Chap001 Solution Manual

They help ensure the validity and credibility of

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They help ensure the validity and credibility of accounting reports. They are often crucial to effective operations and reliable reporting. More generally, the absence of internal controls can adversely affect the effectiveness of domestic and global financial markets. 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. 1-6
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Chapter 01 - Accounting in Business Quick Study 1-3 a. E g. E b. I h. E c. E i. E d. I j. I e. E k. E f. E l. E Quick Study 1-4 Accounting professionals practice in at least four main areas. These four areas, along with a listing of some work opportunities in each, are: 1. Financial accounting Preparation Analysis Auditing (external) Consulting Investigation 2. Managerial accounting Cost accounting Budgeting Auditing (internal) Consulting 3. Tax accounting Preparation Planning Regulatory Consulting Investigation 4. Accounting-related Lending Consulting Analyst Investigator Appraiser 1-7
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Chapter 01 - Accounting in Business Quick Study 1-5 The choice of an accounting method when more than one alternative method is acceptable often has ethical implications. This is because accounting information can have major impacts on individuals’ (and firms’) well-being. To illustrate, many companies base compensation of managers on the amount of reported income. When the choice of an accounting method affects the amount of reported income, the amount of compensation is also affected. Similarly, if workers in a division receive bonuses based on the division’s income, its computation has direct financial implications for these individuals. Quick Study 1-6 a. Cost principle (also called historical cost) b. Business entity assumption c. Revenue recognition principle Quick Study 1-7 Assets = Liabilities + Equity $40,000 (a) $30,000 $10,000 $55,000 (b) $27,500 (b) $27,500 Quick Study 1-8 Assets = Liabilities + Equity $30,000 (a) $10,000 $20,000 (b) $80,000 $ 50,000 $30,000 $90,000 $ 10,000 (c) $80,000 1-8
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Chapter 01 - Accounting in Business Quick Study 1-9 (a) Examples of business transactions that are measurable include: Selling products and services. Collecting funds from dues, taxes, contributions, or investments. Borrowing money. Purchasing products and services. (b) Examples of business events that are measurable include: Decreases in the value of securities (assets). Bankruptcy of a customer owing money. Technological advances rendering patents (or other assets) worthless. An “act of God” (casualty) that destroys assets. Quick Study 1-10 a. For September 26, 2009, the account and its dollar amount (in millions) for Apple are: (1) Assets = $47,501 (2) Liabilities = $ 15,861 (3) Equity = $ 31,640 b. Using Apple’s amounts from (a) we verify that (in millions): Assets = Liabilities + Equity $47,501 = $ 15,861 + $ 31,640 Quick Study 1-11 Return on assets = = = 5.3% Interpretation: Its return of 5.3% is slightly above the 5% of its competitors.
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