1. Answers will vary but should include factors such as starting salaries, value of fringe benefits,

9/13/23, 2:27 PMAnswer Key Chapter 1 - Principles of Accounting, Volume 1: Financial Accounting | OpenStax

https://openstax.org/books/principles-financial-accounting/pages/chapter-11/2

Multiple Choice

• B
• C
• A
• B
• B
• E
• A
• D
• A
• B

Questions

• Answers will vary but should include factors such as starting salaries, value of fringe benefits,

cost of living, and other monetary factors.

• Answers will vary but should include considerations such as price, convenience, features, ease of

purchase, availability, and other decision-making factors.

• Responses should comment on the growth Netflix has experienced. Although this may have

been due to subscription price increases, the biggest driver of these increases is the number of subscriptions. While this is only a few data points, it does appear likely that Netflix will continue to grow sales in the next year or so. Factors influencing this prediction would be competition, changes in the streaming market, and economic considerations.

• Answers will vary, but responses should state, in a sentence or two, the primary purpose of the

entity. The goal of this exercise is to have students clearly communicate why the entity exists, the stakeholders served by the entity, and the role accounting plays in the organization.

• Answers will vary but should highlight aspects of each model: Brick-and-mortar: higher

investment in physical storefront, interior, etc., to attain visual appeal; insurance and regulatory requirements; space/storage considerations; lower delivery costs; no delivery time. Online: less overhead costs, higher delivery costs, higher website and technology costs, competition.

• Manufacturer: movies; service: hotels, restaurants, waste removal, entertainment; retail:

shopDisney, clothes and apparel. 1 / 3

9/13/23, 2:27 PMAnswer Key Chapter 1 - Principles of Accounting, Volume 1: Financial Accounting | OpenStax

https://openstax.org/books/principles-financial-accounting/pages/chapter-12/2

• Answers will vary but should include the key services of the SEC related to regulation and

enforcement. You may be particularly interested to explore the SEC’s whistle-blowing initiatives.Responses regarding required filings for publicly traded companies should include a discussion about the relationship between transparency and protecting the public interest. The significant amount of invested capital by the investing public is also relevant to the discussion.

• Answers will vary but should include the increase in popularity of energy drinks and Monster’s

partnership with the Coca-Cola Company (which now owns close to a 17% stake in Monster).Considerations as to whether or not to purchase Monster shares today would include the estimated future performance of the company, the energy drink market, purchasing at a high point, etc.

• Answers will vary but should include a discussion of the importance for accountants to provide

information that is unbiased. Accountants have an obligation to protect the public interest by reporting information that is useful for decision-making but does not sway the user in a particular way. Accountants are in a unique position where they serve many stakeholders, including their employer, clients, and the public. The interests of all stakeholders must be considered while maintaining the highest level of integrity.

• Answers will vary and may include certifications/licensing in nursing, information technology,

engineering, human resources management, counseling, medicine, and many other occupations. 2 / 3

9/13/23, 2:28 PMAnswer Key Chapter 2 - Principles of Accounting, Volume 1: Financial Accounting | OpenStax

https://openstax.org/books/principles-financial-accounting/pages/chapter-21/1

Multiple Choice

• D
• A
• B
• A
• B
• D
• B
• C
• C

Questions

• Income statement shows the financial performance of a business for a period of time; statement

of owner’s equity shows the change in net worth of a business for a period of time; balance sheet shows the financial position of a business on a specific date; statement of cash flows shows the cash inflows and outflows of the business for a period of time.

• Both revenues and gains represent inflows to the business, making it more valuable. Revenues

relate to the primary purpose of the business, while gains represent incidental or peripheral activities. This is important to stakeholders because revenues represent ongoing or permanent activities, while gains represent infrequent or transient activities. Stakeholders should focus on permanent earnings and put peripheral or incidental earnings into the proper context.

• Equity is the net worth of the business. It can also be thought of as the net assets (assets minus

liabilities) of the business. Activities that affect equity include revenues, expenses, gains, losses, and investment by and distributions to owners.

• Both tangible and intangible assets have value to the company and can be bought, sold, or

impaired; tangible assets have physical substance, while intangible assets do not.

• Assets = Liabilities + Owner’s Equity. Answers will vary and should include a combination of

revenues/gains (increases), expenses/losses (decreases), investments (increases), and distributions (decreases). It is important to understand the following transactions/exchanges will not change equity: an asset for an asset, liability for liability, asset acquisitions by incurring liabilities, and asset reductions to reduce liabilities.

• Revenues and investments increase equity, while expenses and distributions decrease equity.
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