithermampresentmormpotentialmdir
ectmfinancialminterestm(investorsmandmcreditors)mormanmindirectmfinancialminterestm(taxingmauthoritie
s,mregu-mlatorymagencies,mlabormunions,mcustomers,mandmeconomicmplanners).
LOm1mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
8. Themfourmmostmcommonmtypesmofmdatamanalyticsmandmthembasicmquestionmeachmaddressesma
re:mDescriptivem(Whatmhappened?),mDiagnosticm(Whymdidmitmhappen?),mPredictivem(Whatmismlikely
m tomhappen?),mandmPrescriptivem(Whatmshouldmwemdomaboutmit?).
LOm1mBT:mKmDifficulty:mEmTOT:m2mmin.mAACSB:mnowledgemAICPAmAC:mMeasurementmAnaly
sismandmInterpretation
QuestionsmChapterm1m(Continued)
9. Themthreemtypesmofmbusinessmactivitiesmaremfinancingmactivities,minvestingmactivities,man
dmoperatingmactivities.mFinancingmactivitiesmincludemborrowingmmoneymandmsellingmsharesmofmst
ock.mInvestingmactivitiesmincludemthempurchasemandmsalemofmproperty,mplant,mandmequipment.mOp
eratingmactivitiesmincludemsellingmgoods,mperformingmservices,mandmpurchasingminventory.
LOm2mBT:mCmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
10. (a)m Incomemstatement. (d) Balancemsheet.
(b) Balancemsheet.m(e) Balancemsheet.
(c) Incomemstatement. (f) Balancemsheet.
LOm3mBT:mKmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
https://www.stuvia.com/user/asolution
, CreatedmBy:mAmSolutio
n
11. Whenmamcompanympaysmdividends,mitmreducesmthemamountmofmassetsmavailablemtompaymcre
ditors.mTherefore,mbanksmandmothermcreditorsmmonitormdividendmpaymentsmtomensuremtheymdomnotm
putmamcompany’smabilitymtommakemdebtmpaymentsmatmrisk.
LOm3mBT:mCmDifficulty:mMmTOT:m2mmin.mAACSB:mKnowledgem AICPAmAC:mMeasurem
entmAnallysismandmInterpretation
12. Yes.mNetmincomemdoesmappearmonmthemincomemstatement—
itmismthemresultmofmsubtractingmexpensesmfrommrevenues.mInmaddition,mnetmincomemappearsminmthemre
tainedmearningsmstatement—itmismshownmasmanmadditionmtomthembeginning-of-
periodmretainedmearnings.mIndirectly,mthemnetmincomemofmamcompanymismalsomincludedminmthembalanc
emsheet.mItmismincludedminmthemretainedmearningsmaccountmwhichmappearsminmthemstockholders’mequi
tymsectionmofmthembalancemsheet.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
13. Themprimarympurposemofmthemstatementmofmcashmflowsmismtomprovidemfinancialminformati
onmaboutmthemcashmreceiptsmandmcashmpaymentsmofmambusinessmformamspecificmperiodmofmtime.
LOm3mBT:mKmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
14. Themthreemcategoriesmofmthemstatementmofmcashmflowsmaremoperatingmactivities,minvesting
m activities,mandmfinancingmactivities.mThemcategoriesmweremchosenmbecausemtheymrepresentmthemth
reemprincipalmtypesmofmbusinessmactivities.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
15. Retainedmearningsmismthemnetmincomemretainedminmamcorporation.mRetainedmearnings
m ismincreasedmbymnetmincomemandmismdecreasedmbymdividendsmandmamnetmloss.
LOm3mBT:mCmDifficulty:mEmTOT:m1mmin.mAACSB:mKnowledgemAICPAmAC:mReporting
16. ThembasicmaccountingmequationmismAssetsm=mLiabilitiesm+mStockholders’mEquity.
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