978-0077862275 Chapter 1 Solution Manual Part 2

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QUICK STUDIES

Quick Study 1-1 (10 minutes)

1. f. Technology

2. c. Recording

3. e. Recordkeeping (bookkeeping)

Quick Study 1-2 (10 minutes)

a. E g. E

Quick Study 1-3 (10 minutes)

a. The choice of an accounting method when more than one alternative

To illustrate, many companies base compensation of managers on the

amount of reported income. When the choice of an accounting method

b. Internal controls serve several purposes:

They involve monitoring an organization’s activities to promote

efficiency and to prevent wrongful use of its resources.

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Examples of internal controls include cash registers with internal tapes

or drives, scanners at doorways to identify tagged products, overhead

video cameras, security guards, and many others.

Quick Study 1-4 (5 minutes)

Quick Study 1-5 (10 minutes)

Attribute Present Proprietorship Partnership Corporation

1. Business taxed no no yes

Quick Study 1-6 (10 minutes)

a. Revenue recognition principle

Quick Study 1-7 (5 minutes)

Assets = Liabilities + Equity

Quick Study 1-8 (10 minutes)

Assets = Liabilities + Equity

$75,000 (a) $35 ,000 $40,000

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Assets = Liabilities + Owner,

Capital

– Owner,

Withdrawals

+ Revenues – Expenses

a. For December 31, 2013, the account and its dollar amount (in KRW

millions) for Samsung are:

b. Using Samsung’s amounts from (a) we verify that (in KRW millions):

Assets = Liabilities + Equity

Quick Study 1-10 (15 minutes)

Assets = Liabilities + Equity

Cash + Accounts

Recble. =Accounts

Payable +Owner,

Capital –Owner,

Withdrawals + Revenues – Expenses

(a) $5,500 = $5,500

Consulting

(b) + $4,00

= + 4,000

Commission

Cleaning

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Quick Study 1-11 (15 minutes)

Assets = Liabilities + Equity

Cash + Supplies + Equip. + Land = Accts.

Pay. +Notes

Pay. +A. Carr,

Capital –

A.Carr,

With-dr

awals

+ Rev. – Exp.

(a) $15,00

= $15,000

(b) -500 + $500 =

Quick Study 1-12 (10 minutes)

[Code: Income statement (I), Balance sheet (B), Statement of owner’s equity (E), or

Statement of cash flows (CF).]

a. B d. B g. CF

*An advanced student might know that this item would also appear on CF, which is an acceptable answer.

Quick Study 1-13 (5 minutes)

1. EX

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Quick Study 1-14 (5 minutes)

1. A

Quick Study 1-15 (10 minutes)

Interpretation: Its return of 8.2% is slightly above the 8% of its competitors.

Home Depot’s performance can be rated as above average.

Quick Study 1-16 (10 minutes)

a. International Financial Reporting Standards (IFRS)

Quick Study 1-17 (10 minutes)

1. D

EXERCISES

Exercise 1-1 (10 minutes)

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C 1. Analyzing and interpreting reports

C 2. Presenting financial information

Exercise 1-2 (20 minutes)

Part A.

1. I 5. I

Part B.

1. I 5. I

Exercise 1-3 (10 minutes)

1. B 5. C

Exercise 1-4 (10 minutes)

1. A 4. F

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Exercise 1-5 (20 minutes)

a. Auditing professionals with competing audit clients are likely to learn

b. Accounting professionals who prepare tax returns can face situations

c. Managers face several situations demanding ethical decision making

in their dealings with employees. Examples include fairness in

performance evaluations, salary adjustments, and promotion

d. Situations involving ethical decision making in coursework include

performing independent work on examinations and individually

Exercise 1-6 (10 minutes)

a. (C) Corporation e. (C) Corporation

Exercise 1-7 (10 minutes)

Code Description Principle/Assumption

H. 1. A company reports details behind financial

statements that would impact users’ decisions.

Full disclosure

principle

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G 2. Financial statements reflect the assumption that

the business continues operating.

Going-concern

assumption

Exercise 1-8 (10 minutes)

Assets = Liabilities + Equity

(a) $ 65,000 = $ 20,000 + $45,000

Exercise 1-9 (20 minutes)

a. Using the accounting equation at the beginning of the year:

Assets = Liabilities + Equity

Thus, beginning liabilities = $200,000

Using the accounting equation at the end of the year:

Assets = Liabilities + Equity

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Alternative approach to solving part (b):

Assets($80,000) = Liabilities($50,000) + Equity(?)

where “” refers to “change in.”

Thus: Ending Equity = $100,000 + $30,000 = $130,000

b. Using the accounting equation:

Assets = Liabilities + Equity

c. Using the accounting equation at the end of the year:

Assets = Liabilities + Equity

Using the accounting equation at the beginning of the year:

Assets = Liabilities + Equity

Exercise 1-10 (20 minutes)

a. Started the business with the owner investing $40,000 cash in the

business.

Exercise 1-11 (20 minutes)

a. Purchased land for $4,000 cash.

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Exercise 1-12 (15 minutes)

Examples of transactions that fit each case include:

a. Cash withdrawals (or some other asset) paid to the owner of the

business; OR, the business incurs an expense paid in cash.

b. Business purchases equipment (or some other asset) on credit.

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