Solution Manual For Intermediate Accounting, 11th Edition by
]+ ]+ ]+ ]+ ]+ ]+ ]+]+ ]+
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
]+ ]+ ]+ ]+ ]+ ]+
,Chapter 1 Environment and Theoretical Structure of ]+ ]+ ]+ ]+ ]+ ]+
Financial Accounting ]+
Question 1–1 ]+
Financial accounting is concerned with providing relevant financial information a
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
bout various kinds of organizations to different types of external users. The primary fo
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
cus of financial accounting is on the financial information provided by profit-
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
oriented companies to their present and potential investors and creditors.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–2 ]+
Resources are efficiently allocated if they are given to enterprises that will use th
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
em to provide goods and services desired by society and not to enterprises that will w
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
aste them. The capital markets are the mechanism that fosters this efficient allocation
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
of resources.
]+
Question 1–3 ]+
Two extremely important variables that must be considered in any investment de
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
cision are the expected rate of return and the uncertainty or risk of that expected retur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
n.
Question 1–4 ]+
In the long run, a company will be able to provide investors and creditors with a r
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ate of return only if it can generate a profit. That is, it must be able to use the resource
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s provided to it to generate cash receipts from selling a product or service that exceed t
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
he cash disbursements necessary to provide that product or service.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–5 ]+
The primary objective of financial accounting is to provide investors and credito
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+
rs with information that will help them make investment and credit decisions.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–6 ]+
Net operating cash flows are the difference between cash receipts and cash disbur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
sements during a period of time from transactions related to providing goods and serv
]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+ ]+ ]+ ]+
ices to customers. Net operating cash flows may not be a good indicator of future cash
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]
+flows because, by ignoring uncompleted transactions, they may not match the accomp
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
lishments and sacrifices of the period. ]+ ]+ ]+ ]+ ]+
,Question 1–7 ]+
GAAP (generally accepted accounting principles) are a dynamic set of both broa
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
d and specific guidelines that a company should follow in measuring and reporting th
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
e information in their financial statements and related notes. It is important that all c
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ] + ]+ ]+ ]+ ]+
ompanies follow GAAP so that investors can compare financial information across co
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
mpanies to make their resource allocation decisions.
]+ ]+ ]+ ]+ ]+ ]+
Question 1–8 ]+
In 1934, Congress created the SEC and gave it the job of setting accounting and r
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
eporting standards for companies whose securities are publicly traded. The SEC has re
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
tained the power, but has relied on private sector bodies to create the standards. The c
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
urrent private sector body responsible for setting accounting standards is the FASB.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–9 ]+
Auditors are independent, professional accountants who examine financial statem
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ents to express an opinion. The opinion reflects the auditors‘ assessment of the statem
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ents' fairness, which is determined by the extent to which they are prepared in complia
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
nce with GAAP. The auditor adds credibility to the financial statements, which increa
]+ ]+ ] + ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ses the confidence of capital market participants relying on that information.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
, Question 1–10 ]+
Key provisions included in the text are:
]+ ]+ ]+ ]+ ]+ ]+
Creation of the Public Company Accounting Oversight Board
]+ ]+ ]+ ]+ ]+ ]+ ]+
Regulate types of non-audit audit services ]+ ]+ ]+ ]+ ]+
Require lead audit partner rotation every 5 year
]+ ]+ ]+ ]+ ]+ ]+ ]+
Corporate executive accountability ]+ ]+
Addresses conflicts of interest for security analysts ]+ ]+ ]+ ]+ ]+ ]+
Internal control reporting and auditor opinion about controls
]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–11 ]+
New accounting standards, or changes in standards, can have significant different
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ial effects on companies, investors and creditors, and other interest groups by causing
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
redistribution of wealth. There also is the possibility that standards could harm the ec
]+ ]+ ] + ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
onomy as a whole by causing companies to change their behavior.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–12 ]+
The FASB undertakes a series of elaborate information gathering steps before iss
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
uing an accounting standard to determine consensus as to the preferred method of acc
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ounting, as well as to anticipate adverse economic consequences.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–13 ]+
The purpose of the conceptual framework is to guide the Board in developing acc
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ounting standards by providing an underlying foundation and basic reasoning on whic
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
h to consider merits of alternatives. The framework does not prescribe GAAP.
]+ ]+ ]+ ]+ ]+ ] + ]+ ]+ ]+ ]+ ]+
]+ ]+ ]+ ]+ ]+ ]+ ]+]+ ]+
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
]+ ]+ ]+ ]+ ]+ ]+
,Chapter 1 Environment and Theoretical Structure of ]+ ]+ ]+ ]+ ]+ ]+
Financial Accounting ]+
Question 1–1 ]+
Financial accounting is concerned with providing relevant financial information a
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
bout various kinds of organizations to different types of external users. The primary fo
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
cus of financial accounting is on the financial information provided by profit-
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
oriented companies to their present and potential investors and creditors.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–2 ]+
Resources are efficiently allocated if they are given to enterprises that will use th
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
em to provide goods and services desired by society and not to enterprises that will w
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
aste them. The capital markets are the mechanism that fosters this efficient allocation
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
of resources.
]+
Question 1–3 ]+
Two extremely important variables that must be considered in any investment de
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
cision are the expected rate of return and the uncertainty or risk of that expected retur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
n.
Question 1–4 ]+
In the long run, a company will be able to provide investors and creditors with a r
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ate of return only if it can generate a profit. That is, it must be able to use the resource
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s provided to it to generate cash receipts from selling a product or service that exceed t
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
he cash disbursements necessary to provide that product or service.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–5 ]+
The primary objective of financial accounting is to provide investors and credito
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+
rs with information that will help them make investment and credit decisions.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–6 ]+
Net operating cash flows are the difference between cash receipts and cash disbur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
sements during a period of time from transactions related to providing goods and serv
]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+ ]+ ]+ ]+
ices to customers. Net operating cash flows may not be a good indicator of future cash
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]
+flows because, by ignoring uncompleted transactions, they may not match the accomp
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
lishments and sacrifices of the period. ]+ ]+ ]+ ]+ ]+
,Question 1–7 ]+
GAAP (generally accepted accounting principles) are a dynamic set of both broa
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
d and specific guidelines that a company should follow in measuring and reporting th
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ]+ ]+
e information in their financial statements and related notes. It is important that all c
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ] + ] + ]+ ]+ ]+ ]+
ompanies follow GAAP so that investors can compare financial information across co
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
mpanies to make their resource allocation decisions.
]+ ]+ ]+ ]+ ]+ ]+
Question 1–8 ]+
In 1934, Congress created the SEC and gave it the job of setting accounting and r
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
eporting standards for companies whose securities are publicly traded. The SEC has re
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
tained the power, but has relied on private sector bodies to create the standards. The c
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
urrent private sector body responsible for setting accounting standards is the FASB.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–9 ]+
Auditors are independent, professional accountants who examine financial statem
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ents to express an opinion. The opinion reflects the auditors‘ assessment of the statem
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ents' fairness, which is determined by the extent to which they are prepared in complia
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
nce with GAAP. The auditor adds credibility to the financial statements, which increa
]+ ]+ ] + ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ses the confidence of capital market participants relying on that information.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
, Question 1–10 ]+
Key provisions included in the text are:
]+ ]+ ]+ ]+ ]+ ]+
Creation of the Public Company Accounting Oversight Board
]+ ]+ ]+ ]+ ]+ ]+ ]+
Regulate types of non-audit audit services ]+ ]+ ]+ ]+ ]+
Require lead audit partner rotation every 5 year
]+ ]+ ]+ ]+ ]+ ]+ ]+
Corporate executive accountability ]+ ]+
Addresses conflicts of interest for security analysts ]+ ]+ ]+ ]+ ]+ ]+
Internal control reporting and auditor opinion about controls
]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–11 ]+
New accounting standards, or changes in standards, can have significant different
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ial effects on companies, investors and creditors, and other interest groups by causing
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
redistribution of wealth. There also is the possibility that standards could harm the ec
]+ ]+ ] + ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
onomy as a whole by causing companies to change their behavior.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–12 ]+
The FASB undertakes a series of elaborate information gathering steps before iss
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
uing an accounting standard to determine consensus as to the preferred method of acc
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ounting, as well as to anticipate adverse economic consequences.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Question 1–13 ]+
The purpose of the conceptual framework is to guide the Board in developing acc
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ounting standards by providing an underlying foundation and basic reasoning on whic
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
h to consider merits of alternatives. The framework does not prescribe GAAP.
]+ ]+ ]+ ]+ ]+ ] + ]+ ]+ ]+ ]+ ]+
