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Solution Manual For Financial And Managerial Accounting 4th Edition by Jerry J Weygandt
Solution Manual For Financial And Managerial Accounting 4th Edition by Jerry J Weygandt
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Full SOLUTION MANUAL FORFinancial And Managerial Accounting 4th Edition by Jerry J
Weygandt, Paul D Kimmel, Jill E Mitchel
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 15, 16, 18 6, 7, 8, 9 4 6, 7, 8 1A, 2A, 4A,
business transactions on the 5A
accounting 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
© 2021 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to
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, 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
1-2 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
,Questions Chapter 1 (Continued)
8. The economic entity assumption requires that the activities of the entity be kept separate and
distinct 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 corporation
enjoys 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 accountants
because they affect the basic accounting equation.
(a) No, the death of the president of the company is not a business transaction as it does not
affect the basic accounting equation.
(b) Yes, supplies purchased on account is a business transaction as it affects the basic
accounting equation.
(c) No, an employee being fired is not a business transaction as it does not affect the basic
accounting 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
© 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, 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
1-4 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
, 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
© 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only) 1-5
,BRIEF EXERCISE 1.4
Stockholders‘ Equity
Common Retained Earnings
Assets = Liabilities + Stock + Revenues – Expenses – Dividend
s
(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) + + NE
(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.
1-6 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
,LO 4, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
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
© 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only) 1-7
,LO 5, BT: C, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
SOLUTIONS FOR DO IT! EXERCISES
DO IT! 1.1
1. False. The three steps in the accounting process are identification,
recording, and communication.
2. True.
3. False. Managerial accounting provides internal reports to help users
make decisions about their companies.
4. True.
5. True.
LO 1, BT: K, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
DO IT! 1.2
1. False. Congress passed the Sarbanes-Oxley Act to reduce unethical
behavior and decrease the likelihood of future corporate scandals.
2. False. The standards of conduct by which actions are judged as right
or wrong, honest or dishonest, fair or not fair, are ethics.
3. False. The primary accounting standard-setting body in the United
States is the Financial Accounting Standards Board (FASB).
4. True.
5. True.
LO 2, BT: K, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
DO IT! 1.3
1. Dividends is dividends (D); it decreases stockholders‘ equity.
2. Rent revenue is revenue (R); it increases stockholders‘ equity.
3. Advertising expense is an expense (E); it decreases stockholders‘
equity.
4. When stockholders invest cash in the business, they receive shares of
stock (I); it increases stockholders‘ equity.
LO 3, BT: K, Difficulty: Easy, TOT: 3 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting
1-8 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
,DO IT! 1.4
Assets = Liabilities + Stockholders‘ Equity
Accounts Accounts Common Retained Earnings
Cash + Receivable = Payable + Stock + Revenues – Expenses – Dividends
(1) + $23,000 + $23,000
(2) +$23,000 – 23,000
(3) + $1,800 – $1,800
(4) – 5,000 - $5,000
$18,000 + $0 + $1,800 $0 + $23,000 – $1,800 – $5,000
LO 4, BT: AP, Difficulty: Easy, TOT: 6 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
DO IT! 1.5
(a) The total assets are $51,500, comprised of Cash $9,000, Accounts
Receivable $13,500, and Equipment $29,000.
(Cash + Accts. rec. + Equip.)
(b) Net income is $21,700, computed as follows:
Revenues
Service revenue................................................... $54,000
Expenses
Salaries and wages expense ............................. $16,500
Rent expense ....................................................... 9,800
Advertising expense ........................................... 6,000
Total expenses ............................................ 32,300
Net income ................................................................... $21,700
(Serv. rev. – Tot. exp.)
© 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only) 1-9
, DO IT! 1.5 (Continued)
(c) The ending stockholders‘ equity balance of Garryowen Company is
$23,500. By rewriting the accounting equation, we can compute
Stockholders‘ Equity as Assets minus Liabilities, as follows:
Total assets [as computed in (a)] .............................. $51,500
Less: Liabilities
Notes payable....................................................... $25,000
Accounts payable ................................................ 3,000 28,000
Stockholders‘ equity ................................................... $23,500
Note that it is not possible to determine the company‘s stockholders‘ equity
in any other way, because the beginning balance for stockholders‘ equity is
not provided.
(Tot. assets – Tot. liabl.)
LO 5, BT: AP, Difficulty: Moderate, TOT: 8 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting
1-10 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
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