College Accounting, 15th Edition By Jeffrey Slater
Email: Richard@qwconsultancy.com
1 Accounting Concepts and Procedures ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 1.
The functions of accounting are to analyze, record, classify, summarize, report, interpret, and communicate financial information. 2. Sole proprietorship—1 owner; unlimited liability; easy to form; limited life Partnership—2 or more owners; unlimited liability; easy to form; limited life Corporation—Stockholders; limited liability; difficult to form; unlimited life 3. Businesses are classified as service, merchandise, or manufacturing. 4. Computer technology has greatly reduced the time required for performing the bookkeeping function. 5. The three elements of the basic accounting equation are assets, liabilities, and owner's equity. 6. Capital is the owner's current investment or equity in the assets of a business. It is one subdivision of owner's equity. 7. True. The sum of the left side of the equation (assets) must equal the sum of the right side of the equation (liabilities and owner's equity). 8. False. That is the income statement. 9. False. Revenue is a subdivision of owner's equity. 10. Owner's equity is subdivided into Capital, Withdrawals, Revenue, and Expenses. 11. False. It is a subdivision of owner's equity and records payments of the owner’s personal (non-business) expenses or distributions direct to the owner. It is not a business expense. 12. Reject. As expenses increase, owner's equity decreases. 13. Revenue less Expenses; an income statement shows performance over time. 14. False. It calculates ending capital. 15. The question in this case is whether Paul should be allowed to "pad" his expense account with an additional $100 of expenses. This would be unethical. Paul should only expense those items that are business related. Paul's argument that he is entitled to an additional $100 is not a valid assumption. However, he should be reimbursed for any business expenses during the weekend. 16. The pandemic has forced many small businesses to add numerous safety precautions to keep both their employees and their customers safe. Some safety measures include shields that create a barrier between a cashier and the customer, requiring masks be worn by employees and customers, and social distancing
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markers on floors. These expenses are borne by companies in the short term but are often passed onto customers via higher prices on products and services sold in the long run. Other changes due to Covid-19 are: (1) offering more delivery and pickup options to customers, (2) changing the business model to focus on online sales, (3) offering remote working options to employees, and (4) reducing retail hours for customers due to deep cleaning.
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SOLUTIONS TO CONCEPT CHECKS
1.
a. A b. A c. L d. A e. OE f. A
2.
a. Liabilities b. Total Assets c. Accounts Payable
3.
a. I b. S
4.
Total assets = Cash $36,000 + Computer equipment $20,000 = $56,000
5.
b. Rashad Lewis, Capital d. Rashad Lewis, Withdrawals f. Advertising Expense g. Taxi Fees Earned
6.
c. Accounts Payable d. Grooming Fees Earned
7.
a, b, d
8.
a. IS b. BS c. BS d. BS e. IS f. IS g. OE h. BS
9.
a. OE b. BS c. BS d. IS
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SOLUTIONS TO SET A EXERCISES 1A-1. a. b. c.
$20,000 $65,000 $15,000
= $8,500 + $11,500 = $5,000 + $60,000 = $12,000 + $3,000
1A-2. Assets + Equipment
Cash A. B. C.
+70,000 (8,000)
= =
Liabilities Accounts Payable
+
+ Owner’s Equity Tatyana, Capital +70,000
+8,000 +900
+900
1A-3. KIM COMPANY CLEANERS BALANCE SHEET SEPTEMBER 30, 202X
Liabilities and Owner’s Equity
Assets Cash Equipment
$67 0 0 0 7 0 0 0
Total Assets
$74 0 0 0
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Liabilities Accounts Payable Total Liabilities
$13 0 0 0 13 0 0 0
Owner's Equity B. Kim, Capital
61 0 0 0
Total Liabilities and Owner's Equity
$74 0 0 0
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