Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Chapter 1
Accounting in Business
QUICK STUDIES
Quick Study 1-1 (10 minutes)
1.
f Artificial Intelligence
Quick Study 1-2 (10 minutes)
a.
External user
g.
External user
c.
External user
e.
k.
External user
Quick Study 1-3 (10 minutes)
1. Opportunity
4. Opportunity
Quick Study 1-4 (5 minutes)
1. Principle
3. Assumption
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
2
Quick Study 1-5 (10 minutes)
Attribute Present
Proprietorship
Corporation
LLC
1.
Business taxed
no
yes
no
2.
no
yes
3.
Legal entity
no
yes
Quick Study 1-6 (10 minutes)
1. Revenue recognition principle
Quick Study 1-7 (5 minutes)
Assets = Liabilities + Equity
Quick Study 1-8 (10 minutes)
1.
Assets = Liabilities + Equity
2.
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
3
Quick Study 1-9 (5 minutes)
a. Increase
Quick Study 1-10 (15 minutes)
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Recble.
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
(a)
$5,500
=
$5,500
Consulting
(e)
+
=
–
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
4
Quick Study 1-11 (15 minutes)
Assets
=
Liabilities
+
Equity
Cash
+
Supplies
+
Equip.
+
Land
=
Accts.
Pay.
+
Common
Stock
–
Divi-
dends
+
Rev.
–
Exp.
(a)
$15,000
=
$15,000
(b)
–500
+
$500
=
+
=
+
+
+
=
+
(d)
+
=
(e)
+
=
Quick Study 1-12 (10 minutes)
a.
Balance sheet
e.
Balance sheet
c.
Balance sheet
g.
Income statement
d.
Income statement
h.
Balance sheet
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
5
Quick Study 1-13 (5 minutes)
1. Expenses 4. Dividends 7. Expenses
Quick study 1–14 (5 minutes)
Quick Study 1-15 (15 minutes)
HAWKIN
Income Statement
For Month Ended December 31
Revenues
Services revenue ………………………….. $16,000
Quick Study 1-16 (15 minutes)
HAWKIN
Statement of Retained Earnings
For Month Ended December 31
Retained earnings, December 1 …………………. $4,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
6
Quick Study 1-17 (15 minutes)
HAWKIN
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $ 5,100 Accounts payable …………….. $ 6,000
Quick Study 1-18 (15 minutes)
STUDIO ONE
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers ……………………………. $23,500
Cash paid for expenditures …………………………………. (6,000)
Net cash provided by operating activities ……………. 17,500
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
7
Quick Study 1-19 (10 minutes)
1. Investing activities
5. Operating activities
Quick Study 1-20 (5 minutes)
Improve
Explanation: Deutsche Auto’s return on assets increased in each of the years
Quick Study 1-21 (10 minutes)
a.
b. Better
Explanation: The company’s 19.0% return on assets exceeds the 11.0%
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
EXERCISES
Exercise 1-1 (10 minutes)
1.
Communicating
5.
Communicating
2.
6.
3.
Recording
7.
4.
Recording
8.
Recording
Exercise 1-2 (20 minutes)
Part A.
1.
Internal user
5.
Internal user
2.
External user
6.
External user
3.
Internal user
7.
Internal user
4.
External user
Part B.
1.
Internal user
5.
Internal user
2.
Internal user
6.
External user
3.
External user
7.
Internal user
4.
8.
Internal user
Exercise 1-3 (10 minutes)
1.
Managerial accounting
5.
Tax accounting
2.
Financial accounting
6.
Tax accounting
3.
7.
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Exercise 1-4 (10 minutes)
1. A. Audit
Exercise 1-5 (20 minutes)
1. E. Audit
Exercise 1-6 (10 minutes)
a.
Corporation
e.
Corporation
c.
Corporation
d.
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
10
Exercise 1-7 (10 minutes)
Principle or Assumption
a.
Full disclosure principle
b.
Going-concern assumption
c.
Expense recognition (matching) principle
d.
Business entity assumption
e.
Revenue recognition principle
Measurement (cost) principle
Exercise 1-8 (15 minutes)
a. $10,000 recorded for truck.
Explanation: Accounting information is based on the measurement (cost)
b. Revenue recorded by month:
May: $1,000
Exercise 1-9 (10 minutes)
Assets
=
Liabilities
+
Equity
(a) $ 65,000
=
$ 20,000
+
$45,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
11
Exercise 1-10 (20 minutes)
a. Using the accounting equation at the beginning of the year:
Assets
=
Liabilities
+
Equity
$300,000
=
+
$100,000
Using the accounting equation at the end of the year:
Assets
=
Liabilities
+
Equity
=
+
?
=
+
?
b. Using the accounting equation:
Assets
=
Liabilities
+
Equity
$123,000
=
$47,000
+
?
c. Using the accounting equation at the end of the year:
Assets
=
Liabilities
+
Equity
$190,000
=
$70,000 – $5,000
+
?
$190,000
=
$65,000
+
$125,000
Assets
=
Liabilities
+
Equity
=
$70,000
+
?
$130,000
=
$70,000
+
?
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
12
Exercise 1-11 (15 minutes)
a. Using the accounting equation on January 1:
Assets
=
Liabilities
+
Equity
?
=
$60,000
+
$40,000
Thus, beginning assets = $100,000
Assets
=
Liabilities
+
Equity
?
=
+
$40,000
?
=
$66,000
+
$40,000
b. Using the accounting equation on March 1:
Assets
=
Liabilities
+
Equity
$100,000
=
$30,000
+
?
Thus, beginning equity = $70,000
Assets
=
Liabilities
+
Equity
=
$30,000
+
?
=
$30,000
+
?
c. Using the accounting equation on August 1:
Assets
=
Liabilities
+
Equity
$30,000
=
$10,000
+
?
Assets
=
Liabilities
+
Equity
=
$10,000
+
?
=
$10,000
+
?
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Exercise 1-12 (20 minutes)
1. d. The owner invested $40,000 cash in the business in exchange for its common stock.
Exercise 1-13 (20 minutes)
1. f. The company purchased land for $4,000 cash.
Exercise 1-14 (15 minutes)
a. 3. Decreases an asset and decreases a liability.
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-15 (30 minutes)
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Equip-
ment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
a.
+$60,000
+
$15,000
=
+
$75,000
b.
– 1,500
______
______
–
$1,500
Bal.
58,500
+
+
15,000
=
+
75,000
–
1,500
c.
_______
+
10,000
______
_____
Bal.
58,500
+
+
25,000
=
10,000
+
75,000
–
1,500
d.
+ 2,500
______
_______
______
+
$2,500
_____
Bal.
61,000
+
+
25,000
=
10,000
+
75,000
+
2,500
–
1,500
e.
_______
+
______
_______
______
+
_____
Bal.
61,000
+
8,000
+
25,000
=
10,000
+
75,000
+
10,500
–
1,500
– 6,000
______
+
_______
______
_____
Bal.
55,000
+
8,000
+
31,000
=
10,000
+
75,000
+
10,500
–
1,500
g.
– 3,000
______
______
_______
______
_____
–
3,000
Bal.
52,000
+
8,000
+
31,000
=
10,000
+
75,000
+
10,500
–
4,500
h.
+ 5,000
______
_______
______
_____
Bal.
57,000
+
3,000
+
31,000
=
10,000
+
75,000
+
10,500
–
4,500
– 10,000
______
______
______
_____
Bal.
47,000
+
3,000
+
31,000
=
0
+
75,000
+
10,500
–
4,500
– 1,000
______
______
_______
______
_____
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-16 (20 minutes)
Equity: Beginning Ending
Assets …………………………….. $50,000 $80,000
a. Net income for year:
Equity, beginning of year ………………….. $28,000
b. Net income for year:
Equity, beginning of year ………………….. $28,000
c. Net income for year:
Equity, beginning of year ………………….. $28,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-17 (20 minutes)
a. Statement of Cash Flow Category
b. Cash Inflow/Outflow
1.
Cash flows from Operating Activities
Cash Inflow
3.
Cash flows from Operating Activities
Cash Outflow
4.
Cash flows from Investing Activities
Cash Outflow
5.
Cash flows from Operating Activities
Cash Outflow
Exercise 1-18 (15 minutes)
ERNST CONSULTING
Income Statement
For Month Ended December 31
Revenues
Consulting revenue ………………………. $14,000
Expenses
Net income ………………………………………….. $ 2,110
Exercise 1-19 (15 minutes)
ERNST CONSULTING
Statement of Retained Earnings
For Month Ended December 31
Retained earnings, December 1 …………………. $ 0
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-20 (15 minutes)
ERNST CONSULTING
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $11,360 Accounts payable …………….. $ 8,500
Accounts receivable …. 14,000 Total liabilities ………………….. 8,500
Exercise 1-21 (20 minutes)
ERNST CONSULTING
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers ……………………………. $ 0
Cash paid to employees ……………………………………… (1,750)
Cash flows from financing activities
Cash investments from shareholders ………………….. 38,000
Cash dividends to shareholders ………………………….. (2,000)
Net cash provided by financing activities ……………. 36,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-22 (15 minutes)
a.
JARVIS
Statement of Retained Earnings
For Year Ended December 31, Year 1
Retained earnings, January 1, Year 1…………. $ 0
b.
JARVIS
Statement of Retained Earnings
For Year Ended December 31, Year 2
Retained earnings, December 31, Year 1 ……. $22,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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Exercise 1-23 (25 minutes)
a.
TERRELL CO
Income Statement
For Year Ended December 31
Revenues
Services revenue ………………………….. $48,000
b.
TERRELL CO
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, January 1 ……………………. $ 0
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
20
Exercise 1-24 (25 minutes)
a.
MAHOMES CO
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, January 1 ……………………. $ 0
b.
MAHOMES CO
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $ 6,000 Accounts payable …………….. $ 3,000
Exercise 1-25 (10 minutes)
Better than competitors.