FULL SOLUTION MANUAL FOR
Financial And Managerial Accounting 4th Edition by Jerry J
Weygandt, Paul D Kimmel, Jill E Mitchel
CHAPTER 1 f
Accounting in Action f f
ASSIGNMENT CLASSIFICATION TABLE f f
Brief A
Learning Objectives
f Questions f Exercises Do It!
f Exercises Problems
1. Identify the activities and
f f f 1, 2, 3, 4, 5
f f f f 1 1, 2f
users associated with
f f f
accounting.
f
2. Explain the building blocks of 6, 7, 8, 9, 10
f f f f f f f f f 2 3, 4f
accounting:
f ethics, f
principles,and assumptions.
f f f
3. State the accounting
f f 11, 12, 13, 14.
f f f 1, 2, 3, 4, 5
f f f f 3 5
equation, and define its f f f 22
components.
f
4. Analyze the effects of f f f 15, 16, 18
f f 6, 7, 8, 9
f f f 4 6, 7, 8
f f 1A, 2A, 4A,
f f
business transactions on the
f f f f 5A
accounting equation.
f f
5. Describe the four financial f f f 17, 19, 20, 21,
f f f 10, 11 f 5 8, 9, 10, 11,
f f 2A, 3A, 4A,
f f f
statements and how they are f f f f 12, 13, 14, 15, 5A
f f f
prepared. 16, 17, 18
f f
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fin fany fform for fby fany fmeans, felectronic, fmechanical, fphotocopying, frecording for fotherwise, fexcept fas fpermitted fby flaw. fAdvice fon fhow fto
fobtain fpermission fto freuse fthis f material fis f available fat f http://www.wiley.com/go/permissions.
, ANSWERS TO QUESTIONS f f
1. True. Virtually every organization and person in our society uses accounting information.
f f f f f f f f f f f
Businesses, investors, creditors, government agencies, and not-for-profit organizations must use
f f f f f f f f f f
accounting information to operate effectively.
f f f f f
LO f 1, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of
f f f f f f f f f f f f
an organization to interested users of the information. The first activity of the accounting process is
f f f f f f f f f f f f f f f f
to identify economic events that are relevant to a particular business. Once identified and
f f f f f f f f f f f f f f
measured, the events are recorded to provide a history of the financial activities of the organization.
f f f f f f f f f f f f f f f f
Recording consists of keeping a chronological diary of these measured events in an orderly and
f f f f f f f f f f f f f f f
systematic manner. The information is communicated through the preparation and distribution of
f f f f f f f f f f f f
accounting reports, the most common of which are called financial statements. A vital
f f f f f f f f f f f f f
element in the communication process is the accountant’s ability and responsibility to analyze and
f f f f f f f f f f f f f f
interpret the reported information.
f f f f
LO f 1, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and
f f f f f f f f f f f f f f f f
other decision makers.
f f f
(b) To assist management, accounting provides internal reports. Examples include financial
f f f f f f f f f
comparisons of operating alternatives, projections of income from new sales campaigns, and
f f f f f f f f f f f f
forecasts of cash needs for the next year.
f f f f f f f f
LO f 1, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell stock.
f f f f f f f f f f f f f
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money. f f f f f f f f f f f f f
LO f 1, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
5. False. Bookkeeping usually involves only the recording of economic events and therefore is just
f f f f f f f f f f f f f
one part of the entire accounting process. Accounting, on the other hand, involves the entire
f f f f f f f f f f f f f f f
process of identifying, recording, and communicating economic events.
f f f f f f f f
LO f 1, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
6. Harper Travel Agency should report the land at $85,000 on its December 31, 2022 balance sheet.
f f f f f f f f f f f f f f f
This is true not only at the time the land is purchased, but also over the time the land is held. In
f f f f f f f f f f f f f f f f f f f f f f
determining which measurement principle to use (historical cost or fair value) companies weigh the
f f f f f f f f f f f f f f
factual nature of cost figures versus the relevance of fair value. In general, companies use historical
f f f f f f f f f f f f f f f f
cost. Only in situations where assets are actively traded do companies apply the fair value
f f f f f f f f f f f f f f f
principle.
f
LO f 2, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Measurement, f Analysis f and f Interpretation
f IMA: fReporting
7. The monetary unit assumption requires that only transaction data capable of being expressed in
f f f f f f f f f f f f f
terms of money be included in the accounting records. This assumption enables accounting to
f f f f f f f f f f f f f f
quantify (measure) economic events.
f f f f
LO f2, fBT: fK, fDifficulty: fEasy, fTOT: f2 fmin., fAACSB: fNone, fAICPA fFC: fMeasurement, fAnalysis fand fInterpretation f IMA:
fReporting
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) f f f
8. The economic entity assumption requires that the activities of the entity be kept separate and
f f f f f f f f f f f f f f
distinct from the activities of its owners and all other economic entities.
f f f f f f f f f f f f
LO f2, fBT: fK, fDifficulty: fEasy, fTOT: f2 fmin., fAACSB: fNone, fAICPA fFC: fMeasurement, fAnalysis fand fInterpretation f IMA:
fReporting
9. The three basic forms of business organizations are (1) proprietorship, (2) partnership,
f f f f f f f f f f f
fand
(3) corporation.
f
LO f 2, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
10. One of the advantages Juana would enjoy is that ownership of a corporation is represented by
f f f f f f f f f f f f f f f
transferable shares of stock. This would allow Juana to raise money easily by selling a part of her
f f f f f f f f f f f f f f f f f f
ownership in the company. Another advantage is that because holders of the shares (stockholders)
f f f f f f f f f f f f f f
enjoy limited liability, they are not personally liable for the debts of the corporate entity. Also,
f f f f f f f f f f f f f f f f
because ownership can be transferred without dissolving the corporation, the corporation enjoys an
f f f f f f f f f f f f f
unlimited life.
f f
LO f 2, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
11. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity.
f f f f f f f f f f
LO f 3, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets— that
ffff f f f f f f f f f f f f f
is, existing debts and obligations. Stockholders’ equity is the ownership claim on total assets.
f f f f f f f f f f f f f f
(b) Stockholders’ equity is affected by stockholders’ investments, dividends, revenues f f f f f f f f f
and f
expenses.
LO f 3, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
13. The liabilities are (b) Accounts payable and (g) Salaries and Wages Payable.
f f f f f f f f f f f
LO f 3, f BT: f K, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is
f f f f f f f f f f f f f f f f f f
faffected. An example would be a transaction where an increase in one asset is offset
f f f f f f f f f f f f f f
fbya decrease in another asset. An increase in the Equipment account which is offset by a decrease
f f f f f f f f f f f f f f f f f
in the Cash account is a specific example.
f f f f f f f f
LO f 3, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
15. Business transactions are the economic events of the enterprise recorded by accountants
f f f f f f f f f f f
because they affect the basic accounting equation.
f f f f f f f
(a) No, the death of the president of the company is not a business transaction as it does
f f f f f f f f f f f f f f f f
notaffect the basic accounting equation.
f f f f f f
(b) Yes, supplies purchased on account is a business transaction as it affects the basic
f f f f f f f f f f f f f
accounting equation.f f
(c) No, an employee being fired is not a business transaction as it does not affect the
f f f f f f f f f f f f f f f
basicaccounting equation.
f f f
LO f 4, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
16. (a) Decrease assets and decrease stockholders’ equity. f f f f f
(b) Increase assets and decrease assets. f f f f
(c) Increase assets and increase stockholders’ equity. f f f f f
(d) Decrease assets and decrease liabilities. f f f f
LO f 4, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f 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)
f f f
17. (a) Income statement. f (d) Balance sheet. f
(b) Balance sheet. f (e) Balance sheet and retained earnings statement.
f f f f f
(c) Income statement. f (f) Balance sheet. f
LO f 5, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
18. No, this treatment is not appropriate. While the transaction does involve a receipt of cash, it does
f f f f f f f f f f f f f f f f
not represent revenues. Revenues are the gross increase in stockholders’ equity resulting from
f f f f f f f f f f f f f
business activities entered into for the purpose of earning income. This transaction is simply an
f f f f f f f f f f f f f f f
additional investment made by one of the owners of the business.
f f f f f f f f f f f
LO f 4, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
19. Yes. Net income does appear on the income statement—it is the result of subtracting expenses from
f f f f f f f f f f f f f f f
revenues. In addition, net income appears on the retained earnings statement—it is shown as an
f f f f f f f f f f f f f f f
addition to the beginning-of-period retained earnings. Indirectly, the net income of a companyis also
f f f f f f f f f f f f f f f
included on the balance sheet. It is included in the end-of-period retained earnings which appears
f f f f f f f f f f f f f f f
in the stockholders’ equity section of the balance sheet.
f f f f f f f f f
LO f 5, f BT: f C, f Difficulty: f Easy, f TOT: f 2 f min., f AACSB: f None, f AICPA f FC: f Reporting, f IMA: f Reporting
20. (a) Ending stockholders’ equity balance .................................................................................$198,000
f f f
Beginning stockholders’ equity balance ............................................................................158,000
f f f
Net income.......................................................................................................
f $ 40,000 f
(b) Ending stockholders’ equity balance .................................................................................$198,000
f f f
Beginning stockholders’ equity balance ............................................................................158,000
f f f
40,000
Deduct: Investment .............................................................................................. 16,000
f
Net income.......................................................................................................
f $ 24,000 f
LO f 5, f BT: f AN, f Difficulty: f Easy, f TOT: f 4 f min., f AACSB: f Analytic, f AICPA f FC: f Reporting, f IMA: f Reporting
21. (a) Total revenues ($30,000 + $70,000) ....................................................................... $100,000
f f f f
(b) Total expenses ($26,000 + $38,000)................................................................
f f f f $64,000
(c) Total revenues ....................................................................................................... $100,000
f
Total expenses ....................................................................................................... 64,000
f
Net income.......................................................................................................
f $ 36,000 f
LO f 5, f BT: f AP, f Difficulty: f Easy, f TOT: f 3 f min., f AACSB: f Analytic, f AICPA f FC: f Reporting, f IMA: f Reporting
22. Apple’s accounting equation (in millions) at September 29, 2018 was $365,725 = $258,578 +
f f f f f f f f f f f f f
$107,147
LO f 3, f BT: f AP, f Difficulty: f Easy, f TOT: f 4 f min., f AACSB: f Analytic, f AICPA f FC: f Reporting, f IMA: f Reporting
1-4 © 2021 John Wiley & Sons, Inc. All rights reserved. Weygandt, Financial & Managerial Accounting 4e, Solutions Manual (For Instructor Use Only)
