Solution Manual for Financial Accounting 11th Edition by Jerry J. Weygandt, Paul D. Kimmel All Chapters

Solution Manual for Financial Accounting 11th Edition by Jerry J. Weygandt, Paul D. Kimmel All Chapters

1. True. Virtually every organization and person in our society uses accounting information. Businesses, investors, creditors, government agencies, and not-for-profit organizations must use accounting information to operate effectively. LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 2. Accounting is the process of identifying, recording, and communicating the economic events of an organization to interested users of the information. The first activity of the accounting process is to identify economic events that are relevant to a particular business. Once identified and measured, the events are recorded to provide a history of the financial activities of the organization. Recording consists of keeping a chronological diary of these measured events in an orderly and systematic manner. The information is communicated through the preparation and distribution of accounting reports, the most common of which are called financial statements. A vital element in the communication process is the accountant’s ability and responsibility to analyze and interpret the reported information. LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision makers. (b) To assist management, accounting provides internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year. LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell stock. (b) Creditors use accounting information to evaluate the risks of granting credit or lending money. LO 1, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 5. False. Bookkeeping usually involves only the recording of economic events and therefore is just one part of the entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording, and communicating economic events. LO 1, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 6. Harper Travel Agency should report the land at $85,000 on its December 31, 2022 balance sheet. This is true not only at the time the land is purchased, but also over the time the land is held. In determining which measurement principle to use (historical cost or fair value) companies weigh the factual nature of cost figures versus the relevance of fair value. In general, companies use historical cost. Only in situations where assets are actively traded do companies apply the fair value principle. LO 2, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA: Reporting 7. The monetary unit assumption requires that only transaction data capable of being expressed in terms of money be included in the accounting records. This assumption enables accounting to quantify (measure) economic events. LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA: Reporting 8. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities. LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Measurement, Analysis and Interpretation IMA: Reporting 9. The three basic forms of business organizations are (1) proprietorship, (2) partnership, and (3) corporation. LO 2, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 10. One of the advantages Juana would enjoy is that ownership of a corporation is represented by transferable shares of stock. This would allow Juana to raise money easily by selling a part of her ownership in the company. Another advantage is that because holders of the shares (stockholders) enjoy limited liability, they are not personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving the corporation, the corporation enjoys an unlimited life. LO 2, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 11. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity. LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 12. (a) Assets are resources owned by a business. Liabilities are creditor claims against assets— that is, existing debts and obligations. Stockholders’ equity is the ownership claim on total assets. (b) Stockholders’ equity is affected by stockholders’ investments, dividends, revenues, and expenses. LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 13. The liabilities are (b) Accounts payable and (g) Salaries and Wages Payable. LO 3, BT: K, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the Equipment account which is offset by a decrease in the Cash account is a specific example. LO 3, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 15. Business transactions are the economic events of the enterprise recorded by accountants because they affect the basic accounting equation. (a) No, the death of the president of the company is not a business transaction as it does not affect the basic accounting equation. (b) Yes, supplies purchased on account is a business transaction as it affects the basic accounting equation. (c) No, an employee being fired is not a business transaction as it does not affect the basic accounting equation. LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting 16. (a) Decrease assets and decrease stockholders’ equity. (b) Increase assets and decrease assets. (c) Increase assets and increase stockholders’ equity. (d) Decrease assets and decrease liabilities. LO 4, BT: C, Difficulty: Easy, TOT: 2 min., AACSB: None, AICPA FC: Reporting, IMA: Reporting