Financial Accounting, 11th Edition by Robert Libby & Patricia Libby – Complete Solution Manual (Chapters 1–13)

Solution Manual for Financial Accounting 11th Edition
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Robert Libby, Patricia Libby, Complete Chapters 1 – 13
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, TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
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CHAPTER 2: Investing and Financing Decisions and the Accounting System
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CHAPTER 3: Operating Decisions and the Accounting System
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CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
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CHAPTER 5: Communicating and Analyzing Accounting Information
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CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
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CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
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Q Resources


CHAPTER 9: Reporting and Interpreting Liabilities
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CHAPTER 10: Reporting and Interpreting Bond Securities
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CHAPTER 11: Reporting and Interpreting Stockholders' Equity
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CHAPTER 12: Statement of Cash Flows
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CHAPTER 13: Analyzing Financial Statements
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,Chapter 1 Financial Statements and Business
Decisions


ANSWERS TO QUESTIONS Q Q




1. Accounting is a system that collects and processes (analyzes, measures, and
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Qrecords) financial information about an organization and reports that information
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to decision makers.
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2. Financial accounting involves preparation of the four basic financial statements and
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Q related disclosures for external decision makers. Managerial accounting involves
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Qthe preparation of detailed plans, budgets, forecasts, and performance reports for
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Qinternal decision makers. Q Q




3. Financial reports are used by both internal and external groups and individuals.
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QThe internal groups are comprised of the various managers of the entity. The
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Qexternal groups include the owners, investors, creditors, governmental agencies,
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Qother interested parties, and the public at large.
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4. Investors purchase all or part of a business and hope to gain by receiving part of
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Q what the company earns and/or selling their ownership interest in the company
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Qin the future at a higher price than they paid. Creditors lend money to a company
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Qfor a specific length of time and hope to gain by charging interest on the loan.
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, 5. In a society, each organization can be defined as a separate accounting entity. An
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Q accounting entity is the organization for which financial data are to be collected.
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Q Typical accounting entities are a business, a church, a governmental unit, a
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Quniversity and other nonprofit organizations such as a hospital and a welfare
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Qorganization. A business typically is defined and treated as a separate entity
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Qbecause the owners, creditors, investors, and other interested parties need to
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Qevaluate its performance and its potential separately from other entities and from
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Qits owners.
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6. Name of Statement
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(a) Income Statement Q (a) Statement of Earnings; Statement of
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Income; Statement of Operations Q Q Q


(b) Balance Sheet Q (b) Statement of Financial Position
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(c) Cash Flow Statement Q Q (c) Statement of Cash Flows
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7. The heading of each of the four required financial statements should include
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Qthe following:
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(a) Name of the entity Q Q Q


(b) Name of the statement Q Q Q


(c) Date of the statement, or the period of time
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(d) Unit of measure Q Q




8. (a) The purpose of the income statement is to present information about the
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Qrevenues, expenses, and the net income of an entity for a specified period
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of time.
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(b) The purpose of the balance sheet is to report the financial position of an entity
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at a given date, that is, to report information about the assets, liabilities and
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Qstockholders’ equity of the entity as of a specific date. Q Q Q Q Q Q Q Q Q


(c) The purpose of the statement of cash flows is to present information about the
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Qflow of cash into the entity (sources), the flow of cash out of the entity (uses),
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and the net increase or decrease in cash during the period.
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(d) The statement of stockholders’ equity reports the changes in each of the
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Qcompany’s stockholders’ equity accounts during the accounting period,
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Qincluding issue and repurchase of stock and the way that net income and
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Qdistribution of dividends affected the retained earnings of the company
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during that period.
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9. The income statement and the statement of cash flows are dated ―For the Year
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Q Ended December 31‖ because they report the inflows and outflows of
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Qresources during a period of time. In contrast, the balance sheet is dated ―At
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QDecember 31‖ because it represents the resources, obligations, and
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Qstockholders’ equity at a specific date. Q Q Q Q Q