Solution manual for intermediate accounting 3rd edition elizabeth a gordon jana s raedy alexander j sannella_compressed

CHAPTER 1 M



The Financial Reporting Environment Soluti
M M M M




ons
Questions

Q1-
1MFinancialMinformationMisMaMmuchMbroaderMconceptMthanMsimplyMtheMfinancialMstatementsMan
dMfootnotesMtoMtheMfinancialMstatements.MFinancialMinformationMincludesMitemsMsuchMasMtheMPr
esident‘sMletterMtoMtheMowners,Mmanagement‘sMdiscussionMandManalysis,MtheMauditors‘Mreport,Mt
heMmanagementMreportMandMpressMreleases.MOfMcourse,MtheMbasicMfinancialMstatementsMandMfoo
tnotesMareMincludedMinMtheMtermMfinancialMinformation.MTheMbasicMfinancialMstatementsMare:Mth
eMbalanceMsheetM(alsoM referredMtoMasMtheMstatementMofMfinancialMposition),MtheMstatementMofMc
omprehensiveMincomeM(alsoMreferredMtoMasMtheMstatementMofMnetMincomeMandMtheMstatementMo
fMcomprehensiveMincome),MtheMstatementMofMcashMflows,MandMtheMstatementMofMshareholders‘M
equity.MFinancialMinformationMisMnotMsynonymousMwithMtheMtermMfinancialMstatementsMbecause
MtheMfinancialMstatementsMareMaMsubsetMofMtheMdifferentMtypesMofMfinancialMinformationMprovid

ed.

Q1-
2MTheMpurposeMofMgeneratingMfinancialMstatementsMisMtoMprovideMusefulMinformationMtoMusersM
toMevaluateMeconomicMentitiesMandMmakeMefficientMresourceMallocationMdecisionsMbasedMonMthe
MrisksMandMreturnsMofMaMparticularMinvestment.MTheMFinancialMAccountingMStandardsMBoardM(

FASB)MidentifiesMinvestors,MlendersMandMotherMcreditorsMasMtheMprimaryMusersMofMtheMfinancia
lMstatements.MTheMfinancialMstatementsMareMtheMculminationMofMtheMfinancialMreportingMproces
s.

Q1-
3MCapitalMisMaMscarceMresource.MInvestorsMandMcreditorsMhaveMtoMmakeMdecisionsMasMtoMhowMm
uchMcapitalMtoMinvestMinManyMgivenMentity;Mtherefore,MtheyMdemandMrelevantMandMfaithfullyMrep
resentativeMinformationMaboutMtheMeconomicMperformanceMandMfinancialMpositionMofMaMcompa
ny.MThisMinformationMisMprovidedMinMtheMfinancialMstatements.

Q1-
4MExternalMauditorsMensureMthatMtheMmanagementMofMaMcompanyMhasMpreparedMfinancialMstate
mentsMinMaccordanceMwithMGenerallyMAcceptedMAccountingMPrinciplesMandMfairlyMpresentMtheM
financialMpositionMandMeconomicMperformanceMofMaMcompany.MInMaddition,MexternalMauditorsM
mustMbeManMindependentMpartyMandMcannotMbeMemployeesMofMtheMcompanyMtheyMareMauditing.
MExternalMauditorsMprovideMaMsignificantMamountMofMcredibilityMtoMtheMfinancialMstatements.



Q1-
5MDataManalyticsMisMtheMprocessMofManalyzingMlargeMdataMsetsMinMorderMtoMdrawMusefulMconclu
sions.MItMinvolvesMconvertingMrawMdataMintoMusefulMknowledge.MInMfinancialMreporting,MdataMa
nalyticsMcanMbeMusedMtoMimproveMtheMqualityMofMestimatesMandMvaluations.

Q1-
6MStandardMsettersMcreateMaccountingMconcepts,Mrules,MandMguidelinesMtoMensureMthatMfinancial

,MstatementsMaccuratelyMpresentMtheMeconomicMperformanceMandMfinancialMpositionMofMaMfirm.M
TheMstandardsMencourageMtransparentMandMtruthfulMreporting.

,
, 1M- SMOMLMUMTMIMOMNMSM MMAMNMUMAMLM FMOMRM IMNMTMEMRMMMEMDMIM
M2M AMTMEM AMCMCMOMUMNMTMING M


Q1-
7MU.S.McompaniesMlistedMonMU.S.MstockMexchangesMdoMnotMhaveMtheMoptionMtoMreportMunderMI
FRS.MHowever,MforeignMcompaniesMthatMtradeMinMtheMU.S.MexchangesMcanMreportMunderMIFRS.
MTheMSECMpermitsMtheMuseMofMIFRS-

basedMfinancialMstatementsMbyMinternationalMcompaniesMwithMsharesMtradingMonMU.S.MstockMex
changes.

Q1-
8MTheMFASBMseeksMandMwelcomesMcommentsMfromMallMpartiesMinMtheMfinancialMreportingMpro
cessMincludingMmanagers,Minvestors,Maccountants,Mpreparers,Mcreditors,Mlenders,MfinancialMstate
mentMusers,MgovernmentalMagencies,MfinancialManalysts,MindustryMgroups,MandMauditors.MFASB
MalsoMreceivesMfeedbackMfromMpublicMroundtableMdiscussions,MpublicMmeetings,MtheMFASAC,Mt

heMPrivateMCompanyMCouncil,MandMEITF.

Q1-
9MYes,MtheMpromulgationMofMfinancialMaccountingMstandardsMisMaMpoliticalMprocess.MThereMare
MseveralMgroupsMthatMinfluenceMtheMstandardMsettingMprocess.MTheMstandardMsettingMprocessMisM

aMpoliticalMprocessMthatMisMaffectedMbyMtheMimpactMofMseveralMlobbyingMgroups.MTheMgovernm
ent,MthroughMtheMSEC,MinfluencesMaccountingMstandards.MTheMSECMhasMtheMauthorityMtoMissueM
accountingMstandardsMbutMhasMassignedMthisMresponsibilityMtoMtheMprivateMsector.MNonetheless,
MtheMSECMcanMexertMpressureMonMtheMFASBMtoMissueMaccountingMstandardsMandMvetoMtheMstan

dardsMpromulgatedMbyMtheMFASB.MAuditingMfirms,MtheMcorporateMsector,Mcreditors,MfinancialMa
nalysts,MtheMfinancialMcommunity,MaccountingMorganizations,MindustryMgroups,MandMinvestorsMc
anMinfluenceMtheMFASBMbyMwrittenMcommentsMaboutMExposureMDraftsMandMparticipationMinMp
ublicMmeetingsMandMpublicMroundtablesMregardingMaMproposedMfinancialMreportingMstandard.
Q1-10MAMprinciples-
basedMstandardMisMconsistentMwithMaMtheoreticalMframework.MInMcontrast,MaMrules-
basedMstandardMdoesMnotMnecessarilyMrelyMonMaMconsistentMtheoreticalMframework.MRather,Mit
McontainsMmoreMspecificMandMprescriptiveMrules.



Q1-
11MRecently,MtheMFASBMhasMtakenManMasset/liabilityMapproachMinMsettingMstandards.MWithMthis
Mapproach,MaMtransactionMisMrecordedMbasedMonMwhetherManMassetMorMliabilityMisMcreated.MAnot

herMtrendMhasMbeenMtheMmovementMtowardMtheMuseMofMfairMvalueMmeasurementsMasManMalterna
tiveMtoMhistoricalMcost.MFASBMhasMalsoMfocusedMonMtheMpromulgationMofMprinciples-
basedMstandardsMinsteadMofMrules-basedMstandards.

BriefMExercisesMSolu

tionMtoMBE1-1

General-
purposeMfinancialMstatementsMprovideMgeneralMfinancialMinformationMaboutManMentityMthatMwill
MbeMusefulMtoMmanyMtypesMofMusers.MGeneral-

purposeMfinancialMstatementsMprovideMinformationMtoMaMwideMspectrumMofMuserMgroups:Minvest
ors,Mcreditors,MfinancialManalysts,Mcustomers,Memployees,Mcompetitors,Msuppliers,Munions,MandM
governmentMagencies.MMostMfinancialMinformationMinMgeneralMpurposeMfinancialMstatementsMisM
providedMtoMsatisfyMusersMwithMlimitedMabilityMorMauthorityMtoMobtainMadditionalMinformation,M
whichMincludesMinvestorsMandMcreditors.MTheMFinancialMAccountingMStandardsMBoardM(FASB)
©M2021MPearsonMEducation,MI
nc.