Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete

Solution Manual For Financial Statement Analysis,
13th Edition
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete

, Chapterp1p Introductio
nptopFinancialpReporting


QUESTIONS

1- 1. a.
ThepAICPApispanporganizationpofpCPAspthatppriorptop1973pacceptedpthep
primarypresponsibilitypforpthepdevelopmentpofpgenerallypacceptedpaccount
ingpprinciples.pTheirprolepwaspsubstantiallypreducedpinp1973pwhenpthepFin
ancialpAccountingpStandardspBoardpwaspestablished.p Theirprolepwaspfurt
herpreducedpwithpthepestablishmentpofpthepPublicpCompanypAccountingpO
versightpBoardpwaspestablishedpinp2002.

b. ThepFinancialpAccountingpStandardspBoardpreplacedpthepAccounting
pPrinciplespBoardpaspthepprimaryprule-

makingpbodypforpaccountingpstandards.pItpispanpindependentporganiz
ationpandpincludespmemberspotherpthanppublicpaccountants.

c. ThepSECphaspthepauthorityptopdeterminepgenerallypacceptedpaccounting
pprinciplespandptopregulatepthepaccountingpprofession.pThepSECphaspele

ctedptopleavepmuchpofpthepdeterminationpofpgenerallypacceptedpaccounti
ngpprinciplesptopthepprivatepsector.p ThepFinancialpAccountingpStandard
spBoardphaspplayedpthepmajorprolepinpestablishingpaccountingpstandards
psincep1973.p Regulationpofpthepaccountingpprofessionpwaspsubstantially

pturnedpoverptopthepPublicpCompanypAccountingpOversightpBoardpinp200

2.

1-p2.
Consistencypispobtainedpthroughpthepapplicationpofpthepsamepaccountingp
principlepfrompperiodptopperiod.p Apchangepinpprincipleprequirespstatement
pdisclosure.



1-p3.
Thepconceptpofphistoricalpcostpdeterminespthepbalancepsheetpvaluationpofpland.p
Theprealizationpconceptprequirespthatpaptransactionpneedsptopoccurpforpthepprofit
ptopbeprecognized.



1-p4. a.p Entity e.p Historicalpcost

b. Realization f.p Historicalpcost

c. Materiality g.p Disclosure

d. Conservatism

,1-p5. Entitypconcept

, 1-p6.
Generallypacceptedpaccountingpprinciplespdopnotpapplypwhenpapfirmpdoespnot
pappearptopbepapgoingpconcern.p Ifpthepdecisionpispmadepthatpthispispnotpapgoin
gpconcern,pthenpthepusepofpGAAPpwouldpnotpbepappropriate.

1-p7.
Withptheptimepperiodpassumption,pinaccuraciespofpaccountingpforpthepentity,psh
ortpofpitspcompleteplifepspan,parepaccepted.pThepassumptionpispmadepthatpthepe
ntitypcanpbepaccountedpforpreasonablypaccuratelypforpapparticularpperiodpofptime
.p Inpotherpwords,pthepdecisionpispmadeptopacceptpsomepinaccuracypbecausepofp
incompletepinformationpaboutpthepfuturepinpexchangepforpmoreptimelypreporting.
p Thepstatementsparepconsideredptopbepmeaningfulpbecausepmaterialpinaccurac

iesparepnotpacceptable.

1- 8.p p Itpisptruepthatptheponlypaccuratepwayptopaccountpforpthepsuccessporpfailurepofpanpe
ntitypisptopaccumulatepallptransactionspfrompthepopeningpofpbusinesspuntilpthepb
usinesspeventuallypliquidates.p Butpitpispnotpnecessarypthatpthepstatementspbepc
ompletelypaccuratepinporderpforpthemptopbepmeaningful.

1- 9. a. Apyearpthatpendspwhenpoperationsparepatpaplowpebbpforpthepyear.

b. ThepaccountingptimepperiodpispendedponpDecemberp31.

c. Aptwelve-
monthpaccountingpperiodpthatpendspatpthependpofpapmonthpotherpthanpDec
emberp31.
1-10. Money.

1-
11.p p Whenpmoneypdoespnotpholdpapstablepvalue,pthepfinancialpstatementspca
nplosepmuchpofptheirpsignificance.p Topthepextentpthatpmoneypdoespnotpremainp
stable,pitplosespusefulnesspaspthepstandardpforpmeasuringpfinancialptransactio
ns.

1-12.
No.p Therepispapproblempwithpdeterminingpthepindexpinporderptopadjustpthepstat
ements.p Thepitemspthatparepincludedpinpthepindexpmustpbeprepresentative.pInp
addition,ptheppricespofpitemspchangepbecausepofpvariouspfactors,psuchpaspquali
ty,ptechnology,pandpinflation.

Yes.pApreasonablepadjustmentptopthepstatementspcanpbepmadepforpinflation.

1-13. False.p Anparbitrarypwrite-
offpofpinventorypcannotpbepjustifiedpunderpthepconservatismpconcept.p Thepcon
servatismpconceptpcanponlypbepappliedpwherepthereparepalternativepmeasurem
entspandpeachpofpthesepalternativepmeasurementsphaspreasonablepsupport.