Chapter 1 Accounting in Business Chapter Opening Vignette Critical Thinking Challenge Questions * 1. What questions might Zane need the answers to, 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 must 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. *The Chapter 1 Critical Thinking Challenge questions are asked at the beginning of this chapter. Students are reminded at the conclusion of the chapter to refer to the Critical Thinking Challenge questions at the beginning of the chapter. The solutions to the Critical Thinking Challenge questions are available here in the Solutions Manual and accessible to students at Connect. Knowledge Check-Up Questions 1. d) 1. c) 2. a) 7. d) 3. b) 8. a) 4. b) 9. d) 5. a) 10. c) Concept Review Questions 1. Accounting will provide Zane useful information to make good decisions. For instance, it is important for Zane to track his revenues and expenses to determine whether his business is profitable (his revenues are exceeding his expenses). Based on the accounting information, Zane can make decisions on how to price his food and where he can decrease expenses to improve his profits. Accounting will provide Zane important information on his business’ performance to make informed decisions on his expansion strategy. 2. Businesses offering products include Spin Master Corp., Lululemon, NIKE, and Reebok which produce apparel; Dell, Hewlett-Packard, and Apple which produce computer equipment; and Abercrombie and Fitch, GAP, and Zara which produce clothing. Service business examples include: WestJet Airlines which provides airline services; Bell Canada, Rogers Communications, and Telus provide information communication services; and Google, Twitter, Skype, Facebook and Instagram which provide internet services. 3. “Accounting is relevant to all students even if they do not plan on becoming an accountant. If you are pursuing a career in marketing, you will need to understand information such as sales volume, advertising costs, promotion costs, salaries of sales personnel, and sales commissions. If you are studying human resources, you will need to understand the financial position of your company to determine whether you have the resources to hire new employees or provide existing employees a pay increase. Even if you do not pursue a career in business, understanding the basics of accounting can help you better understand your own personal finances and the world around us. I am convinced that this course will be a good investment of our time.” 4. Answers will vary on what students would sell. Business organizations can be organized