Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the use and users of accounting and the objective of
financial reporting.
2. Compare the different forms of business organization.
3. Explain the building blocks of accounting: ethics and the
concepts included in the conceptual framework.
4. Describe the components of the financial statements and
explain the accounting equation.
5. Analyze the effects of business transactions on the
accounting equation.
6. Prepare financial statements.
Solutions Manual 1.1 Chapter 1
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, Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
Summary of Questions by Learning Objectives and Bloom‘s Taxonomy
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
Questions
1. 1 C 5. 3 C 9. 3 C 13. 4 K 17. 5 C
2. 1 C 6. 3 K 10. 3 C 14. 4 K 18. 5 AP
3. 1 C 7. 3 K 11. 3 C 15. 4 C 19. 6 K
4. 2 K 8. 3 C 12. 4 K 16. 4 K 20. 6 C
Brief Exercises
1. 1 K 5. 3 C 9. 4 AP 13. 5 AP 17. 6 AP
2. 2 C 6. 3 C 10. 4 AP 14. 4,5 AP 18. 6 AP
3. 3 AN 7. 4 C 11. 4 K 15. 4,6 AP
4. 3 C 8. 4 AP 12. 5 AP 16. 6 AP
Exercises
1. 1 C 5. 1,3,5 K 9. 3,5,6 C 13. 4,5 AP 17. 6 AP
2. 1 C 6. 4 AP 10. 5 C 14. 6 AP
3. 2 C 7. 4 AP 11. 5 C 15. 6 AP
4. 3 C 8. 5 C 12. 4,5 AP 16. 6 AP
Problems
1. 1 S 4. 4 AP 7. 3,4,5,6 AP 10. 6 AN
2. 2,3 AP 5. 3,5 C 8. 4,5,6 AP 11. 3,4,5,6 AP
3. 4 AP 6. 4,6 AP 9. 6 AP
Solutions Manual 1.2 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
Legend: The following abbreviations will appear throughout the
solutions manual file.
LO Learning objective
Bloom's
BT Taxonomy
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: Level of difficulty
S Simple
M Moderate
C Complex
Time: Estimated time to complete in minutes
AACSB Association to Advance Collegiate Schools of Business
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec. Thinking Reflective Thinking
CPA CM CPA Canada Competency Map
Ethics Professional and Ethical Behaviour
PS and DM Problem-Solving and Decision-Making
Comm. Communication
Self-Mgt. Self-Management
Team & Lead Teamwork and Leadership
Reporting Financial Reporting
Stat. & Gov. Strategy and Governance
Mgt. Accounting Management Accounting
Audit Audit and Assurance
Finance Finance
Tax Taxation
Solutions Manual 1.3 Chapter 1
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, Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
ASSIGNMENT CLASSIFICATION TABLE
Brief Problems Problems
Learning Objectives Questions Exercises Exercises Set A Set B
1. Identify the use and 1, 2, 3 1 1, 2, 5 1 1
users of accounting
and the objective of
financial reporting.
2. Compare the different 4 2 3, 2 2
forms of business
organization.
3. Explain the building 5, 6, 7, 8, 3, 4, 5, 6 3, 4, 5, 9, 2, 5, 7, 2, 5, 7, 11
blocks of accounting: 9, 10, 11 10 11
ethics and the
concepts included in
the conceptual
framework.
4. Describe the 12, 13, 14. 7, 8, 9, 6, 7, 13 3, 4, 6, 7, 3, 4, 6, 7,
components of the 15, 16 10, 11, 15 8, 11 8, 11
financial statements
and explain the
accounting equation.
5. Analyze the effects of 17, 18 12, 13, 14 5, 8, 9, 5, 7, 8, 6, 7, 8, 9,
business transactions 10, 11, 11 10, 11
on the accounting 12, 13
equation.
6. Prepare financial 19, 20 14, 15, 16 9, 14, 15, 6, 7, 8, 9, 2, 5, 7, 11
statements. 17, 18 16, 17 10, 11
Solutions Manual 1.4 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time
Number Description Level Allotted (min.)
1A Identify users and uses of accounting information. Simple 15-20
2A Determine forms of business organization and Simple 15-20
types of accounting standards.
3A Determine missing items. Complex 20-25
4A Classify accounts and prepare accounting Simple 20-30
equation.
5A Assess accounting treatment. Moderate 20-25
6A Analyze transactions and calculate owner’s equity. Simple 35-45
7A Analyze transactions and prepare balance sheet. Simple 40-50
8A Analyze transactions and prepare financial Moderate 40-50
statements.
9A Prepare financial statements. Simple 35-45
10A Determine missing amounts, and comment. Moderate 35-45
11A Discuss errors and prepare corrected balance Moderate 45-55
sheet.
1B Identify users and uses of accounting information. Simple 15-20
2B Determine forms of business organization and Simple 15-20
types of accounting standards.
3B Determine missing items. Complex 20-25
4B Classify accounts and prepare accounting Simple 20-30
equation.
5B Assess accounting treatment. Moderate 20-25
6B Analyze transactions and calculate owner’s equity. Simple 35-45
7B Analyze transactions and prepare balance sheet. Simple 40-50
8B Analyze transactions and prepare financial Moderate 40-50
statements.
9B Prepare financial statements. Simple 35-45
10B Determine missing amounts, and comment. Moderate 35-45
11B Discuss errors and prepare corrected balance Moderate 45-55
sheet.
Solutions Manual 1.5 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
BLOOM‘S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-
Chapter Material
Evaluat
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
1. Identify the use and Q1.3 Q1.1 P1.1A
users of accounting BE1.1 Q1.2 P1.1B
and the objective of E1.5 E1.1
financial reporting. E1.2
2. Compare the Q1.4 P1.2A
different forms of BE1.2 P1.2B
business BE1.4 P1.11B
organization. BE1.10
E1.3
E1.7
3. Explain the building Q1.6 Q1.5 P1.2A BE1.3
blocks of accounting: Q1.7 Q1.8 P1.2B
ethics and the E1.5 Q1.9 P1.3A
concepts included in Q1.10 P1.3B
the conceptual Q1.11 P1.7A
framework. BE1.4 P1.7B
BE1.5 P1.11A
BE1.6 P1.11B
E1.3
E1.4
E1.9
E1.10
P1.5A
P1.5B
4. Describe the Q1.12 BE1.7 BE1.8
components of the Q1.13 BE1.9
financial statements Q1.14 BE1.10
and explain the Q1.16 BE1.14
accounting equation. BE1.11 BE1.15
E1.6
E1.7
E1.13
P1.4A
P1.4B
P1.6A
P1.6B
P1.7A
P1.7B
P1.8A
P1.8B
P1.11A
P1.11B
Solutions Manual 1.6 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
BLOOM‘S TAXONOMY TABLE (Continued)
Evaluat
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
5. Analyze the effects Q1.19 Q1.17 Q1.18
of business E1.5 Q1.20 BE1.12
transactions on the E1.8 BE1.13
accounting equation. E1.9 BE1.14
E1.10 E1.12
E1.11 E1.13
P1.5A P1.7A
P1.5B P1.7B
P1.8A
P1.8B
P1.11A
P1.11B
6. Prepare financial Q1.19 BE1.15 P1.10A
statements. Q1.20 BE1.16 P1.10B
E1.9 BE1.17
BE1.18
E1.14
E1.15
E1.16
E1.17
P1.6A
P1.6B
P1.7A
P1.7B
P1.8A
P1.8B
P1.9A
P1.9B
P1.11A
P1.11B
Broadening Your BYP1.1 Santé Saga BYP1.3 BYP1.4 BYP1.2
Perspective BYP1. 6 BYP1.5
Solutions Manual 1.7 Chapter 1
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,Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak Accounting Principles, Ninth Canadian Edition
ANSWERS TO QUESTIONS
1. Yes. Accounting is the financial information system that provides useful
financial information to every person who owns and uses economic
resources or otherwise engages in economic activity.
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
2. Internal users are those who plan, organize, and run businesses and
include managers, supervisors, directors, and company officers. External
users work for other organizations but have reasons to be interested in the
company’s financial position and performance, and include current or
potential investors (owners), and creditors.
Internal users may want answers to several types of questions. For
example, the finance department wants to know if there is enough cash to
pay the bills. The marketing department wants to know what price the
business should use in selling its products to maximize profits. The human
resources department wants to know how many people the business can
afford to hire. The production department wants to know which product
lines make the business the most profit.
External users may want answers to several types of questions. For
example, investors want to know if the company is earning enough to give
them a return on their investment. Creditors want to know if the company
is able to pay its debts as they come due. Labour unions want to know
whether the owners can afford to pay increased wages and benefits.
Customers are interested in whether a company will continue to honour its
product warranties and support its product lines. Taxing authorities want to
know whether the company respects the tax laws. Regulatory agencies
want to know whether the company is respecting established rules.
LO 1 BT: C Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
3. The main objective of financial reporting is to provide useful information to
investors and creditors (external users) to make decisions about a
business. Users may be potential investors who need to decide if they
wish to invest in the business or they may be creditors deciding if they
wish to lend money to the business. These users want to know if the
business is running successfully and can generate cash and earn a profit.
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
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QUESTIONS (Continued)
4. Proprietorships, partnerships, and corporations are the three main forms of
business organizations. The main difference among these three forms is
the size of the business. Since a proprietorship is a business owned by
one person, it has limited resources. The size of the business is typically
small and the life of the business is limited to the life of the owner. The size
of businesses can expand in the case of a partnership as more owners are
involved in the day-to-day operations of the business. In order to achieve a
large size, with a diverse group of owners, the corporate form is used to
have easy transferability of the ownership through the issuance of shares.
Another important difference is that the corporation is a separate legal
entity and pays income taxes. In addition, the corporation is the only form
where owners have limited liability with respect to the business. The
following are the main characteristics of each form:
a. A proprietorship is a private business with one owner who has
unlimited liability for the business. The proprietorship has a limited life
tied to the life of the owner. There is transparency between the owner
and the business. Ultimately, the owner is personally responsible to
pay tax on the profit of the business.
b. A partnership has essentially the same characteristics as a
proprietorship except that in a partnership, there is more than one
owner. Partnerships are often used to organize service-type
businesses, including professional practices.
c. For corporations, the owners are one or more shareholders who
enjoy limited liability. The corporation pays income taxes and can
have an indefinite live since its ownership units, in the form of shares,
are easily transferred to other owners.
LO 2 BT: K Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
5. Ethics is a fundamental business concept. If accountants do not have a
high ethical standard, the information they produce will not have any
credibility.
Ethics are important to statement users because it provides them comfort
that the financial information they are using is credible and reliable.
LO 3 BT: C Difficulty: S Time: 5 min. AACSB: Ethics CPA: cpa-t001 cpa-e001 CM: Reporting
and Ethics
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QUESTIONS (Continued)
6. The users of financial information of publicly accountable companies have
different needs than the users of financial information of private
companies. Publicly traded corporations are required to present financial
information using accounting rules that are consistent with those used
globally. To do this, public traded companies need to follow International
Financial Reporting Standards (IFRS). Doing so helps Canadian
companies compete in a global market. But following this set of policies
and standards is often not essential or cost effective for privately owned
businesses. The users of private company financial statements often do
not require the extensive measurements and disclosures required by IFRS
and thus private companies may report under Accounting Standards for
Private Enterprises (ASPE).
LO 3 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
7. The reporting entity concept states that economic events can be identified
with a particular unit of accountability. This concept requires that the
activities of the entity be kept separate and distinct from the activities of its
owners and all other economic entities.
LO 3 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
8. Accounting information has relevance if it makes a difference in a decision.
Faithful representation shows the economic reality of events rather than
just their legal form. Faithful representation is achieved if the information is
complete, neutral, and free from material error. Complete information
includes all information necessary to show the economic reality of the
transaction. Accounting information is neutral if it is free from bias intended
to attain a predetermined result or encourage a particular behaviour .
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
9. Historical cost represents the amount paid in a transaction. The fair value
of an asset is generally the amount an asset could be sold for in the
market. On the date of purchase, fair value and cost are the same. As time
progresses, the fair value changes depending on the nature of the asset.
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
10. In order for an event to be recognized in the accounting records, the event
must change the entity’s financial position. Examples of events that are not
transactions include hiring of employees and signing a lease for premises.
LO 3 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
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