Solution Manual for Financial Accounting, 16th Edition

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1.Some users of accounting information include managers, employees, investors, creditors,customers, and the government.2.The role of accounting is to provide information for managers to use in operating the business.In addition, accounting provides information to others to use in assessing the economicperformance and condition of the business.3.The corporate form allows the company to obtain large amounts of resources by issuing stock.For this reason, most companies that require large investments in property, plant, and equipmentare organized as corporations.4.No. The business entity concept limits the recording of economic data to transactions directlyaffecting the activities of the business. The payment of the interest of $4,500 is a personaltransaction of Josh Reilly and should not be recorded by Dispatch Delivery Service.5.The land should be recorded at its cost of $167,500 to Reliable Repair Service. This is consistentwith the cost concept.6.a.No. The offer of $2,000,000 and the increase in the assessed value should not be recognizedin the accounting records because land is recorded on the cost basis.b.Cash would increase by $2,125,000, land would decrease by $900,000, and owner’s equitywould increase by $1,225,000.7.An account receivable is a claim against a customer for goods or services sold. An accountpayable is an amount owed to a creditor for goods or services purchased. Therefore, an accountreceivable in the records of the seller is an account payable in the records of the purchaser.8.(b)The business realized net income of $91,000 ($679,000 – $588,000).9.(a)The business incurred a net loss of $75,000 ($640,000 – $715,000).10.(a)Net income or net loss(b)Owner’s equity at the end of the period(c)Cash at the end of the periodCHAPTER 1INTRODUCTION TO ACCOUNTING AND BUSINESSDISCUSSION QUESTIONS1-1

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