Fundamental Accounting Principles, Volume 1 15th Canadian Edition Solution Manual

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Solutions Manual to accompany Fundamental Accounting Principles, 15th Canadian Edition. 1-1

SOLUTIONS MANUAL

to accompany

Fundamental Accounting Principles

15th Canadian Edition

by Larson/Jensen/Dieckmann

Revised for the 15th Edition by:

Praise Ma, Kwantlen Polytechnic University

Technical checks by:

Rhonda Heninger, Southern Alberta Institute of Technnology

Michelle Young, CPA
Last revised: May 24, 2016
Solutions Manual to accompany Fundamental Accounting Principles, 15th Canadian Edition. 1-2

Chapter 1 Accounting in Business

Chapter Opening Vignette Critical Thinking Challenge Questions*

1. What questions might Zane need the answers to in order to get a loan from a
bank?

The key question the bank wants answered is whether Zane can repay the loan. In
order to assess this, they would ask questions such as:

Financial Results: How much is the business earning per year? How profitable
has the food truck been for the past year? How much are revenues and
expenses? How are the results compared to the past year or couple of years?
Where do you expect results to be in the next few years?

Cash: How much cash does Zane currently have? How much does he want for
the loan? What is his credit score?

Debt: Are there any outstanding loans? If so, what is the balance outstanding,
the term, the payments, and the interest rate?

Assets: What personal or business assets does Zane have? The bank may
want to take some of Zane’s assets as collateral.

Customers: How many customers on average are served per day? How many
customers are new or repeat customers?

Employees: How many employees does he need to hire to serve his
customers? Does Zane pay his employees a salary or a wage? How much does
he pay them? Does he have the cash in the bank to pay his employees?

Food Truck: Does Zane own his food trucks? If the trucks are purchased, did
he pay cash or does he owe money on it? If he owes money, does he pay
interest? Does he lease them? Does he have insurance?

Toronto Pearson Airport Location: How much is the rent?
Food (Inventory): How much food is purchased in advance? How does Zane
manage his food to prevent spoilage? Does Zane need to pay his suppliers
right away or can he pay on credit?

Advertising: Does Zane advertise? If so, how much does he pay?
Taxes: What is the amount of income tax he has to pay?
There are many other questions that could be asked.
2. Who else might require accounting information from Zane’s business?

Other stakeholders that might require accounting information from Zane’s
business include Canada Revenue Agency (CRA), employees, and potential
investors.

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Subject
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