1.Some users of accounting information include managers, employees, investors, creditors,

1.Some users of accounting information include managers, employees, investors, creditors, customers, and the government.

2.The role of accounting is to provide information for managers to use in operating the business.In addition, accounting provides information to others to use in assessing the economic performance and condition of the business.

3.The corporate form allows the company to obtain large amounts of resources by issuing stock.For this reason, most companies that require large investments in property, plant, and equipment are organized as corporations.

4.No. The business entity concept limits the recording of economic data to transactions directly affecting the activities of the business. The payment of the interest of $4,500 is a personal transaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.

5.The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is consistent with the cost concept.

• a.No. The offer of $2,000,000 and the increase in the assessed value should not be recognized

in the accounting records.b.Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s equity would increase by $1,225,000.

7.An account receivable is a claim against a customer for goods or services sold. An account payable is an amount owed to a creditor for goods or services purchased. Therefore, an account receivable in the records of the seller is an account payable in the records of the purchaser.

• (b)The business realized net income of $91,000 ($679,000 – $588,000).
• (a)The business incurred a net loss of $75,000 ($640,000 – $715,000).
• (a)Net income or net loss

(b)Owner’s equity at the end of the period (c)Cash at the end of the period

CHAPTER 1

INTRODUCTION TO ACCOUNTING AND BUSINESS

DISCUSSION QUESTIONS

1-1 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Accounting, 26e Carl Warren James Reeve Jonathan Duchac (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file. 1 / 4

CHAPTER 1 Introduction to Accounting and Business

PE 1–1A

$230,000. Under the cost concept, the land should be recorded at the cost to Kountry Repair Service.

PE 1–1B

$437,500. Under the cost concept, the land should be recorded at the cost to Higgins Repair Service.

PE 1–2A

• A = L + OE

$780,000 = $150,000 + OE

OE = $630,000

• A = L + OE

+$90,000 = +$25,000 + OE

OE = +$65,000

OE on December 31, 2016 =

$695,000 = $630,000 + $65,000

PE 1–2B

• A = L + OE

$395,000 = $97,000 + OE

OE = $298,000

• A = L + OE

–$65,000 = +$36,000 + OE

OE = –$101,000

OE on December 31, 2016 =

$197,000 = $298,000 – $101,000

PE 1–3A

(2) Asset (Cash) decreases by

$3,750;

Liability (Accounts Payable) decreases by $3,750.(3) Asset (Accounts Receivable) increases by

$22,400;

Revenue (Delivery Service Fees) increases by $22,400.(4) Asset (Cash) increases by

$11,300;

Asset (Accounts Receivable) decreases by $11,300.(5) Asset (Cash) decreases by

$6,000;

Asset (Gates Deeter, Drawing) increases by $6,000.

PRACTICE EXERCISES

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CHAPTER 1 Introduction to Accounting and Business

PE 1–3B

(2) Expense (Advertising Expense) increases by $4,850; Asset (Cash) decreases by $4,850.(3) Asset (Supplies) increases by $2,100; Liability (Accounts Payable) increases by $2,100.(4) Asset (Accounts Receivable) increases by $14,700; Revenue (Delivery Service Fees) increases by $14,700.(5) Asset (Cash) increases by $8,200; Asset (Accounts Receivable) decreases by $8,200.

PE 1–4A

Fees earned $1,475,000

Expenses:

Wages expense $885,000 Office expense 320,000 Miscellaneous expense 28,000 Total expenses 1,233,000 Net income $ 242,000

PE 1–4B

Fees earned $750,000

Expenses:

Wages expense $450,000 Office expense 295,000 Miscellaneous expense 12,000 Total expenses 757,000 Net loss$ (7,000) Income Statement For the Year Ended August 31, 2016

OUSEL TRAVEL SERVICE

Income Statement For the Year Ended November 30, 2016

SENTINEL TRAVEL SERVICE

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CHAPTER 1 Introduction to Accounting and Business

PE 1–5A

Shane Ousel, capital, December 1, 2015 $666,000 Additional investment by owner during year $ 50,000 Net income for the year 242,000

$292,000

Less withdrawals 30,000 Increase in owner’s equity 262,000 Shane Ousel, capital, November 30, 2016 $928,000

PE 1–5B

Barb Schroeder, capital, September 1, 2015 $380,000 Additional investment by owner during year $36,000 Net loss for the year (7,000)

$29,000

Less withdrawals 18,000 Increase in owner’s equity 11,000 Barb Schroeder, capital, August 31, 2016 $391,000

PE 1–6A

Cash $308,000 Accounts payable $ 62,500 Accounts receivable 186,000 Supplies 16,500 Land 480,000 Shane Ousel, capital 928,000 Total liabilities and Total assets $990,500 owner’s equity $990,500

SENTINEL TRAVEL SERVICE

Statement of Owner’s Equity For the Year Ended August 31, 2016

OUSEL TRAVEL SERVICE

Statement of Owner’s Equity For the Year Ended November 30, 2016 Owner’s Equity

OUSEL TRAVEL SERVICE

Balance Sheet November 30, 2016 Assets Liabilities 1-4 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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