Solution Manual for Intermediate Accounting
3rd Edition by Gordon,
Chapter 1 to 22
,TABLE OF CONTENTS g g
1. The Financial Reporting Environment
g g g
2. Financial Reporting Theory
g g
3. Judgment and Applied Financial Accounting Research
g g g g g
4. Review of the Accounting Cycle
g g g g
5. Statements of Net Income and Comprehensive Income
g g g g g g
6. Statements of Financial Position and Cash Flows and the Annual Report
g g g g g g g g g g
7. Accounting and the Time Value of Money
g g g g g g
8. Revenue Recognition (Current Standard) Revenue Recognition (Previous
g g g g g g g
Standards)gONLINE
9. Short-Term Operating Assets. Cash and Receivables
g g g g g
10. Short-Termg Operatingg Assets.gInventory
11. Long-TermgOperatinggAssets.gAcquisition,gCostgAllocation,gandgDerecognition
12. Long-TermgOperatinggAssets.gDeparturesgfromgHistoricalg Cost
13. OperatinggLiabilitiesgandgContingencies
14. Financingg Liabilities
15. AccountinggforgStockholders'gEquity
16. InvestmentsgingFinancialgAssets
17. AccountinggforgIncomegTaxes
18. AccountinggforgLeasesg(NewgStandard)gAccountinggforgLe
asesg(CurrentgStandards)gONLINE
19. AccountinggforgEmployeegCompensationgandgBenefits
20. EarningsgpergShare
21. AccountinggChangesgandgErrorgAnalysis
22. ThegStatementgofgCashgFlows
,CHAPTER 1 g
The Financial Reporting Environment Soluti
g g g g
ons
Questions
Q1-
1gFinancialginformationgisgagmuchgbroadergconceptgthangsimplygthegfinancialgstatementsgandgfootnotesgtogt
hegfinancialgstatements.gFinancialginformationgincludesgitemsgsuchgasgthegPresident‘sglettergtogthegowners,g
management‘sgdiscussiongandganalysis,gthegauditors‘greport,gthegmanagementgreportgandgpressgreleases.gOfg
course,gthegbasicgfinancialgstatementsgand
footnotesgaregincludedgingthetermgfinancialginformation.gThegbasicgfinancialgstatementsgare:gthegbalancegshe
etg(alsog referredgtogasgthegstatementgofgfinancialgposition),gthegstatementgofgcomprehensivegincomeg(alsog
referredgtogasgthegstatementgofgnetgincomegandgthegstatementgofgcomprehensivegincome),gthegstatementgo
fgcashgflows,gandgthegstatementgofgshareholders‘gequity.gFinancialginformationgisgnotgsynonymousgwithgth
egtermgfinancialgstatementsgbecausegthegfinancialgstatementsgaregagsubsetgofgthegdifferentgtypesgofgfinancia
lginformationgprovided.
Q1-
2gThegpurposegofggeneratinggfinancialgstatementsgisgtogprovidegusefulginformationgtogusersgtogevaluategecon
omicgentitiesgandgmakegefficientgresourcegallocationgdecisionsgbasedgongthegrisksgandgreturnsgofgagparticularg
investment.gThegFinancialgAccountinggStandardsgBoardg(FASB)gidentifiesginvestors,glendersgandgothergcred
itorsgasgthegprimarygusersgofgthegfinancialgstatements.gThegfinancialstatementsgaregthegculminationgofgtheg
financialgreportinggprocess.
Q1-
3gCapitalgisgagscarcegresource.gInvestorsgandgcreditorsghavegtogmakegdecisionsgasgtoghowgmuchcapitalgtoginve
stginganyggivengentity;gtherefore,gtheygdemandgrelevantgandgfaithfullygrepresentativeginformationgaboutgth
egeconomicgperformancegandgfinancialgpositiongofgagcompany.gThisginformationgisgprovidedgingthegfin
ancialgstatements.
Q1-
4gExternalgauditorsgensuregthatgthegmanagementgofgagcompanyghasgpreparedgfinancialgstatementsgingacc
ordancegwithgGenerallygAcceptedgAccountinggPrinciplesgandgfairlygpresentgthegfinancialgpositiongandgecon
omicgperformancegofgagcompany.gIngaddition,gexternalgauditorsgmustgbegangindependentgpartygandgcannotg
begemployeesgofgthegcompanygtheygaregauditing.
Externalg auditorsprovidegagsignificantgamountgofgcredibilitygtogthegfinancialgstatements.
Q1-
5gDataganalyticsgisgthegprocessgofganalyzingglargegdatagsetsgingordergtogdrawgusefulgconclusions.gItinvolvesgc
onvertinggrawgdatagintogusefulgknowledge.gIngfinancialgreporting,gdataganalyticsgcangbegusedgtogimprovegth
egqualitygofgestimatesgandgvaluations.
Q1-
6gStandardgsettersgcreategaccountinggconcepts,grules,gandgguidelinesgtogensuregthatgfinancialgstatem
entsgaccuratelygpresentgthegeconomicgperformancegandgfinancialgpositiongofgagfirm.gThegstandardsge
ncouragegtransparentgandgtruthfulgreporting.
, 1g-g2 SgOgLgUgTgIgOgNgSg MgAgNgUgAgLg FgOgRg IgNgTgEgRgMgEgDgIgAgTgEg AgCgCgOgUgNg
TgING
Q1-
7gU.S.gcompaniesglistedgongU.S.gstockgexchangesgdognotghavegthegoptiongtogreportgundergIFRS.However,
g foreigngcompaniesgthatgtradegingthegU.S.gexchangesgcangreportgundergIFRS.gThegSECgpermitsgthegusegofgIF
RS-basedgfinancialgstatementsgbyginternationalgcompaniesgwithgsharesgtradinggongU.S.gstockgexchanges.
Q1-
8gThegFASBgseeksgandgwelcomesgcommentsgfromgallgpartiesgingthegfinancialgreportinggprocessgincludingg
managers,ginvestors,gaccountants,gpreparers,gcreditors,glenders,gfinancialgstatementgusers,governmentalgag
encies,gfinancialganalysts,gindustryggroups,gandgauditors.gFASBgalsogreceivesgfeedbackgfromgpublicgroundta
blegdiscussions,gpublicgmeetings,gthegFASAC,gthegPrivategCompanygCouncil,gandgEITF.
Q1-
9gYes,gthegpromulgationgofgfinancialgaccountinggstandardsgisgagpoliticalgprocess.gTheregaregseveralggroupsgt
hatginfluencegthegstandardgsettinggprocess.gThegstandardgsettinggprocessgisgagpoliticalgprocessgthatgisgaffecte
dgbygthegimpactgofgseveralglobbyingggroups.gTheggovernment,gthroughgthegSEC,ginfluencesgaccountinggsta
ndards.gThegSECghasgthegauthoritygtogissuegaccountinggstandardsgbutghasgassignedgthisgresponsibilitygtogtheg
privategsector.gNonetheless,gthegSECgcangexertgpressuregongtheFASBgtogissuegaccountinggstandardsgandgve
togthegstandardsgpromulgatedgbygthegFASB.gAuditinggfirms,gthegcorporategsector,gcreditors,gfinancialganalysts
,gthegfinancialgcommunity,gaccountinggorganizations,gindustryggroups,gandginvestorsgcanginfluencegthegFASB
gbygwrittengcommentsgaboutgExposuregDraftsgandgparticipationgingpublicgmeetingsgandgpublicgroundtable
sgregardinggagproposedgfinancialgreportinggstandard.
Q1-10gAgprinciples-basedgstandardgisgconsistentgwithgagtheoreticalgframework.gIngcontrast,gagrules-
gbasedgstandardgdoesgnotgnecessarilygrelygongagconsistentgtheoreticalgframework.gRather,gitgcontainsg
moregspecificgandgprescriptivegrules.
Q1-
11gRecently,gthegFASBghasgtakengangasset/liabilitygapproachgingsettinggstandards.gWithgthisgapproach,gagtrans
actiongisgrecordedgbasedgongwhethergangassetgorgliabilitygisgcreated.gAnothergtrendghasgbeengthegmovementgt
owardgthegusegofgfairgvaluegmeasurementsgasgangalternativegtoghistoricalgcost.gFASBghasgalsogfocusedgongth
egpromulgationgofgprinciples-basedgstandardsginsteadgofgrules-gbasedgstandards.
BriefgExercisesg
SolutiongtogBE1-g1
General-
purposegfinancialgstatementsgprovideggeneralgfinancialginformationgaboutgangentitygthatgwillgbegusefulgtog
manygtypesgofgusers.gGeneral-
purposegfinancialgstatementsgprovideginformationgtogagwidegspectrumgofguserggroups:ginvestors,gcreditor
s,gfinancialganalysts,gcustomers,gemployees,gcompetitors,gsuppliers,gunions,gandggovernmentgagencies.gMo
stgfinancialginformationginggeneralgpurposegfinancialgstatementsgisgprovidedgtogsatisfygusersgwithglimitedgabili
tygorgauthoritygtogobtaingadditionalginformation,gwhichgincludesginvestorsgandgcreditors.gThegFinancialgAc
countinggStandardsBoardg(FASB)gidentifiesginvestors,glenders,gandgothergcreditorsgasgthegprimarygusersgof
gthegfinancialgstatements.
3rd Edition by Gordon,
Chapter 1 to 22
,TABLE OF CONTENTS g g
1. The Financial Reporting Environment
g g g
2. Financial Reporting Theory
g g
3. Judgment and Applied Financial Accounting Research
g g g g g
4. Review of the Accounting Cycle
g g g g
5. Statements of Net Income and Comprehensive Income
g g g g g g
6. Statements of Financial Position and Cash Flows and the Annual Report
g g g g g g g g g g
7. Accounting and the Time Value of Money
g g g g g g
8. Revenue Recognition (Current Standard) Revenue Recognition (Previous
g g g g g g g
Standards)gONLINE
9. Short-Term Operating Assets. Cash and Receivables
g g g g g
10. Short-Termg Operatingg Assets.gInventory
11. Long-TermgOperatinggAssets.gAcquisition,gCostgAllocation,gandgDerecognition
12. Long-TermgOperatinggAssets.gDeparturesgfromgHistoricalg Cost
13. OperatinggLiabilitiesgandgContingencies
14. Financingg Liabilities
15. AccountinggforgStockholders'gEquity
16. InvestmentsgingFinancialgAssets
17. AccountinggforgIncomegTaxes
18. AccountinggforgLeasesg(NewgStandard)gAccountinggforgLe
asesg(CurrentgStandards)gONLINE
19. AccountinggforgEmployeegCompensationgandgBenefits
20. EarningsgpergShare
21. AccountinggChangesgandgErrorgAnalysis
22. ThegStatementgofgCashgFlows
,CHAPTER 1 g
The Financial Reporting Environment Soluti
g g g g
ons
Questions
Q1-
1gFinancialginformationgisgagmuchgbroadergconceptgthangsimplygthegfinancialgstatementsgandgfootnotesgtogt
hegfinancialgstatements.gFinancialginformationgincludesgitemsgsuchgasgthegPresident‘sglettergtogthegowners,g
management‘sgdiscussiongandganalysis,gthegauditors‘greport,gthegmanagementgreportgandgpressgreleases.gOfg
course,gthegbasicgfinancialgstatementsgand
footnotesgaregincludedgingthetermgfinancialginformation.gThegbasicgfinancialgstatementsgare:gthegbalancegshe
etg(alsog referredgtogasgthegstatementgofgfinancialgposition),gthegstatementgofgcomprehensivegincomeg(alsog
referredgtogasgthegstatementgofgnetgincomegandgthegstatementgofgcomprehensivegincome),gthegstatementgo
fgcashgflows,gandgthegstatementgofgshareholders‘gequity.gFinancialginformationgisgnotgsynonymousgwithgth
egtermgfinancialgstatementsgbecausegthegfinancialgstatementsgaregagsubsetgofgthegdifferentgtypesgofgfinancia
lginformationgprovided.
Q1-
2gThegpurposegofggeneratinggfinancialgstatementsgisgtogprovidegusefulginformationgtogusersgtogevaluategecon
omicgentitiesgandgmakegefficientgresourcegallocationgdecisionsgbasedgongthegrisksgandgreturnsgofgagparticularg
investment.gThegFinancialgAccountinggStandardsgBoardg(FASB)gidentifiesginvestors,glendersgandgothergcred
itorsgasgthegprimarygusersgofgthegfinancialgstatements.gThegfinancialstatementsgaregthegculminationgofgtheg
financialgreportinggprocess.
Q1-
3gCapitalgisgagscarcegresource.gInvestorsgandgcreditorsghavegtogmakegdecisionsgasgtoghowgmuchcapitalgtoginve
stginganyggivengentity;gtherefore,gtheygdemandgrelevantgandgfaithfullygrepresentativeginformationgaboutgth
egeconomicgperformancegandgfinancialgpositiongofgagcompany.gThisginformationgisgprovidedgingthegfin
ancialgstatements.
Q1-
4gExternalgauditorsgensuregthatgthegmanagementgofgagcompanyghasgpreparedgfinancialgstatementsgingacc
ordancegwithgGenerallygAcceptedgAccountinggPrinciplesgandgfairlygpresentgthegfinancialgpositiongandgecon
omicgperformancegofgagcompany.gIngaddition,gexternalgauditorsgmustgbegangindependentgpartygandgcannotg
begemployeesgofgthegcompanygtheygaregauditing.
Externalg auditorsprovidegagsignificantgamountgofgcredibilitygtogthegfinancialgstatements.
Q1-
5gDataganalyticsgisgthegprocessgofganalyzingglargegdatagsetsgingordergtogdrawgusefulgconclusions.gItinvolvesgc
onvertinggrawgdatagintogusefulgknowledge.gIngfinancialgreporting,gdataganalyticsgcangbegusedgtogimprovegth
egqualitygofgestimatesgandgvaluations.
Q1-
6gStandardgsettersgcreategaccountinggconcepts,grules,gandgguidelinesgtogensuregthatgfinancialgstatem
entsgaccuratelygpresentgthegeconomicgperformancegandgfinancialgpositiongofgagfirm.gThegstandardsge
ncouragegtransparentgandgtruthfulgreporting.
, 1g-g2 SgOgLgUgTgIgOgNgSg MgAgNgUgAgLg FgOgRg IgNgTgEgRgMgEgDgIgAgTgEg AgCgCgOgUgNg
TgING
Q1-
7gU.S.gcompaniesglistedgongU.S.gstockgexchangesgdognotghavegthegoptiongtogreportgundergIFRS.However,
g foreigngcompaniesgthatgtradegingthegU.S.gexchangesgcangreportgundergIFRS.gThegSECgpermitsgthegusegofgIF
RS-basedgfinancialgstatementsgbyginternationalgcompaniesgwithgsharesgtradinggongU.S.gstockgexchanges.
Q1-
8gThegFASBgseeksgandgwelcomesgcommentsgfromgallgpartiesgingthegfinancialgreportinggprocessgincludingg
managers,ginvestors,gaccountants,gpreparers,gcreditors,glenders,gfinancialgstatementgusers,governmentalgag
encies,gfinancialganalysts,gindustryggroups,gandgauditors.gFASBgalsogreceivesgfeedbackgfromgpublicgroundta
blegdiscussions,gpublicgmeetings,gthegFASAC,gthegPrivategCompanygCouncil,gandgEITF.
Q1-
9gYes,gthegpromulgationgofgfinancialgaccountinggstandardsgisgagpoliticalgprocess.gTheregaregseveralggroupsgt
hatginfluencegthegstandardgsettinggprocess.gThegstandardgsettinggprocessgisgagpoliticalgprocessgthatgisgaffecte
dgbygthegimpactgofgseveralglobbyingggroups.gTheggovernment,gthroughgthegSEC,ginfluencesgaccountinggsta
ndards.gThegSECghasgthegauthoritygtogissuegaccountinggstandardsgbutghasgassignedgthisgresponsibilitygtogtheg
privategsector.gNonetheless,gthegSECgcangexertgpressuregongtheFASBgtogissuegaccountinggstandardsgandgve
togthegstandardsgpromulgatedgbygthegFASB.gAuditinggfirms,gthegcorporategsector,gcreditors,gfinancialganalysts
,gthegfinancialgcommunity,gaccountinggorganizations,gindustryggroups,gandginvestorsgcanginfluencegthegFASB
gbygwrittengcommentsgaboutgExposuregDraftsgandgparticipationgingpublicgmeetingsgandgpublicgroundtable
sgregardinggagproposedgfinancialgreportinggstandard.
Q1-10gAgprinciples-basedgstandardgisgconsistentgwithgagtheoreticalgframework.gIngcontrast,gagrules-
gbasedgstandardgdoesgnotgnecessarilygrelygongagconsistentgtheoreticalgframework.gRather,gitgcontainsg
moregspecificgandgprescriptivegrules.
Q1-
11gRecently,gthegFASBghasgtakengangasset/liabilitygapproachgingsettinggstandards.gWithgthisgapproach,gagtrans
actiongisgrecordedgbasedgongwhethergangassetgorgliabilitygisgcreated.gAnothergtrendghasgbeengthegmovementgt
owardgthegusegofgfairgvaluegmeasurementsgasgangalternativegtoghistoricalgcost.gFASBghasgalsogfocusedgongth
egpromulgationgofgprinciples-basedgstandardsginsteadgofgrules-gbasedgstandards.
BriefgExercisesg
SolutiongtogBE1-g1
General-
purposegfinancialgstatementsgprovideggeneralgfinancialginformationgaboutgangentitygthatgwillgbegusefulgtog
manygtypesgofgusers.gGeneral-
purposegfinancialgstatementsgprovideginformationgtogagwidegspectrumgofguserggroups:ginvestors,gcreditor
s,gfinancialganalysts,gcustomers,gemployees,gcompetitors,gsuppliers,gunions,gandggovernmentgagencies.gMo
stgfinancialginformationginggeneralgpurposegfinancialgstatementsgisgprovidedgtogsatisfygusersgwithglimitedgabili
tygorgauthoritygtogobtaingadditionalginformation,gwhichgincludesginvestorsgandgcreditors.gThegFinancialgAc
countinggStandardsBoardg(FASB)gidentifiesginvestors,glenders,gandgothergcreditorsgasgthegprimarygusersgof
gthegfinancialgstatements.
