Solution Manual for Financial Accounting 11th Edition
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Robert Libby, Patricia Libby, Complete Chapters 1 –
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13
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, TABLE OF CONTENTS hg hg
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
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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 hg hg hg hg hg
Decisions
ANSWERS TO QUESTIONS hg hg
1. Accounting is a system that collects and processes (analyzes, measures, and
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records) financial information about an organization and reports that
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information to decision makers.
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2. Financial accounting involves preparation of the four basic financial statements
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and related disclosures for external decision makers. Managerial accounting
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involves the preparation of detailed plans, budgets, forecasts, and performance
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reports for internal decision makers.
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3. Financial reports are used by both internal and external groups and individuals.
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The internal groups are comprised of the various managers of the entity. The
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external groups include the owners, investors, creditors, governmental
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agencies, other 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
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of what the company earns and/or selling their ownership interest in the
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company in the future at a higher price than they paid. Creditors lend money
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to a company for a specific length of time and hope to gain by charging
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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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h gaccounting entity is the organization for which financial data are to be collected.
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h gTypical accounting entities are a business, a church, a governmental unit, a
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university and other nonprofit organizations such as a hospital and a welfare
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organization. A business typically is defined and treated as a separate entity
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because the owners, creditors, investors, and other interested parties need to
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evaluate its performance and its potential separately from other entities and
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from its owners.
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6. Name of Statement hg hg Alternative Title hg
(a) Income Statement hg (a) Statement of Earnings; Statement of
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Income; Statement of Operations hg hg hg
(b) Balance Sheet hg (b) Statement of Financial Position
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(c) Cash Flow Statement hg hg (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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the following:
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(a) Name of the entity hg hg hg
(b) Name of the statement hg hg hg
(c) Date of the statement, or the period of time
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(d) Unit of measure hg hg
8. (a) The purpose of the income statement is to present information about
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the revenues, expenses, and the net income of an entity for a
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specified period of time.
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(b) The purpose of the balance sheet is to report the financial position of an
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entity at a given date, that is, to report information about the assets,
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liabilities and stockholders’ equity of the entity as of a specific date.
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(c) The purpose of the statement of cash flows is to present information about
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the flow of cash into the entity (sources), the flow of cash out of the
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entity (uses), 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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h gcompany’s stockholders’ equity accounts during the accounting period,
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h gincluding issue and repurchase of stock and the way that net income and
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h gdistribution of dividends affected the retained earnings of the company hg hg hg hg hg hg hg hg hg
during that period.
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9. The income statement and the statement of cash flows are dated ―For the
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Year Ended December 31‖ because they report the inflows and outflows
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of resources during a period of time. In contrast, the balance sheet is
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dated ―At December 31‖ because it represents the resources, obligations,
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and stockholders’ equity at a specific date.
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Robert Libby, Patricia Libby, Complete Chapters 1 –
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13
hg
h
h
g
g
, TABLE OF CONTENTS hg hg
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
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hg Natural h g 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 hg hg hg hg hg
Decisions
ANSWERS TO QUESTIONS hg hg
1. Accounting is a system that collects and processes (analyzes, measures, and
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records) financial information about an organization and reports that
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information to decision makers.
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2. Financial accounting involves preparation of the four basic financial statements
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and related disclosures for external decision makers. Managerial accounting
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involves the preparation of detailed plans, budgets, forecasts, and performance
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reports for internal decision makers.
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3. Financial reports are used by both internal and external groups and individuals.
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The internal groups are comprised of the various managers of the entity. The
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external groups include the owners, investors, creditors, governmental
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agencies, other 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
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of what the company earns and/or selling their ownership interest in the
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company in the future at a higher price than they paid. Creditors lend money
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to a company for a specific length of time and hope to gain by charging
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interest on the loan.
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g
, 5. In a society, each organization can be defined as a separate accounting entity. An
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h gaccounting entity is the organization for which financial data are to be collected.
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h gTypical accounting entities are a business, a church, a governmental unit, a
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university and other nonprofit organizations such as a hospital and a welfare
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organization. A business typically is defined and treated as a separate entity
hg hg h g hg hg hg hg hg hg hg hg hg
because the owners, creditors, investors, and other interested parties need to
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evaluate its performance and its potential separately from other entities and
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from its owners.
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6. Name of Statement hg hg Alternative Title hg
(a) Income Statement hg (a) Statement of Earnings; Statement of
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Income; Statement of Operations hg hg hg
(b) Balance Sheet hg (b) Statement of Financial Position
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(c) Cash Flow Statement hg hg (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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the following:
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(a) Name of the entity hg hg hg
(b) Name of the statement hg hg hg
(c) Date of the statement, or the period of time
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(d) Unit of measure hg hg
8. (a) The purpose of the income statement is to present information about
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the revenues, expenses, and the net income of an entity for a
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specified period of time.
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(b) The purpose of the balance sheet is to report the financial position of an
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entity at a given date, that is, to report information about the assets,
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liabilities and stockholders’ equity of the entity as of a specific date.
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(c) The purpose of the statement of cash flows is to present information about
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the flow of cash into the entity (sources), the flow of cash out of the
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entity (uses), 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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h gcompany’s stockholders’ equity accounts during the accounting period,
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h gincluding issue and repurchase of stock and the way that net income and
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h gdistribution of dividends affected the retained earnings of the company hg hg hg hg hg hg hg hg hg
during that period.
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9. The income statement and the statement of cash flows are dated ―For the
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Year Ended December 31‖ because they report the inflows and outflows
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of resources during a period of time. In contrast, the balance sheet is
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dated ―At December 31‖ because it represents the resources, obligations,
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and stockholders’ equity at a specific date.
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