Full Solution Manual for Financial Accounting 11th Edition Libby, Libby, Hodge – Complete Answers (Chapters 1-13, Appendix A, & MBA Companion)

TEST BANKV


FinancialVAccounting

byVRobertVLibby,VPatriciaVLibby,VFrankVHodge
11thVEdition.




FULL TEST BANK!!!
V V

, FULL SOLUTION MANUAL FOR
V V V


FinancialVAccountingV11thVEditionVRobertVLibby,VPatri
ciaVLibby,VFrankVHodge



Chapter 1 V


Financial Statements and Business Decisions
V V V V




ANSWERSVTOVQUESTIONS

1. AccountingVisVaVsystemVthatVcollectsVandVprocessesV(analyzes,Vmeasures,Vand
Vrecords)VfinancialVinformationVaboutVanVorganizationVandVreportsVthatVinformati
onVtoVdecisionVmakers.

2. FinancialVaccountingVinvolvesVpreparationVofVtheVfourVbasicVfinancialVstatementsV
andVrelatedVdisclosuresVforVexternalVdecisionVmakers.VManagerialVaccountingVin
volvesVtheVpreparationVofVdetailedVplans,Vbudgets,Vforecasts,VandVperformanceVr
eportsVforVinternalVdecisionVmakers.

3. FinancialVreportsVareVusedVbyVbothVinternalVandVexternalVgroupsVandVindividuals.
VTheVinternalVgroupsVareVcomprisedVofVtheVvariousVmanagersVofVtheVentity.VThe
VexternalVgroupsVincludeVtheVowners,Vinvestors,Vcreditors,VgovernmentalVagencie
s,VotherVinterestedVparties,VandVtheVpublicVatVlarge.

4. InvestorsVpurchaseVallVorVpartVofVaVbusinessVandVhopeVtoVgainVbyVreceivingVp
artVofVwhatVtheVcompanyVearnsVand/orVsellingVtheirVownershipVinterestVinVtheV
companyVinVtheVfutureVatVaVhigherVpriceVthanVtheyVpaid.VCreditorsVlendVmoney
VtoVaVcompanyVforVaVspecificVlengthVofVtimeVandVhopeVtoVgainVbyVchargingVint
erestVonVtheVloan.




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,5. InVaVsociety,VeachVorganizationVcanVbeVdefinedVasVaVseparateVaccountingVentity.
VAnVaccountingVentityVisVtheVorganizationVforVwhichVfinancialVdataVareVtoVbeVcoll
ected.VTypicalVaccountingVentitiesVareVaVbusiness,VaVchurch,VaVgovernmentalVun
it,VaVuniversityVandVotherVnonprofitVorganizationsVsuchVasVaVhospitalVandVaVwelf
areVorganization.VAVbusinessVtypicallyVisVdefinedVandVtreatedVasVaVseparateVenti
tyVbecauseVtheVowners,Vcreditors,Vinvestors,VandVotherVinterestedVpartiesVneedVt
oVevaluateVitsVperformanceVandVitsVpotentialVseparatelyVfromVotherVentitiesVandVf
romVitsVowners.

6. NameVofVStatement AlternativeVTitle
(a) IncomeVStatement (a)VStatementVofVEarnings;VStatementVof
Income;VStatementVofVOperations
(b) BalanceVSheet (b)VStatementVofVFinancialVPosition
(c) CashVFlowVStatement (c)V StatementVofVCashVFlows

7. TheVheadingVofVeachVofVtheVfourVrequiredVfinancialVstatementsVshouldVinclud
eVtheVfollowing:
(a) NameVofVtheVentity
(b) NameVofVtheVstatement
(c) DateVofVtheVstatement,VorVtheVperiodVofVtime
(d) UnitVofVmeasure

8. (a)
TheVpurposeVofVtheVincomeVstatementVisVtoVpresentVinformationVaboutVth
eVrevenues,Vexpenses,VandVtheVnetVincomeVofVanVentityVforVaVspecifiedVp
eriodVofVtime.
(b) TheVpurposeVofVtheVbalanceVsheetVisVtoVreportVtheVfinancialVpositionVofVanV
entityVatVaVgivenVdate,VthatVis,VtoVreportVinformationVaboutVtheVassets,Vliabi
litiesVandVstockholders’VequityVofVtheVentityVasVofVaVspecificVdate.
(c) TheVpurposeVofVtheVstatementVofVcashVflowsVisVtoVpresentVinformationVabo
utVtheVflowVofVcashVintoVtheVentityV(sources),VtheVflowVofVcashVoutVofVtheVe
ntityV(uses),VandVtheVnetVincreaseVorVdecreaseVinVcashVduringVtheVperiod.
(d) TheVstatementVofVstockholders’VequityVreportsVtheVchangesVinVeachVofVthe
Vcompany’sVstockholders’VequityVaccountsVduringVtheVaccountingVperiod,Vi
ncludingVissueVandVrepurchaseVofVstockVandVtheVwayVthatVnetVincomeVand
VdistributionVofVdividendsVaffectedVtheVretainedVearningsVofVtheVcompanyVd
uringVthatVperiod.

9. TheVincomeVstatementVandVtheVstatementVofVcashVflowsVareVdatedV―ForVtheV
YearVEndedVDecemberV31‖VbecauseVtheyVreportVtheVinflowsVandVoutflowsVofV
resourcesVduringVaVperiodVofVtime.VInVcontrast,VtheVbalanceVsheetVisVdatedV―
AtVDecemberV31‖VbecauseVitVrepresentsVtheVresources,Vobligations,VandVstoc
kholders’VequityVatVaVspecificVdate.

, 10. AssetsVareVimportantVtoVcreditorsVandVinvestorsVbecauseVassetsVprovideVaVbasi
sVforVjudgingVwhetherVsufficientVresourcesVareVavailableVtoVoperateVtheVcompan
y.VAssetsVareValsoVimportantVbecauseVtheyVcouldVbeVsoldVforVcashVinVtheVeven
tVtheVcompanyVgoesVoutVofVbusiness.VLiabilitiesVareVimportantVtoVcreditorsVand
VinvestorsVbecauseVtheVcompanyVmustVbeVableVtoVgenerateVsufficientVcashVfro
mVoperationsVorVfurtherVborrowingVtoVmeetVtheVpaymentsVrequiredVbyVdebtVagr
eements.VIfVaVbusinessVdoesVnotVpayVitsVcreditors,VtheVlawVmayVgiveVtheVcredit
orsVtheVrightVtoVforceVtheVsaleVofVassetsVsufficientVtoVmeetVtheirVclaims.

11. NetVincomeVisVtheVexcessVofVtotalVrevenuesVoverVtotalVexpenses.VNetVlossVi
sVtheVexcessVofVtotalVexpensesVoverVtotalVrevenues.

12. TheVequationVforVtheVincomeVstatementVisVRevenuesV-
VExpensesV=VNetVIncomeV(orVNetVLossVifVtheVamountVisVnegative).VThus,VtheVt
hreeVmajorVitemsVreportedVonVtheVincomeVstatementVareV(1)Vrevenues,V(2)Vex
penses,VandV(3)VnetVincome.
13. TheVequationVforVtheVbalanceVsheetV(alsoVknownVasVtheVbasicVaccountingVequat
ion)Vis:VAssetsV=VLiabilitiesV+VStockholders’VEquity.VAssetsVareVtheVprobableV(ex
pected)VfutureVeconomicVbenefitsVownedVbyVtheVentityVasVaVresultVofVpastVtrans
actions.V TheyVareVtheVresourcesVownedVbyVtheVbusinessVatVaVgivenVpointVinVti
meVsuchVasVcash,Vreceivables,Vinventory,Vmachinery,Vbuildings,Vland,VandVpaten
ts.VLiabilitiesVareVprobableV(expected)VdebtsVorVobligationsVofVtheVentityVasVaVre
sultVofVpastVtransactionsVthatVwillVbeVpaidVwithVassetsVorVservicesVinVtheVfuture.
VTheyVareVtheVobligationsVofVtheVentityVsuchVasVaccountsVpayable,VnotesVpayab
le,VandVbondsVpayable.VStockholders’VequityVisVfinancingVprovidedVbyVownersVof
VtheVbusinessVandVoperations.VItVisVtheVclaimVofVtheVownersVtoVtheVassetsVofVth
eVbusinessVafterVtheVcreditors’VclaimsVhaveVbeenVsatisfied.VItVmayVbeVthoughtVo
fVasVtheVresidualVinterestVbecauseVitVrepresentsVassetsVminusVliabilities.

14. TheVequationVforVtheVstatementVofVcashVflowsVis:VCashVflowsVfromVoperatingVactivities
+VCashVflowsVfromVinvestingVactivitiesV+VCashVflowsVfromVfinancingVactivitiesV=V
ChangeVinVcashVforVtheVperiod.VTheVnetVcashVflowsVforVtheVperiodVrepresentVthe
VincreaseVorVdecreaseVinVcashVthatVoccurredVduringVtheVperiod.VCashVflowsVfrom
VoperatingVactivitiesVareVcashVflowsVdirectlyVrelatedVtoVearningVincomeV(normalVb
usinessVactivityVincludingVinterestVpaidVandVincomeVtaxesVpaid).VCashVflowsVfrom
VinvestingVactivitiesVincludeVcashVflowsVthatVareVrelatedVtoVtheVacquisitionVorVsale
VofVproductiveVassetsVusedVbyVtheVcompany.VCashVflowsVfromVfinancingVactivitie
sVareVdirectlyVrelatedVtoVtheVfinancingVofVtheVenterpriseVitself.

15. TheVretainedVearningsVequationVis:VBeginningVRetainedVEarningsV+VNetVInco
meV-VDividendsV=VEndingVRetainedVEarnings.VItVbeginsVwithVbeginning-of-the-
yearVRetainedVEarningsVwhichVisVtheVpriorVyear’sVendingVretainedVearningsVre
portedVonVtheVbalanceVsheet.V TheVcurrentVyear'sVNetVIncomeVreportedVonVth
eVincomeVstatementVisVaddedVandVtheVcurrentVyear'sVDividendsVareVsubtracte
dVfromVthisVamount.VTheVendingVRetainedVEarningsVamountVisVreportedVonVth
eVend-of-periodVbalanceVsheet.


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