SOLUTION MANUAL Financial
Accounting 11th Edition by Jerry J.
Weygandt, Paul D. Kimmel Chapters 1 - 13 |
Complete
,TABLE OF CONTENTS
Chapter 1. Accounting in Action
Chapter 2. The Recording Process
Chapter 3. Adjusting the Accounts
Chapter 4. Completing the Accounting Cycle
Chapter 5. Accounting for Merchandising Operations
Chapter 6. Inventories
Chapter 7. Fraud, Internal Control and Cash
Chapter 8. Accounting for Receivables
Chapter 9. Plant Assets, Natural Resources and Intangible Assets
Chapter 10. Liabilities
Chapter 11. Corporations: Organisations, Stock Transactions and
Stockholders’ Equity
Chapter 12. Statement of Cash Flows
Chapter 13. Financial Analysis: The Big Picture
,CHAPTER 1
Accounting in Action
ASSIGNMENT CLASSIFICATION TABLE
Brief A
Learning Objectives Questions Exercises Do It! Exercises Problems
1. Identify the activities and 1, 2, 3, 4, 5 1 1, 2
users associated with
accounting.
2. Explain the building blocks of 6, 7, 8, 9, 10 2 3, 4
accounting: ethics, principles, and
assumptions.
3. State the accounting 11, 12, 13, 14. 1, 2, 3, 4, 5 3 5
equation, and define its 22
components.
4. Analyze the effects of business 15, 16, 18 6, 7, 8, 9 4 6, 7, 8 1A, 2A, 4A,
transactions on theaccounting 5A
equation.
5. Describe the four financial 17, 19, 20, 21, 10, 11 5 8, 9, 10, 11, 2A, 3A, 4A,
statements and how they are 12, 13, 14, 15, 5A
prepared. 16, 17, 18
, ANSWERS TO QUESTIONS
1. True. Virtually every organization and person in our society uses accounting information. Businesses, investors,
creditors, government agencies, and not-for-profit organizations must use accounting information to operate
effectively.
LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of an
organization to interested users of the information. The first activity of the accounting process is to identify
economic events that are relevant to a particular business. Once identified and measured, the events are
recorded to provide a history of the financial activities of the organization. Recording consists of keeping a
chronological diary of these measured events in an orderly and systematic manner. The information is
communicated through the preparation and distribution of accounting reports, the most common of which
are called financial statements. A vital element in the communication process is the accountant’s ability and
responsibility to analyze and interpret the reported information.
LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and other
decision makers.
(b) To assist management, accounting provides internal reports. Examples include financial comparisons of
operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for
the next year.
LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell stock.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
5. False. Bookkeeping usually involves only the recording of economic events and therefore is just one part of the
entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording,
and communicating economic events.
LO 1, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
6. Harper Travel Agency should report the land at $85,000 on its December 31, 2022 balance sheet. This is true
not only at the time the land is purchased, but also over the time the land is held. In determining which
measurement principle to use (historical cost or fair value) companies weigh the factual nature of cost figures
versus the relevance of fair value. In general, companies use historical cost. Only in situations where assets are
actively traded do companies apply the fair value principle.
LO 2, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA: Reporting
7. The monetary unit assumption requires that only transaction data capable of being expressed in terms of
money be included in the accounting records. This assumption enables accounting to quantify (measure)
economic events.
LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA:Reporting
,Questions Chapter 1 (Continued)
8. The economic entity assumption requires that the activities of the entity be kept separate anddistinct from
the activities of its owners and all other economic entities.
LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA:Reporting
9. The three basic forms of business organizations are (1) proprietorship, ( 2) partnership, and
(3) corporation.
LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
10. One of the advantages Juana would enjoy is that ownership of a corporation is represented by transferable
shares of stock. This would allow Juana to raise money easily by selling a part of her ownership in the
company. Another advantage is that because holders of the shares (stockholders) enjoy limited liability, they are
not personally liable for the debts of the corporate entity. Also, because ownership can be transferred without
dissolving the corporation, the corporationenjoys an unlimited life.
LO 2, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
11. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets— that is, existing
debts and obligations. Stockholders’ equity is the ownership claim on total assets.
(b) Stockholders’ equity is affected by stockholders’ investments, dividends, revenues, and expenses.
LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
13. The liabilities are (b) Accounts payable and (g) Salaries and Wages Payable.
LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected.
An example would be a transaction where an increase in one asset is offset by a decrease in another
asset. An increase in the Equipment account which is offset by a decrease in the Cash account is a specific
example.
LO 3, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
15. Business transactions are the economic events of the enterprise recorded by accountantsbecause they affect
the basic accounting equation.
(a) No, the death of the president of the company is not a business transaction as it does notaffect the
basic accounting equation.
(b) Yes, supplies purchased on account is a business transaction as it affects the basicaccounting equation.
(c) No, an employee being fired is not a business transaction as it does not affect the basicaccounting
equation.
LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
16. (a) Decrease assets and decrease stockholders’ equity.
(b) Increase assets and decrease assets.
(c) Increase assets and increase stockholders’ equity.
(d) Decrease assets and decrease liabilities.
LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
© 2020 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial Accounting 11e, Solutions Manual (For Instructor Use Only) 1-3
,Questions Chapter 1 (Continued)
17. (a) Income statement. (d) Balance sheet.
(b) Balance sheet. (e) Balance sheet and retained earnings statement.
(c) Income statement. (f) Balance sheet.
LO 5, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
18. No, this treatment is not appropriate. While the transaction does involve a receipt of cash, it does not represent
revenues. Revenues are the gross increase in stockholders’ equity resulting from business activities entered into
for the purpose of earning income. This transaction is simply an additional investment made by one of the
owners of the business.
LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
19. Yes. Net income does appear on the income statement—it is the result of subtracting expenses from revenues.
In addition, net income appears on the retained earnings statement—it is shown as an addition to the
beginning-of-period retained earnings. Indirectly, the net income of a company is also included on the balance
sheet. It is included in the end-of-period retained earnings which appears in the stockholders’ equity section of
the balance sheet.
LO 5, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
20. (a) Ending stockholders’ equity balance ..................................................................................................... $198,000
Beginning stockholders’ equity balance ................................................................................................ 158,000
Net income....................................................................................................... $ 40,000
(b) Ending stockholders’ equity balance ..................................................................................................... $198,000
Beginning stockholders’ equity balance ................................................................................................ 158,000
40,000
Deduct: Investment ................................................................................................................................ 16,000
Net income....................................................................................................... $ 24,000
LO 5, BT: AN, Difficulty: Easy, TOT: 4 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
21. (a) Total revenues ($30,000 + $70,000)...................................................................................................... $100,000
(b) Total expenses ($26,000 + $38,000)................................................................ $64,000
(c) Total revenues .......................................................................................................................................... $100,000
Total expenses .......................................................................................................................................... 64,000
Net income....................................................................................................... $ 36,000
LO 5, BT: AP, Difficulty: Easy, TOT: 3 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
22. Apple’s accounting equation (in millions) at September 29, 2018 was $365,725 = $258,578 +
$107,147
LO 3, BT: AP, Difficulty: Easy, TOT: 4 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
, SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1.1
(a) $78,000 – $50,000 = $28,000 (Stockholders‘ Equity).(b)
$45,000 + $70,000 = $115,000 (Assets).
(c) $94,000 – $60,000 = $34,000 (Liabilities).
LO 3, BT: AP, Difficulty: Easy, TOT: 3 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.2
(a) $120,000 + $232,000 = $352,000 (Total assets).
(Liabl. + Stock. equity = Assets)
(b) $190,000 – $86,000 = $104,000 (Total liabilities).
(Assets – Stock. equity = Liabl.)
(c) $600,000 – 0.5($600,000) = $300,000 (Stockholders‘ equity).
[Assets – (0.5 x Assets) = Stock. equity]
LO 3, BT: AP, Difficulty: Easy, TOT: 3 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.3
(a) ($870,000 + $150,000) – ($500,000 – $80,000) = $600,000
(Stockholders‘ equity).
[(Beg. assets + incr.) – (Beg. liabl. – decrease) = Stock. equity]
(b) ($500,000 + $100,000) + ($870,000 – $500,000 – $66,000) = $904,000
(Assets).
[(Beg. liabl. + incr.) + (Beg, stock. equity – decr.) = Assets
(c) ($870,000 – $80,000) – ($870,000 – $500,000 + $120,000) = $300,000
(Liabilities).
[(Beg. assets – decr.) – (Beg. stock. equity + incr.) = Liabl.]
LO 3, BT: AP, Difficulty: Easy, TOT: 5 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
© 2020 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial Accounting 11e, Solutions Manual (For Instructor Use Only) 1-5
,BRIEF EXERCISE 1.4
Stockholders‘ Equity
Common Retained Earnings
Assets = Liabilities Stock Revenues – Expenses – Dividends
+
+
(a) X = $90,000 + $150,000 + $450,000 – $320,000 – $40,000
X = $90,000 + $240,000
X = $330,000
(Assets = Liabl. + Com. stock + Rev. - Exp. - Div.)
(b) $57,000 = X + $23,000 + $50,000 – $35,000 – $7,000
$57,000 = X + $31,000
X = $26,000 ($57,000 – $31,000)
(Liabl. = Assets - Com. stk. - Rev. + Exp. + Div.)
(c) $600,000 = ($600,000 x 2/3) + X (Stockholders‘ equity)
$600,000 = $400,000 +X
X = $200,000
(Stk. equity = Assets - (2/3 x Assets))
LO 3, BT: AP, Difficulty: Moderate, TOT: 6 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.5
A (a) Accounts receivable A (d) Supplies
L (b) Salaries and wages payable SE (e) Dividends
A (c) Equipment L (f) Notes payable
LO 3, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.6
Assets Liabilities Stockholders‘ Equity
(a) + + N
E
(b) + NE +
(c) – NE –
LO 4, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.7
Assets Liabilities Stockholders‘ Equity
(a) + NE +
(b) – NE –
(c) NE* NE NE
,*Cash increased and accts. rec. decreased, so tot. assets unchanged.
LO 4, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
© 2020 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial Accounting 11e, Solutions Manual (For Instructor Use Only) 1-7
, BRIEF EXERCISE 1.8
E (a) Advertising expense D (e) Dividends
R (b) Service revenue R (f) Rent revenue
E (c) Insurance expense E (g) Utilities expense
E (d) Salaries and wages expense
LO 4, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.9
R (a) Received cash for services performed.
NSE (b) Paid cash to purchase equipment.
E (c) Paid employee salaries.
LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.10
ELLERBY COMPANY
Balance Sheet
December 31, 2022
Assets
Cash .................................................................................................. $ 44,000
Accounts receivable........................................................................ 72,500
Total assets .............................................................................. $116,500
Liabilities and Stockholders‘ Equity
Liabilities
Accounts payable .................................................................... $ 85,000
Stockholders‘ equity
Common stock .................................................................. $21,500
Retained earnings ................................................................ 10,000
Total stockholders‘ equity .............................................. 31,500
Total liabilities and stockholders‘ equity ...................... $116,500
(Cash + Accts. rec. = Accts. pay. + Com. stk. + Ret. earn.)
LO 5, BT: AP, Difficulty: Easy, TOT: 4 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
BRIEF EXERCISE 1.11
BS (a) Notes payable
IS (b) Advertising expense
BS (c) Common stock
BS (d) Cash
IS (e) Service revenue
RE (f) Dividends
LO 5, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
