Examples of financingactivitiesfor SouthwestAirlinescould includeissuingstock,

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8.Theroleof accountingistoprovide information for managerstouseinoperating the business.Inaddition, accounting provides informationtoother stakeholderstousein assessing the economic performance and condition of the business.Examples of financingactivitiesfor SouthwestAirlinescould includeissuingstock, borrowing from banks, and paying dividends. Examples of investingactivitiescould include purchasing new aircraft, acquiring new terminalfacilities,and upgradingitscomputerized reservationsystems.Examples of operatingactivitiescould include transporting passengers and freight.No. The stakeholderswithinagroup do not always share the same interests. For example, bankers areprimarilyconcerned about theabilityof the businesstorepayitsdebt, including interest.Incontrast, stockholders are more concerned about the long-term profitabilityof the business, the business’sabilitytopay dividends, and the future appreciation of their stock.

CHAPTER 1

THE ROLE OF ACCOUNTING IN BUSINESS

CLASS DISCUSSION QUESTIONS

The objective of most businessesistomaximizeprofits.Profit isthe difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide those goods or services.A manufacturing business changes basic inputs into products that are sold to customers. In contrast,amerchandising business purchases productsinaform that can besoldto customers without any additional changes. Examples of manufacturing businesses include Alcoa, Boeing, Caterpillar, and Dow Chemical. Examples of merchandising businesses include Best Buy, Macy’s, Target, and Walmart.Amanufacturing business changes basic inputsintoproducts that aresoldtocustomers.A servicebusiness provides services rather than productstocustomers.Arestaurant,such as McDonald’s, has characteristics of bothamanufacturing andaservicebusinessinthat McDonald’s takes raw inputs,suchas cheese,fish,and beef, and processes theminto products for consumption byitscustomers.Atthe sametime,McDonald’s provides services of waiting on its customers.The corporate formallowsthe companytoobtain large amounts of resources byissuing stock.Inaddition,inacorporation, the stockholders’liabilitytocreditors for the debts of the companyis limitedtotheir investmentinthe corporation. For these reasons, most large companies that require large investmentsinproperty, plant, and equipment are organized as corporations.eBay servicesitscustomers by maintainingaWeb-based communityinwhichbuyers and sellersare brought togetherinan efficient formattobrowse, buy, andsell itemssuchas collectibles,automobiles, high-end or premium art pieces, jewelry, consumer electronics, and a host of practical and miscellaneous items.Survey of Accounting, 10e Carl Warren, A manda Farmer, Jefferson Jones (Solutions Manual, A ll Chapters. 100% Original Verified, A+ Grade) 1 / 4

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14.The land should be recorded atitscostof $110,000toWok Repair Service.This isconsistent with the cost concept.No. The offer of $975,000 and the increaseintheassessedvalue should not be recognized in the accounting records. This is consistent with the cost concept.CLASS DISCUSSION QUESTIONS (Continued) Net income or netloss willappear on the income statement and the statement of stockholders’ equity. The Retained Earnings and CommonStockbalances at the end of the periodwillappear on the statement of stockholders’ equity and the balance sheet.Finally,the Cash balance at the end of the periodwillappear on the balance sheet and the statement of cash flows.No. The business entity conceptlimitsthe recording of economic datatotransactionsdirectly affecting theactivitiesof the business. The payment of the interest of $6,000isapersonal transaction of Billy Jessop and should not be recorded by Valley Delivery Service.The income statement presentsasummary of the revenues and expenses ofabusiness for aspecificperiod oftime.The statement of stockholders’ equity indicates the changesin retained earnings that have occurred overaspecificperiod oftime.The balance sheet presentsalistingof theassets,liabilities,and stockholders’ equity ofabusiness as ofa specificdate. The statement ofcashflowspresentsasummary of thecashreceipts andcash payments of a business entity for a specific period of time.Target reported net income of $6,946 million ($106,005 million – $99,059 million). 2 / 4

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E1–1

1.service6.merchandising 11.manufacturing 2.merchandising 7.manufacturing 12.service 3.manufacturing 8.manufacturing 13.service 4.manufacturing 9.service14.service 5.service10.manufacturing 15.merchandising

E1–2

(in millions)

Best Buy: $17,504 – 14,484 = $3,020

Gamestop: $3,499 – 1,897 = $1,602

E1–3

(in millions)

Apple: $351,002 – $287,912 = $63,090

Microsoft:$333,779 – $191,791 = $141,988

E1–4

a.$295,500 + $475,000 = $770,500 b.$1,110,000 – $737,500 = $372,500 c.$3,350,000 – $1,050,000 = $2,300,000

E1–5

a.$59,268 – $41,190 = $18,078 b.$53,811 – $12,827 = $40,984 c.$152,969 + $91,891 = $244,860

E1–6

EXERCISES

It would be incorrect to say the business had incurred a net loss of $10,000. The excess of the dividends over the net income for the period is a decrease in the amount of retained earnings in the business. 3 / 4

E1–7

Stockholders’ equity at end of year ($900,000 – $300,000)....................................$600,000Deduct stockholders’ equity at beginning of year ($775,000 – $400,000).............(375,000)Net income (increase in stockholders’ equity)...................................................

$225,000

Increase in stockholders’ equity (as determined for Chang).................................$225,000Add dividends.............................................................................................................90,000Net income.............................................................................................................

$315,000

Increase in stockholders’ equity (as determined for Chang).................................$225,000Deduct additional issuance of capital stock............................................................(125,000)Net income.............................................................................................................

$100,000

Increase in stockholders’ equity (as determined for Chang).................................$225,000Deduct additional issuance of capital stock............................................................

(125,000)

$100,000Add dividends.............................................................................................................90,000Net income.............................................................................................................

$190,000

E1–8

a.(1)$4,865 – $1,438 = $3,427

(2)$5,614 – $3,734 = $1,880

b.$8,465 – $6,602 – $1,629 – $3 – $44 = $187 net income

E1–9

Balance sheet items: 1, 2, 3, 7, 8

E1–10

Income statement items: 4, 5, 6, 9, 10

E1–11

1.a—asset6.a—asset 2.b—liability7.b—liability 3.a—asset8.d—expense 4.e—dividend9.d—expense 5.c—revenue10.d—expense Company Chang Company Henry Company Nagel Company Wilcox 4 © 2024 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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