Solutions
Manual
d
, CHAPTER 1 d
Accounting in Action d d
Learning Objectives d
1. Identify the activities and users associated with accounting.
d d d d d d d
2. Explain the building blocks of accounting: ethics, principles, and
d d d d d d d d
assumptions.
d
3. State the accounting equation, and define its components.
d d d d d d d
4. Analyze the effects of business transactions on the accounting equation.
d d d d d d d d d
5. Describe the four financial statements and how they are prepared.
d d d d d d d d d
*6. Explain the career opportunities in accounting.
d d d d d d
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material
d d d d d d d d d d d
dcontained in the appendix to the chapter.
d d d d d d
Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse 1-1
dOnly)
, ANSWERS TO QUESTIONS d d
1. This is true. Virtually every organization and person in our society uses accounting information.
d d d d d d d d d d d d d
Businesses, investors, creditors, government agencies, and not-for-profit organizations must use
d d d d d d d d d d
accounting information to operate effectively.
d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
2. Accounting is the process of identifying, recording, and communicating the economic events of
d d d d d d d d d d d d
dan organization to interested users of the information. The first activity of the accounting
d d d d d d d d d d d d d
process is to identify economic events that are relevant to a particular business. Once identified
d d d d d d d d d d d d d d d
and measured, the events are recorded to provide a history of the financial activities of the
d d d d d d d d d d d d d d d d
organization. Recording consists of keeping a chronological diary of these measured events in
d d d d d d d d d d d d d
an orderly and systematic manner. The information is communicated through the preparation
d d d d d d d d d d d d
and distribution of accounting reports, the most common of which are called financial
d d d d d d d d d d d d d
dstatements. A vital element in the communication process is the accountant’s ability and
d d d d d d d d d d d d
responsibility to analyze and interpret the reported information.
d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers
d d d d d d d d d d d d d d d
and other decision makers.
d d d d
(b) To assist management, managerial accounting provides internal reports. Examples include
d d d d d d d d d
financial comparisons of operating alternatives, projections of income from new sales
d d d d d d d d d d d
campaigns, and forecasts of cash needs for the next year.
d d d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell
d d d d d d d d d d d d d
ownership shares of a company.
d d d d d
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
d d d d d d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore is
d d d d d d d d d d d d d d
just one part of the entire accounting process. Accounting, on the other hand, involves the entire
d d d d d d d d d d d d d d d d
process of identifying, recording, and communicating economic events.
d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2027 balance
d d d d d d d d d d d d d d
sheet. This is true not only at the time the land is purchased, but also over the time the land is
d d d d d d d d d d d d d d d d d d d d d
held. In determining which measurement principle to use (historical cost or fair value)
d d d d d d d d d d d d d
companies weigh the factual nature of cost figures versus the relevance of fair value. In general,
d d d d d d d d d d d d d d d d
companies use historical cost. Only in situations where assets are actively traded do companies
d d d d d d d d d d d d d d
apply the fair value principle.
d d d d d
LO2 d BT: dC d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
7. The monetary unit assumption requires that only transaction data that can be expressed in
d d d d d d d d d d d d d
terms of money be included in the accounting records. This assumption enables accounting to
d d d d d d d d d d d d d d
quantify (measure) economic events.
d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
8. The economic entity assumption requires that the activities of the entity be kept separate and
d d d d d d d d d d d d d d
distinct from the activities of its owners and all other economic entities.
d d d d d d d d d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
1-2 Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse dOnly)
, Questions Chapter 1 (Continued)
d d d
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership,
d d d d d d d d d d d
dand
(3) corporation.
d
LO2 d BT: dK d Difficulty: dEasy d TOT:1 dmin. d AACSB: dNone d AICPA dFC: dReporting
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is
d d d d d d d d d d d d d d
represented by transferable shares of stock. This would allow Helen to raise money easily by
d d d d d d d d d d d d d d d
selling a part of her ownership in the company. Another advantage is that because holders of
d d d d d d d d d d d d d d d d
the shares (stockholders) enjoy limited liability; they are not personally liable for the debts of the
d d d d d d d d d d d d d d d d
corporate entity. Also, because ownership can be transferred without dissolving the corporation, the
d d d d d d d d d d d d d
corporation enjoys an unlimited life.
d d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
d d d d d d d d d d
LO3 d BT: dK d Difficulty: dEasy d TOT: d1 dmin. d AACSB: dNone d AICPA dFC: dMeasurement
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets.
d d d d d d d d d d d d d
Put more simply, liabilities are existing debts and obligations. Owner’s equity is the
d d d d d d d d d d d d d
ownership claim on total assets.
d d d d d
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses.
d d d d d d d d d d
LO3 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
d d d d d d d d d d d
LO3 d BT: dC d Difficulty: dEasy d TOT: d1 dmin. d AACSB: dNone d AICPA dFC: dReporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting
d d d d d d d d d d d d d d d d
equation is affected. An example would be a transaction where an increase in one asset is
d d d d d d d d d d d d d d d d
offset by a decrease in another asset. An increase in the Equipment account which is offset by a
d d d d d d d d d d d d d d d d d d
decrease in the Cash account is a specific example.
d d d d d d d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d3 dmin. d AACSB: dNone d AICPA dFC: dReporting
15. Business transactions are the economic events of the enterprise recorded by
d d d d d d d d d d
daccountants because they affect the basic accounting equation. d d d d d d d
(a) The death of the owner of the company is not a business transaction as it does not affect of
d d d d d d d d d d d d d d d d d d
the components of the basic accounting equation.
d d d d d d d
(b) Supplies purchased on account is a business transaction as it affects the basic accounting
d d d d d d d d d d d d d
equation.d
(c) An employee being fired is not a business transaction as it does not affect any
d d d d d d d d d d d d d d
of the components of the basic accounting equation.
d d d d d d d d
(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the
d d d d d d d d d d d d d d d d d
basic accounting equation.
d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
16. (a) Decrease assets and decrease owner’s equity. d d d d d
(b) Increase assets and decrease assets. d d d d
(c) Increase assets and increase owner’s equity. d d d d d
(d) Decrease assets and decrease liabilities. d d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d3 dmin. d AACSB: dNone d AICPA dFC: dReporting
Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse 1-3
dOnly)
Manual
d
, CHAPTER 1 d
Accounting in Action d d
Learning Objectives d
1. Identify the activities and users associated with accounting.
d d d d d d d
2. Explain the building blocks of accounting: ethics, principles, and
d d d d d d d d
assumptions.
d
3. State the accounting equation, and define its components.
d d d d d d d
4. Analyze the effects of business transactions on the accounting equation.
d d d d d d d d d
5. Describe the four financial statements and how they are prepared.
d d d d d d d d d
*6. Explain the career opportunities in accounting.
d d d d d d
*Note: All asterisked Questions, Brief Exercises, Exercises, and Problems relate to material
d d d d d d d d d d d
dcontained in the appendix to the chapter.
d d d d d d
Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse 1-1
dOnly)
, ANSWERS TO QUESTIONS d d
1. This is true. Virtually every organization and person in our society uses accounting information.
d d d d d d d d d d d d d
Businesses, investors, creditors, government agencies, and not-for-profit organizations must use
d d d d d d d d d d
accounting information to operate effectively.
d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
2. Accounting is the process of identifying, recording, and communicating the economic events of
d d d d d d d d d d d d
dan organization to interested users of the information. The first activity of the accounting
d d d d d d d d d d d d d
process is to identify economic events that are relevant to a particular business. Once identified
d d d d d d d d d d d d d d d
and measured, the events are recorded to provide a history of the financial activities of the
d d d d d d d d d d d d d d d d
organization. Recording consists of keeping a chronological diary of these measured events in
d d d d d d d d d d d d d
an orderly and systematic manner. The information is communicated through the preparation
d d d d d d d d d d d d
and distribution of accounting reports, the most common of which are called financial
d d d d d d d d d d d d d
dstatements. A vital element in the communication process is the accountant’s ability and
d d d d d d d d d d d d
responsibility to analyze and interpret the reported information.
d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers
d d d d d d d d d d d d d d d
and other decision makers.
d d d d
(b) To assist management, managerial accounting provides internal reports. Examples include
d d d d d d d d d
financial comparisons of operating alternatives, projections of income from new sales
d d d d d d d d d d d
campaigns, and forecasts of cash needs for the next year.
d d d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell
d d d d d d d d d d d d d
ownership shares of a company.
d d d d d
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
d d d d d d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
5. This is false. Bookkeeping usually involves only the recording of economic events and therefore is
d d d d d d d d d d d d d d
just one part of the entire accounting process. Accounting, on the other hand, involves the entire
d d d d d d d d d d d d d d d d
process of identifying, recording, and communicating economic events.
d d d d d d d d
LO1 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
6. Benton Travel Agency should report the land at $90,000 on its December 31, 2027 balance
d d d d d d d d d d d d d d
sheet. This is true not only at the time the land is purchased, but also over the time the land is
d d d d d d d d d d d d d d d d d d d d d
held. In determining which measurement principle to use (historical cost or fair value)
d d d d d d d d d d d d d
companies weigh the factual nature of cost figures versus the relevance of fair value. In general,
d d d d d d d d d d d d d d d d
companies use historical cost. Only in situations where assets are actively traded do companies
d d d d d d d d d d d d d d
apply the fair value principle.
d d d d d
LO2 d BT: dC d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
7. The monetary unit assumption requires that only transaction data that can be expressed in
d d d d d d d d d d d d d
terms of money be included in the accounting records. This assumption enables accounting to
d d d d d d d d d d d d d d
quantify (measure) economic events.
d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
8. The economic entity assumption requires that the activities of the entity be kept separate and
d d d d d d d d d d d d d d
distinct from the activities of its owners and all other economic entities.
d d d d d d d d d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
1-2 Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse dOnly)
, Questions Chapter 1 (Continued)
d d d
9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership,
d d d d d d d d d d d
dand
(3) corporation.
d
LO2 d BT: dK d Difficulty: dEasy d TOT:1 dmin. d AACSB: dNone d AICPA dFC: dReporting
10. One of the advantages Helen Rupp would enjoy is that ownership of a corporation is
d d d d d d d d d d d d d d
represented by transferable shares of stock. This would allow Helen to raise money easily by
d d d d d d d d d d d d d d d
selling a part of her ownership in the company. Another advantage is that because holders of
d d d d d d d d d d d d d d d d
the shares (stockholders) enjoy limited liability; they are not personally liable for the debts of the
d d d d d d d d d d d d d d d d
corporate entity. Also, because ownership can be transferred without dissolving the corporation, the
d d d d d d d d d d d d d
corporation enjoys an unlimited life.
d d d d d
LO2 d BT: dK d Difficulty: dEasy d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
11. The basic accounting equation is Assets = Liabilities + Owner’s Equity.
d d d d d d d d d d
LO3 d BT: dK d Difficulty: dEasy d TOT: d1 dmin. d AACSB: dNone d AICPA dFC: dMeasurement
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets.
d d d d d d d d d d d d d
Put more simply, liabilities are existing debts and obligations. Owner’s equity is the
d d d d d d d d d d d d d
ownership claim on total assets.
d d d d d
(b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses.
d d d d d d d d d d
LO3 d BT: dC d Difficulty: dEasy d TOT: d2 dmin. d AACSB: dNone d AICPA dFC: dReporting
13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable.
d d d d d d d d d d d
LO3 d BT: dC d Difficulty: dEasy d TOT: d1 dmin. d AACSB: dNone d AICPA dFC: dReporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting
d d d d d d d d d d d d d d d d
equation is affected. An example would be a transaction where an increase in one asset is
d d d d d d d d d d d d d d d d
offset by a decrease in another asset. An increase in the Equipment account which is offset by a
d d d d d d d d d d d d d d d d d d
decrease in the Cash account is a specific example.
d d d d d d d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d3 dmin. d AACSB: dNone d AICPA dFC: dReporting
15. Business transactions are the economic events of the enterprise recorded by
d d d d d d d d d d
daccountants because they affect the basic accounting equation. d d d d d d d
(a) The death of the owner of the company is not a business transaction as it does not affect of
d d d d d d d d d d d d d d d d d d
the components of the basic accounting equation.
d d d d d d d
(b) Supplies purchased on account is a business transaction as it affects the basic accounting
d d d d d d d d d d d d d
equation.d
(c) An employee being fired is not a business transaction as it does not affect any
d d d d d d d d d d d d d d
of the components of the basic accounting equation.
d d d d d d d d
(d) A withdrawal of cash by the owner from the business is a business transaction as it affects the
d d d d d d d d d d d d d d d d d
basic accounting equation.
d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d4 dmin. d AACSB: dNone d AICPA dFC: dReporting
16. (a) Decrease assets and decrease owner’s equity. d d d d d
(b) Increase assets and decrease assets. d d d d
(c) Increase assets and increase owner’s equity. d d d d d
(d) Decrease assets and decrease liabilities. d d d d
LO4 d BT: dC d Difficulty: dModerate d TOT: d3 dmin. d AACSB: dNone d AICPA dFC: dReporting
Copyright d© d2024 dWILEY Weygandt, dAccounting dPrinciples, d15/e, dSolutions dManual (For dInstructor dUse 1-3
dOnly)
