Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
SOLUTION MANUAL FOR u u
Accountinguprinciples,uvolumeu1,u10thucanadianueditionujerryuj.uWeygandt,up
aulud.uKimmel,ujillue.uMitchell,uvalerieuwarren,uloriunovak
Chapteru1-10
CHAPTER 1 u
ANSWERS TO QUESTIONS
u u
1. Yes.uAccountinguisutheufinancialuinformationusystemuthatuprovidesuusefulufina
ncialuinformationutoueveryupersonuwhouownsuanduusesueconomicuresourcesu
oruotherwiseuengagesuinueconomicuactivity.
LOu1uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
2. Internaluusersuareuthoseuwhouplan,uorganize,uandurunubusinessesuanduinclud
eumanagers,usupervisors,udirectors,uanducompanyuofficers.uExternaluusersuw
orkuforuotheruorganizationsubutuhaveureasonsutoubeuinteresteduinutheucompany
’sufinancialupositionuanduperformance,uanduincludeucurrentuorupotentialuinvest
orsu(owners),uanducreditors.
Internaluusersumayuwantuanswersutouseveralutypesuofuquestions.uForuexampl
e,utheufinanceudepartmentuwantsutouknowuifuthereuisuenoughucashutoupayutheu
bills.uTheumarketingudepartmentuwantsutouknowuwhatupriceutheubusinessusho
ulduuseuinusellinguitsuproductsutoumaximizeuprofits.uTheuhumanuresourcesudep
artmentuwantsutouknowuhowumanyupeopleutheubusinessucanuaffordutouhire.uTh
euproductionudepartmentuwantsutouknowuwhichuproductulinesumakeutheubusin
essutheumostuprofit.
Externaluusersumayuwantuanswersutouseveralutypesuofuquestions.uForuexampl
e,uinvestorsuwantutouknowuifutheucompanyuisuearninguenoughutougiveuthemu au r
eturnu onu theiru investment.u Creditorsu wantu tou knowu ifu theu companyuisuableutou
payuitsudebtsuasutheyucomeudue.uLabouruunionsuwantutouknowuwhetherutheuo
wnersucanuaffordutoupayuincreaseduwagesuandubenefits.uCustomersuareuinter
esteduinuwhetheruaucompanyuwillucontinueutouhonouruitsuproductuwarrantiesua
ndusupportuitsuproductulines.uTaxinguauthoritiesuwantutouknowuwhetherutheuco
mpanyurespectsutheutaxulaws.uRegulatoryuagenciesuwantutouknowuwhetheruth
eucompanyuisurespectinguestablishedurules.
LOu1u BT:uCu Difficulty:uMu Time:u15umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
3. Theumainuobjectiveuofufinancialureportinguisutouprovideu usefuluinformationuto
SolutionsuManual 1.1 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
,Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
investorsuanducreditorsu(externaluusers)utoumakeudecisionsuaboutuaubusiness
.u Usersu mayu beu potentialu investorsu whou needu tou decideu ifu theyuwishutouin
vestuinutheubusinessuorutheyumayubeu creditorsudecidinguifutheyuwishutoulendum
oneyutoutheubusiness.uTheseuusersuwantutouknowuifutheubusinessuisurunningus
uccessfullyuanducanugenerateucashuanduearnuauprofit.
LOu1uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
4. Proprietorships,upartnerships,uanducorporationsuareutheuthreeumainuformsuofub
usinessuorganizations.uTheumainudifferenceuamongutheseuthreeuformsuisutheu
sizeu ofu theu business.u Sinceu au proprietorshipu isu au businessu ownedu byuoneup
erson,uituhasulimiteduresources.uTheusizeuofutheubusinessuisutypicallyusmalluan
dutheulifeuofutheubusinessuisulimitedutoutheulifeuofutheuowner.uTheusizeuofubusines
sesucanuexpanduinutheucaseuofuaupartnershipuasumoreuownersuareuinvolveduinu
theuday-to-
dayuoperationsuofutheubusiness.uInuorderutouachieveuaulargeusize,uwithuaudivers
eugroupuofuowners,utheucorporateuformuisuusedutouhaveueasyutransferabilityuofu
theuownershiputhroughutheuissuanceuofushares.uAnotheruimportantudifferenceu
isuthatutheucorporationuisuauseparateu legaluentityuandupaysuincomeutaxes.uInua
ddition,utheucorporationuisutheuonlyuformuwhereuownersuhaveulimiteduliabilityuw
ithurespectutoutheubusiness.uTheufollowinguareutheumainucharacteristicsuofueac
huform:
a. Auproprietorshipuisuauprivateubusinessuwithuoneuowneruwhouhasuunlimite
duliabilityuforutheubusiness.uTheuproprietorshipuhasuaulimitedulifeutiedutouth
eulifeuofutheuowner.uThereuisutransparencyubetweenutheuowneruandutheub
usiness.uUltimately,utheuowneruisupersonallyuresponsibleutoupayutaxuonut
heuprofituofutheubusiness.
b. Aupartnershipuhasuessentiallyutheusameucharacteristicsuasuauproprietors
hipuexceptuthatuinuaupartnership,uthereuisumoreuthanuoneuowner.uPartner
shipsuareuoftenuusedutouorganizeuservice-
typeubusinesses,uincludinguprofessionalupractices.
c. Forucorporations,utheuownersuareuoneuorumoreushareholdersu whouenjoy
ulimiteduliability.uTheucorporationupaysuincomeutaxesuanducanuhaveuanuin
definiteuliveusinceuitsuownershipuunits,uinutheuformuofushares,uareueasilyutr
ansferredutouotheruowners.
LOu2uBT:uKu Difficulty:uMu Time:u15umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
5. Ethicsuisuaufundamentalubusinessuconcept.uIfuaccountantsudounotuhaveuauhigh
uethicalustandard,utheuinformationutheyuproduceuwillunotuhaveuanyucredibility.
Ethicsuareuimportantutoustatementuusersubecauseuituprovidesuthemucomfortuth
atutheufinancialuinformationutheyuareuusinguisucredibleuandureliable.
SolutionsuManual 1.2 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
,Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
LOu3u BT:uCu Difficulty:u Su Time:u5umin.u AACSB:uEthicsu CPA:ucpa-t001ucpa-
e001uCM:uReportinguanduEthics
6. Theuusersuofufinancialuinformationuofupubliclyuaccountableucompaniesuhaveudi
fferentuneedsuthanutheuusersuofufinancialuinformationuofu privateucompanies.uP
ubliclyutradeducorporationsuareurequiredutoupresentufinancialuinformationuusin
guaccountingurulesuthatuareuconsistentuwithuthoseuuseduglobally.uToudouthis,up
ublicutradeducompaniesuneedutoufollowuInternationaluFinancialuReportinguSta
ndardsu(IFRS).uDoingusouhelpsu Canadianucompaniesucompeteuinuauglobalum
arket.u Butufollowinguthisusetuofupoliciesuandustandardsuisuoftenunotuessentialuo
rucostueffectiveuforuprivatelyuownedubusinesses.uTheuusersuofuprivateucompan
yufinancialustatementsuoftenu dounoturequireutheuextensiveumeasurementsuan
dudisclosuresurequiredubyuIFRSuanduthusuprivateucompaniesumayureportuunde
ruAccountinguStandardsuforuPrivateuEnterprisesu(ASPE).
LOu3uBT:uKu Difficulty:uMu Time:u10umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
7. Theureportinguentityuconceptustatesuthatueconomicueventsucanubeuidentifieduw
ithuauparticularuunituofuaccountability.uThisuconcepturequiresuthatutheuactivitiesu
ofutheuentityubeukeptuseparateuandudistinctufromutheuactivitiesuofuitsuownersuan
dualluotherueconomicuentities.
LOu3uuBT:uKu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
8. Accountinguinformationuhasurelevanceuifuitumakesuaudifferenceuinuaudecision.uF
aithfulu representationu showsu theu economicu realityu ofu eventsu ratheru thanuju
stutheirulegaluform.uFaithfulurepresentationuisuachieveduifutheuinformationuisuco
mplete,uneutral,uandufreeufromumaterialuerror.uCompleteuinformationuincludesu
alluinformationunecessaryutoushowutheueconomicurealityuofutheutransaction.uAc
countinguinformationuisuneutraluifuituisufreeufromubiasuintendedutouattainuauprede
termineduresultuoruencourageuauparticularubehaviour.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
9. Historicalucosturepresentsutheuamountupaiduinuautransaction.u Theufairuvalueuof
uanuassetuisu generallyutheuamountuanuassetucouldubeusolduforuinutheumarket.uO
nutheudateuofupurchase,ufairuvalueuanducostuareutheusame.uAsutimeuprogresses,
utheufairuvalueuchangesudependinguonutheunatureuofutheuasset.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
10. Inuorderuforuanueventutoubeurecognizeduinutheuaccountingurecords,utheueventum
ustuchangeutheuentity’sufinancialuposition.uExamplesuofueventsuthatuareunotutra
nsactionsuincludeuhiringuofuemployeesuandusigninguauleaseuforupremises.
LOu3uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
SolutionsuManual 1.3 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
, Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
QUESTIONS (Continued) u
11. Theumonetaryuunituconceptustatesuthatuonlyutransactionudatauthatucanubeuexpr
esseduasuanuamountuofumoneyumayubeuincludeduinutheuaccountingurecords.uC
onsequently,uinformationuthatucannotubeuobjectivelyumeasureduinudollarsucan
notubeuincludeduasutransactionsuofutheubusiness.uItuisualsouassumeduthatutheu
monetaryuunituisustableuwithurespectutoutheuvalueuoveruseveraluyears.uInuotheru
words,uinflationuisuignored.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
12. TheubasicuaccountinguequationuisuAssetsu=uLiabilitiesu+uOwner'suEquityuandut
heuexpandeduaccountinguequationuisu Assetsu=uLiabilitiesu+uOwner'su Capital
–
uOwner’suDrawingsu+uRevenueu−uExpenses.uTheuequationuisutheubasisuforurec
ordinguandusummarizinguallutheueconomicueventsuandutransactionsuofuaubusin
ess.
LOu4uBT:uKu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
13. a.u Assetsuareuresourcesucontrolledubyuaubusiness,uasuauresultuofupastuevents,
uandufromuwhichufutureueconomicubenefitsu(likeucash)uhaveutheupotential
utouflowuintoutheubusiness.uLiabilitiesuareuexistinguobligations,uarisingufro
mupastuevents,utheusettlementuofuwhichuwilluincludeuanuoutflowuofuecono
micubenefitsu(suchuasucashuoruservices)uPutumoreusimply,uliabilitiesuareu
existingudebtsuanduobligations.uOwner'suequityuisutheuowner’suclaimuonut
heuresidualuassetsuofutheucompany,uwhichuisutheuassetsuinuaubusinessuaft
erudeductinguliabilities.
b.
Revenuesuanduinvestmentsubyutheuowneruincreaseuowner'suequity.uDr
awingsuanduexpensesudecreaseuowner’suequity.
LOu4uBT:uKu Difficulty:uMu Time:u10umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
14. AccountsuReceivableurepresentuamountsuowedutoutheubusinessubyuitsucusto
mersuforuservicesuperformeduorugoodsuprovided,ubutuforuwhichucollectionuha
sunotuyetubeenureceived.uItuisuanuasset.uAccountsuPayableurepresentuamount
suowedubyutheubusinessuforuservicesuorugoodsureceived,ubutuforuwhichupaym
entuhasunotuyetubeenumade.uItuisuauliability.
LOu4uBT:uKu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
15. Profituorulossuisutheuresultuofutheucalculation:urevenuesulessuexpenses.uIfurev
enuesuexceeduexpenses,utheubusinessuhasuexperienceduprofit.uIfuexpensesu
exceedurevenues,uaulossuisuexperiencedubyutheubusiness.
LOu4uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
SolutionsuManual 1.4 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
SOLUTION MANUAL FOR u u
Accountinguprinciples,uvolumeu1,u10thucanadianueditionujerryuj.uWeygandt,up
aulud.uKimmel,ujillue.uMitchell,uvalerieuwarren,uloriunovak
Chapteru1-10
CHAPTER 1 u
ANSWERS TO QUESTIONS
u u
1. Yes.uAccountinguisutheufinancialuinformationusystemuthatuprovidesuusefulufina
ncialuinformationutoueveryupersonuwhouownsuanduusesueconomicuresourcesu
oruotherwiseuengagesuinueconomicuactivity.
LOu1uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
2. Internaluusersuareuthoseuwhouplan,uorganize,uandurunubusinessesuanduinclud
eumanagers,usupervisors,udirectors,uanducompanyuofficers.uExternaluusersuw
orkuforuotheruorganizationsubutuhaveureasonsutoubeuinteresteduinutheucompany
’sufinancialupositionuanduperformance,uanduincludeucurrentuorupotentialuinvest
orsu(owners),uanducreditors.
Internaluusersumayuwantuanswersutouseveralutypesuofuquestions.uForuexampl
e,utheufinanceudepartmentuwantsutouknowuifuthereuisuenoughucashutoupayutheu
bills.uTheumarketingudepartmentuwantsutouknowuwhatupriceutheubusinessusho
ulduuseuinusellinguitsuproductsutoumaximizeuprofits.uTheuhumanuresourcesudep
artmentuwantsutouknowuhowumanyupeopleutheubusinessucanuaffordutouhire.uTh
euproductionudepartmentuwantsutouknowuwhichuproductulinesumakeutheubusin
essutheumostuprofit.
Externaluusersumayuwantuanswersutouseveralutypesuofuquestions.uForuexampl
e,uinvestorsuwantutouknowuifutheucompanyuisuearninguenoughutougiveuthemu au r
eturnu onu theiru investment.u Creditorsu wantu tou knowu ifu theu companyuisuableutou
payuitsudebtsuasutheyucomeudue.uLabouruunionsuwantutouknowuwhetherutheuo
wnersucanuaffordutoupayuincreaseduwagesuandubenefits.uCustomersuareuinter
esteduinuwhetheruaucompanyuwillucontinueutouhonouruitsuproductuwarrantiesua
ndusupportuitsuproductulines.uTaxinguauthoritiesuwantutouknowuwhetherutheuco
mpanyurespectsutheutaxulaws.uRegulatoryuagenciesuwantutouknowuwhetheruth
eucompanyuisurespectinguestablishedurules.
LOu1u BT:uCu Difficulty:uMu Time:u15umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
3. Theumainuobjectiveuofufinancialureportinguisutouprovideu usefuluinformationuto
SolutionsuManual 1.1 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
,Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
investorsuanducreditorsu(externaluusers)utoumakeudecisionsuaboutuaubusiness
.u Usersu mayu beu potentialu investorsu whou needu tou decideu ifu theyuwishutouin
vestuinutheubusinessuorutheyumayubeu creditorsudecidinguifutheyuwishutoulendum
oneyutoutheubusiness.uTheseuusersuwantutouknowuifutheubusinessuisurunningus
uccessfullyuanducanugenerateucashuanduearnuauprofit.
LOu1uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
4. Proprietorships,upartnerships,uanducorporationsuareutheuthreeumainuformsuofub
usinessuorganizations.uTheumainudifferenceuamongutheseuthreeuformsuisutheu
sizeu ofu theu business.u Sinceu au proprietorshipu isu au businessu ownedu byuoneup
erson,uituhasulimiteduresources.uTheusizeuofutheubusinessuisutypicallyusmalluan
dutheulifeuofutheubusinessuisulimitedutoutheulifeuofutheuowner.uTheusizeuofubusines
sesucanuexpanduinutheucaseuofuaupartnershipuasumoreuownersuareuinvolveduinu
theuday-to-
dayuoperationsuofutheubusiness.uInuorderutouachieveuaulargeusize,uwithuaudivers
eugroupuofuowners,utheucorporateuformuisuusedutouhaveueasyutransferabilityuofu
theuownershiputhroughutheuissuanceuofushares.uAnotheruimportantudifferenceu
isuthatutheucorporationuisuauseparateu legaluentityuandupaysuincomeutaxes.uInua
ddition,utheucorporationuisutheuonlyuformuwhereuownersuhaveulimiteduliabilityuw
ithurespectutoutheubusiness.uTheufollowinguareutheumainucharacteristicsuofueac
huform:
a. Auproprietorshipuisuauprivateubusinessuwithuoneuowneruwhouhasuunlimite
duliabilityuforutheubusiness.uTheuproprietorshipuhasuaulimitedulifeutiedutouth
eulifeuofutheuowner.uThereuisutransparencyubetweenutheuowneruandutheub
usiness.uUltimately,utheuowneruisupersonallyuresponsibleutoupayutaxuonut
heuprofituofutheubusiness.
b. Aupartnershipuhasuessentiallyutheusameucharacteristicsuasuauproprietors
hipuexceptuthatuinuaupartnership,uthereuisumoreuthanuoneuowner.uPartner
shipsuareuoftenuusedutouorganizeuservice-
typeubusinesses,uincludinguprofessionalupractices.
c. Forucorporations,utheuownersuareuoneuorumoreushareholdersu whouenjoy
ulimiteduliability.uTheucorporationupaysuincomeutaxesuanducanuhaveuanuin
definiteuliveusinceuitsuownershipuunits,uinutheuformuofushares,uareueasilyutr
ansferredutouotheruowners.
LOu2uBT:uKu Difficulty:uMu Time:u15umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
5. Ethicsuisuaufundamentalubusinessuconcept.uIfuaccountantsudounotuhaveuauhigh
uethicalustandard,utheuinformationutheyuproduceuwillunotuhaveuanyucredibility.
Ethicsuareuimportantutoustatementuusersubecauseuituprovidesuthemucomfortuth
atutheufinancialuinformationutheyuareuusinguisucredibleuandureliable.
SolutionsuManual 1.2 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
,Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
LOu3u BT:uCu Difficulty:u Su Time:u5umin.u AACSB:uEthicsu CPA:ucpa-t001ucpa-
e001uCM:uReportinguanduEthics
6. Theuusersuofufinancialuinformationuofupubliclyuaccountableucompaniesuhaveudi
fferentuneedsuthanutheuusersuofufinancialuinformationuofu privateucompanies.uP
ubliclyutradeducorporationsuareurequiredutoupresentufinancialuinformationuusin
guaccountingurulesuthatuareuconsistentuwithuthoseuuseduglobally.uToudouthis,up
ublicutradeducompaniesuneedutoufollowuInternationaluFinancialuReportinguSta
ndardsu(IFRS).uDoingusouhelpsu Canadianucompaniesucompeteuinuauglobalum
arket.u Butufollowinguthisusetuofupoliciesuandustandardsuisuoftenunotuessentialuo
rucostueffectiveuforuprivatelyuownedubusinesses.uTheuusersuofuprivateucompan
yufinancialustatementsuoftenu dounoturequireutheuextensiveumeasurementsuan
dudisclosuresurequiredubyuIFRSuanduthusuprivateucompaniesumayureportuunde
ruAccountinguStandardsuforuPrivateuEnterprisesu(ASPE).
LOu3uBT:uKu Difficulty:uMu Time:u10umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
7. Theureportinguentityuconceptustatesuthatueconomicueventsucanubeuidentifieduw
ithuauparticularuunituofuaccountability.uThisuconcepturequiresuthatutheuactivitiesu
ofutheuentityubeukeptuseparateuandudistinctufromutheuactivitiesuofuitsuownersuan
dualluotherueconomicuentities.
LOu3uuBT:uKu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
8. Accountinguinformationuhasurelevanceuifuitumakesuaudifferenceuinuaudecision.uF
aithfulu representationu showsu theu economicu realityu ofu eventsu ratheru thanuju
stutheirulegaluform.uFaithfulurepresentationuisuachieveduifutheuinformationuisuco
mplete,uneutral,uandufreeufromumaterialuerror.uCompleteuinformationuincludesu
alluinformationunecessaryutoushowutheueconomicurealityuofutheutransaction.uAc
countinguinformationuisuneutraluifuituisufreeufromubiasuintendedutouattainuauprede
termineduresultuoruencourageuauparticularubehaviour.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
9. Historicalucosturepresentsutheuamountupaiduinuautransaction.u Theufairuvalueuof
uanuassetuisu generallyutheuamountuanuassetucouldubeusolduforuinutheumarket.uO
nutheudateuofupurchase,ufairuvalueuanducostuareutheusame.uAsutimeuprogresses,
utheufairuvalueuchangesudependinguonutheunatureuofutheuasset.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
10. Inuorderuforuanueventutoubeurecognizeduinutheuaccountingurecords,utheueventum
ustuchangeutheuentity’sufinancialuposition.uExamplesuofueventsuthatuareunotutra
nsactionsuincludeuhiringuofuemployeesuandusigninguauleaseuforupremises.
LOu3uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
SolutionsuManual 1.3 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
, Weygandt,uKieso,uKimmel,uTrenholm,uWarren,uNovak AccountinguPrinciples,uTenthuCanadianuEdition
QUESTIONS (Continued) u
11. Theumonetaryuunituconceptustatesuthatuonlyutransactionudatauthatucanubeuexpr
esseduasuanuamountuofumoneyumayubeuincludeduinutheuaccountingurecords.uC
onsequently,uinformationuthatucannotubeuobjectivelyumeasureduinudollarsucan
notubeuincludeduasutransactionsuofutheubusiness.uItuisualsouassumeduthatutheu
monetaryuunituisustableuwithurespectutoutheuvalueuoveruseveraluyears.uInuotheru
words,uinflationuisuignored.
LOu3u BT:uCu Difficulty:uMu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
12. TheubasicuaccountinguequationuisuAssetsu=uLiabilitiesu+uOwner'suEquityuandut
heuexpandeduaccountinguequationuisu Assetsu=uLiabilitiesu+uOwner'su Capital
–
uOwner’suDrawingsu+uRevenueu−uExpenses.uTheuequationuisutheubasisuforurec
ordinguandusummarizinguallutheueconomicueventsuandutransactionsuofuaubusin
ess.
LOu4uBT:uKu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
13. a.u Assetsuareuresourcesucontrolledubyuaubusiness,uasuauresultuofupastuevents,
uandufromuwhichufutureueconomicubenefitsu(likeucash)uhaveutheupotential
utouflowuintoutheubusiness.uLiabilitiesuareuexistinguobligations,uarisingufro
mupastuevents,utheusettlementuofuwhichuwilluincludeuanuoutflowuofuecono
micubenefitsu(suchuasucashuoruservices)uPutumoreusimply,uliabilitiesuareu
existingudebtsuanduobligations.uOwner'suequityuisutheuowner’suclaimuonut
heuresidualuassetsuofutheucompany,uwhichuisutheuassetsuinuaubusinessuaft
erudeductinguliabilities.
b.
Revenuesuanduinvestmentsubyutheuowneruincreaseuowner'suequity.uDr
awingsuanduexpensesudecreaseuowner’suequity.
LOu4uBT:uKu Difficulty:uMu Time:u10umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
14. AccountsuReceivableurepresentuamountsuowedutoutheubusinessubyuitsucusto
mersuforuservicesuperformeduorugoodsuprovided,ubutuforuwhichucollectionuha
sunotuyetubeenureceived.uItuisuanuasset.uAccountsuPayableurepresentuamount
suowedubyutheubusinessuforuservicesuorugoodsureceived,ubutuforuwhichupaym
entuhasunotuyetubeenumade.uItuisuauliability.
LOu4uBT:uKu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
15. Profituorulossuisutheuresultuofutheucalculation:urevenuesulessuexpenses.uIfurev
enuesuexceeduexpenses,utheubusinessuhasuexperienceduprofit.uIfuexpensesu
exceedurevenues,uaulossuisuexperiencedubyutheubusiness.
LOu4uBT:uCu Difficulty:uSu Time:u5umin.u AACSB:uNoneu CPA:ucpa-t001u CM:uReporting
SolutionsuManual 1.4 Chapteru1
©u2022uJohnuWileyu&uSonsuCanada,uLtd.uUnauthorizeducopying,udistribution,uorutransmissionuofuthisupageuisuprohibite
d.
