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https://testbankfan.com/download/financial-and-managerial-accounting-11th-edition-w
arren-solutions-manual/
CHAPTER 1
INTRODUCTION TO ACCOUNTING
AND BUSINESS
DISCUSSION QUESTIONS
1. Some users of accounting information include 6. a. No. The offer of $1,000,000 and the
managers, employees, creditors, customers, increase in the assessed value should
investors, and the government. not be recognized in the accounting rec-
ords.
2. The role of accounting is to provide infor-
mation for managers to use in operating the b. Cash would increase by $1,000,000, land
business. In addition, accounting provides would decrease by $525,000, and owner’s
information to others to use in assessing the equity would increase by $475,000.
economic performance and condition of the 7. An account receivable is a claim against a
business. customer for goods or services sold. An
3. The corporate form allows the company to account payable is an amount owed to a
obtain large amounts of resources by issuing creditor for goods or services purchased.
stock. For this reason, most companies that Therefore, an account receivable in the rec-
require large investments in property, plant, ords of the seller is an account payable in
and equipment are organized as corpora- the records of the purchaser.
tions. 8. (a) The business incurred a net loss of
4. No. The business entity concept limits the $185,000 ($615,000 – $430,000).
recording of economic data to transactions 9. (b) The business realized net income of
directly affecting the activities of the busi- $117,000 ($825,000 – $708,000).
ness. The payment of the interest of $3,200
is a personal transaction of Murray Stoltz 10. Net income or net loss
and should not be recorded by Ontime Retained earnings at the end of the period
Delivery Service. Cash at the end of the period
5. The land should be recorded at its cost of
$82,000 to A2Z Repair Service. This is con-
sistent with the cost concept.
PE 1–1A
$105,000. Under the cost concept, the land should be recorded at the cost to Easy
Repair Service.
PE 1–1B
$57,500. Under the cost concept, the land should be recorded at the cost to AAA
Repair Service.
PE 1–2A
a. A = L + OE b. A = L + OE
$800,000 = $450,000 + OE + $175,000 = – $60,000 + OE
OE = $350,000 OE = + $235,000
OE on December 31, 2012 =
$585,000 = $350,000 + $235,000
PE 1–2B
a. A = L + OE b. A = L + OE
$575,000 = $125,000 + OE + $85,000 = + $30,000 + OE
OE = $450,000 OE = + $55,000
OE on December 31, 2012 =
$505,000 = $450,000 + $55,000
PE 1–3A
2
PE 1–3B
PE 1–4A
PE 1–4B
3
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