Chapter_1_Solutions - Chapter 1 Accounting and the Business Environment √ Quick Check Answers 1 d 3 d 5 c 7 d 9 b 2 a 4 c 6 b 8 a 10 c

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Unformatted text preview: Chapter 1 Accounting and the Business Environment √ Quick Check Answers: 1. d 3. d 5. c 7. d 9. b 2. a 4. c 6. b 8. a 10. c Explanations: 4. c. Liabilities ($117) = Assets ($381) – Owner’s Equity ($264) 8. a. Net income ($15,000) = Revenues ($50,000) – Expenses ($35,000) Chapter 1 Accounting and the Business Environment 1 √ Short Exercises (5 min.) S 1-1 Revenues increase owner’s equity by delivering goods or services to customers. Expenses decrease owner’s equity by using up assets or increasing liabilities in order to deliver goods or services to customers. (5 min.) S 1-2 Assets are the economic resources of a business that are expected to benefit the business in the future. Liabilities are debts payable to outsiders called creditors. Owner’s equity is the owner’s claim to the assets of the business. The relationship among assets, liabilities, and owner’s equity is given by the accounting equation: ASSETS = LIABILITIES + OWNER’S EQUITY Accounting 7/e Solutions Manual 2 (5 min.) S 1-3 1. Keep your business’s accounting records separate from your personal records so that you can evaluate the success or failure of the business. If your personal records get mixed up with your business’s accounting records, it may become difficult to tell how well the business is performing (entity concept). 2. Record assets and liabilities at actual historical cost (cost principle). (5 min.) S 1-4 Hunter is violating the going-concern concept . Hunter should account for assets at their actual cost , as determined by the cost principle . Chapter 1 Accounting and the Business Environment 3 (5 min.) S 1-5 Assets = Liabilities + Owner’s Equity Cash Note Payable Owner, Capital $2,000 + $1,000 = $1,000 + $2,000 $3,000 (5-10 min.) S 1-6 Assets = Liabilities + Owner’s Equity Accounts Craven, Cash + Furniture = Payable + Capital $2,000 + $8,000 = $6,000 + $4,000 Based on the accounting equation, Craven has $4,000 equity in the business. (5 min.) S 1-7 Jackson recorded no liability for the purchase of land because he paid for the land with cash. Jackson has no debt—no liability—to make a future payment for the land. Accounting 7/e Solutions Manual 4 (5 min.) S 1-8 Cash: $ -0- Total assets (accounts receivable): $3,000 (5 min.) S 1-9 Polson recorded no revenue when he collected cash on account because he recorded the revenue one month earlier, when he earned it. (5 min.) S 1-10 Assets = Liabilities + Owner’s Equity Cash Owner, Capital (a) $300 = $300 Revenue (b) $200 − = $200 − Expense Chapter 1 Accounting and the Business Environment 5 (10 min.) S 1-11 Cookie Lapp Travel Design Balance Sheet April 21, 2008 ASSETS LIABILITIES Cash $11,900 Accounts payable $ 200 Accounts receivable 3,000 Office supplies 500 OWNER’S EQUITY Land 20,000 Cookie Lapp, capital 35,200 Total liabilities and Total assets $35,400 owner's equity $35,400 (5 min.) S 1-12 Total revenues – Total expenses = Net income (or Net loss) (5-10 min.) S 1-13 Advanced Automotive...
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This note was uploaded on 05/05/2010 for the course BUSINESS 71395 taught by Professor Brown during the Spring '09 term at Miss. College.

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Chapter_1_Solutions - Chapter 1 Accounting and the Business Environment √ Quick Check Answers 1 d 3 d 5 c 7 d 9 b 2 a 4 c 6 b 8 a 10 c

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