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Financial Accounting (Williams, Haka, Bettner, Meigs)

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Solution to select discussion questions on chapters 1-5 from the text "Financial Accounting" by Williams, Haka, Bettner, and Meigs.

These are the actual questions from the text, the answers can be found in the actual attachment.

Chapter 1, Question 2: Accounting is sometimes described as the language of business. What is meant by this description?

Chapter 1, Question 8: What do we mean when we say that an accounting system needs to be cost-effective?

Chapter 2, Question 1: In broad general terms, what is the purpose of accounting?

Chapter 2, Question 7: Explain briefly why each of the following groups might be interested in the financial statements of a business:

Chapter 3, Question 3: At the beginning of the year, the Office Equipment account of Gulf Coast Airlines had a debit balance of $126,900. During the year, debit entries of $23,400 and credit entries of $38,200 were posted to the account. What was the balance of this account at the end of the year? (Indicate debit or credit balance.)

Office Equipment
Debit l Credit
$ 126,900
$ 23,400
$38,200

$ 112,100

The balance at the end of the year is $112,100 (debit balance)

Chapter 3, Question 13: What is the meaning of the term expenses? Does the payment of cash by a business indicate that an expense has been incurred? Explain.

Chapter 4, Question 3: Do adjusting entries affect income statement accounts, balance sheet accounts, or both? Explain.

Chapter 4, Question 5: Why does the purchase of a one-year insurance policy four months ago give rise to insurance expense in the current month?

Chapter 5, Question 3: Some people think that a company's retained earnings represent cash reserved for the payment of dividends. Are they correct? Explain.

Chapter 5, Question 15: How does depreciation expense differ from other operating expenses?

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Solution Preview

SELECT TEXTBOOK QUESTIONS (CHAPTER 1-5) FROM
"FINANCIAL ACCOUNTING: ELEVENTH EDITION" BY WILLIAMS−HAKA−BETTNER−MEIGS (MCGRAW-HILL COMPANIES, 2003)

CH 1, Q2: Accounting is a way of communicating the results of business activity and, therefore, is sometimes described as the language of business. Among the important accounting measurements that communicate business activity and justify describing accounting as the language of business are costs, prices, sales volume, profits, and return on investment.

CH 1, Q8: To be cost-effective, the benefit of doing something must exceed the cost of doing it. In the case of an accounting system, the information provided by the system must be at least as valuable as the cost of the system to be cost-effective. We might be able to produce more sophisticated, better information, for example, but if the cost of doing that exceeds the benefit, to still produce the information would not be cost-effective.

CH 2, Q 1: The basic purpose of accounting is to provide decision makers with information useful in making economic decisions.

CH 2, Q 7:
a) Creditors are interested in financial statements to ...

$2.19
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