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Ryerson University
ACC 110
Marla Spergel

CHAPTER 1 The Accounting Environment: What Is Accounting and Why Is It Done? EXERCISES E1-1. This is a good critical thinking question. Many students will assume an answer and provide it. The key is understanding the factors that go into the choice that person is makingthe objectives she has in making the trip and the constraints she faces. The purpose of the question is to realize that solutions are context based. You really cant provide an answer that you can be sure is helpful until you ask some questions. Does she intend to drive, in which case she wants to know the best route for the trip? If so, does she prefer a scenic route or the route that will get her there in the shortest time, or the least distance? Other modes of transportation can be introduced (train, plane, bus, roller skates). The solution should consider constraints (does she have the money for a plane ticket, time for the scenic route, a drivers license if a drive is recommended). Many variations are possible, but the point is that no useful answer can be given without knowing more about the criteria she will apply in making the decision. E1-3. Various answers might be provided, but stakeholders would include students, faculty and staff, government agencies who provide funding, potential donors, alumni, and potential students. Students/potential students want to know that they will obtain the best university experience for them. They may want to know whether the university has above average library or computing facilities. They may want to know the quality of the programs, the reputation of the faculty, the availability of fitness facilities, or even whether its a party school. Various sources of information could be consulted. University calendars, university fairs, discussions with current students, faculty, and alumni, and independent rankings may provide useful information. Faculty will want to know that the university is committed to excellence in teaching and research and will provide the needed resources, particularly for the programs they value. They will want to detect trends in funding of programs, resources for research and teaching or salaries. They will look at proposed budgets and hiring plans as well as financial statements of recent periods. Governments want to assess the financial needs of universities to determine their funding requirements. They will look to determine how past funding amounts have been used, projected enrollments and budgets and the participation of other sources of funding. Potential donors want to know that the money they give will be used for the purpose for which it is given. They will look for accountability for past donations, plans for the future, and the needs of the institution. Alumni might be interested in the perceived success or prestige of the university. E1-5. A claim by a chain of donut shops that they serve the best coffee in the world is not very credible since it is very unlikely that they have evaluated even all coffee shops in their own community let Copyright 2010 McGraw-Hill Ryerson Ltd. 1 John Friedlan, Financial Accounting: A Critical Approach, 3ealone the country or the world. The claim would be more credible, for example, if they reported that some independent organization had awarded them first prize in a contest, which had received entries from many countries. To determine whether the chain had the worlds best coffee would be very difficult, since best is a subjective matter with differing tastes across countries and individuals. Conceivably one could sample the coffee served by the best-known chains or look to the opinions of experts. Perhaps an internet website that invites everyones opinion might provide helpful information. Most people would not consider the cost of obtaining a high level of certainty about the claim to be worth the benefits of finding out. E1-7. Individual responses will vary considerably to this question. However, its necessary to clearly establish the criteria applied for selecting a university and those criteria should be tailored to the circumstances of the cousin. Then consideration can be given to what and how relevant information should be gathered and then to how the universities will be ranked. Considerations would include areas of interest (science, arts, business), career goals, academic performance, resources to pay for university and accommodation away from home if appropriate, extra- curricular and social interests, and any other personal interests. This question has no right answer. What is crucial is the approach used to solve the problem and to recognize that a one-size fits all approach is not appropriate. E1-9. Many different measurements might be suggested. The following list is not comprehensive: Class size indicates how much attention an individual student might receive from their professors. This would be fairly easy to measure since number of students in a
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