Solution manual fundamentals of accounting by cabrera chapter 03

Chapter Introduction: Accounting and Its Environment Exercises Exercise 1 a a/b a a a 10 c c c c a 11 12 13 14 15 c c a a/b c 16 17 18 19 20 b/c c c b c Exercise a Retailer Unless she manufactures the jewelry Otherwise, she is also a manufacturer b P15,000 – P10,000 = P5,000 c Selling, administrative, financial (interest) and income taxes Exercise a Manufacturer A company that purchases raw materials and converts them into some tangible, physical product Wholesale merchandiser A company that sells tangible, physical product to another wholesale merchandiser or to a retail merchandiser Retail merchandiser A company that sells tangible, physical product to the end consumer Product is purchased either directly from a manufacturer or from a wholesale merchandiser Service A company that performs some sort of service as its major business activity Hybrid A company involved in more than one of the three major types of business activity (manufacturing, merchandising, service) b Manufacturer Different from a wholesale merchandiser and a retail merchandiser in that it manufactures the tangible, physical product it sells Different from a service business in that it sells a tangible, physical 3-1 Chapter product Different from a hybrid business because it manufactures and nothing else Wholesale merchandiser Different from a manufacturer because it buys its tangible, physical product already made Different from a retailer because it does not sell its product to the end consumer Different from a service business because it sells a tangible, physical product Different from a hybrid business because it sells wholesale and nothing else Retail merchandiser Different from a manufacturer because it buys its tangible, physical product already made Different from a wholesaler because it only sells its product to the end consumer Different from a service business because it sells a tangible, physical product Different from a hybrid business because it sells retail and nothing else Service Different from a manufacturer, wholesaler and retailer in that it does not sell any tangible, physical product Different from a hybrid business because it performs a service and nothing else Hybrid Different from all the other four because while each of them performs a single function (manufacturing, wholesaling, retailing, or service), this type of business performs at least two of those functions c Note to Instructor: There is no way either we or you can anticipate your students’ answers to this requirement You will simply have to evaluate their answers based on your own experience and judgment Wholesale merchandise will likely be the most difficult for students to come up with and the most difficult for you to evaluate Exercise a Professor Francisco is proposing to form a corporation We can determine this because he will be selling shares of stock A corporation is the only one of the three principal forms of business organization that issues shares of stock b Limited liability The maximum amount a shareholder can lose is the amount of his or her investment Greater access to capital Corporations can attract a great number of investors by dividing ownership into relatively low-cost shares of stock Easy transferability of ownership Because shares of stock are usually relatively low in cost, they can be purchased and sold by individual 3-2 Role of Accounting in Business investors much more easily than ownership interests in either proprietorships or partnerships Continuity of life A corporation continues to exist even when there is a complete change in ownership The transfer of shares of stock from one investor to another has no effect on a corporation Exercise 5 S S T AA Y 10 I G R A K 11 12 13 14 15 M Q F C P Exercise a b c d e f g S, P, C S, P C S, P C S, P C Multiple Choice Questions c c c a c d 3-3 16 17 18 19 20 X B H Z C 21 22 23 24 25 U O FF D EE ... low-cost shares of stock Easy transferability of ownership Because shares of stock are usually relatively low in cost, they can be purchased and sold by individual 3-2 Role of Accounting in Business... shares of stock b Limited liability The maximum amount a shareholder can lose is the amount of his or her investment Greater access to capital Corporations can attract a great number of investors by. .. Exercise a Professor Francisco is proposing to form a corporation We can determine this because he will be selling shares of stock A corporation is the only one of the three principal forms of business