Financial Accounting, 13e William Thomas, Wendy Tietz Solutions Manual with Test Bank All

Copyright ©2022 Pearson Education Inc. Chapter 1 The Financial Statements 1-1 Chapter 1 The Financial Statements Ethics Check (5-10 min.) EC 1-1 a.Objectivity and independence b.Due care c.Integrity d.Integrity Financial Accounting, 13e William Thomas, Wendy Tietz (Solutions Manual with Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

1-2 Financial Accounting 13/e Solutions Manual Copyright © 2022 Pearson Education Inc.Short Exercises

(10 min.) S 1-1

• Corporation, limited partners of a Limited-liability partnership (LLP)

and Limited-liability company (LLC). If any of these businesses fails and cannot pay its liabilities, creditors cannot force the owners to pay the business’s debts from the owners’ personal assets.Creditors can go after the general partner of a limited liability partnership.

• Proprietorship. There is a single owner of the business, so the

owner is answerable to no other owner.

• Partnership. If the partnership fails and cannot pay its liabilities,

creditors can force the partners to pay the business’s debts from their personal assets. A partnership affords more protection for creditors than a proprietorship because there are two or more owners to share this liability.

(5 min.) S 1-2

• The entity assumption applies.
• Application of the entity assumption will separate Osmond ’s

personal assets from the assets of Simple Treats, Inc. This will help Osmond, investors, and lenders know how much assets, liabilities and equity the business has, and this knowledge will help all parties evaluate the business realistically. 2 / 4

Copyright © 2022 Pearson Education Inc. Chapter 1 The Financial Statements 1-3 (5-10 min.) S 1-3

• Stable-monetary-unit assumption
• Historical cost principle; $300 is the accounting value of the

laptop

• Historical cost principle; the sale price is the amount actually

received from the sale

• Entity assumption

(10 min.) S 1-4

Computed amounts in boxes

Total Assets = Total Liabilities + Stockholders’ Equity

• $660,000 = $300,000 + $360,000

• 85,000 = 50,000 + 35,000

• 350,000 = 75,000 + 275,000

(5 min.) S 1-5

• Liabilities = Assets − Owners’ Equity
• Owners’ Equity = Assets − Liabilities

This way of determining the amount of owners’ equity applies to any company or your household.

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1-4 Financial Accounting 13/e Solutions Manual Copyright © 2022 Pearson Education Inc.(5-10 min.) S 1-6

• Land A g. Retained earnings S

• Accrued expenses payable L h. Prepaid expenses A

• Supplies A i. Accounts payable L

• Equipment A j. Accounts receivable A

• Notes payable L k. Merchandise inventory A

• Long-term debt L l. Common stock S

(5-10 min.) S 1-7

• Assets are the economic resources of a business that are expected

to produce a benefit in the future.Owners’ (stockholders’) equity represents the insider claims of a business, the owners’ interest in its assets.Assets and owners’ equity differ in that assets are resources and owners’ equity is a claim to assets.Assets must be at least as large as owners’ equity, so equity can be smaller than assets.

• Both liabilities and owners’ (stockholders’) equity are claims to

assets.Liabilities are the outsider claims to the assets of a business; they are obligations to pay creditors.Owners’ equity represents the insider claims to the assets of the business; they are the owners’ interest in its assets.

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