Solution Manual for Fundamentals of Financial Accounting 6th Edition Phillips / All Chapters 1 - 13 / Full Complete 2023

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Solution Manual for Finan U U U




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entals 6th Edition By Wil U U U U




QUESTIONS
1.
The purpose of accounting is to provide decision makers with relevant and reliable
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information to help them make better decisions. Examples include information for p
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eople making investments, loans, and business plans.
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2.
Technology reduces the time, effort, and cost of recordkeeping. There is still a de
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mand for people who can design accounting systems, supervise their operation, anal
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yze complex transactions, and interpret reports. Demand also exists for people who
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can effectively use computers to prepare and analyze accounting reports. Technolog
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y will never substitute for qualified people with abilities to prepare, use, analyze, and
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interpret accounting information. U U



3.
External users and their uses of accounting information include: (a) lenders, to me
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asure the risk and return of loans; (b) shareholders, to assess whether to buy, sell, or
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Uhold their shares; (c) directors, to oversee their interests in the organization; (d) emp
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loyees and labor unions, to judge the fairness of wages and assess future employme
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nt opportunities; and (e) regulators, to determine whether the organization is complyi
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ng with regulations. Other users are voters, legislators, governmentofficials, contrib
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utors to nonprofits, suppliers, and customers.
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4.
Business owners and managers use accounting information to help answer questi
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ons such as: What resources does an organization own? What debts are owed? How
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much income is earned? Are expenses reasonable for the level of sales? Are custo
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mers’ accounts being promptly collected?
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5.
Service businesses include: Standard and Poor’s, Dun & Bradstreet, Merrill Lynch
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, Southwest Airlines, CitiCorp, Humana, Charles Schwab, and Prudential. Businesse
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s offering products include Nike, Reebok, Gap, Apple, Ford Motor Co., Philip Morris,
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Coca-Cola, Best Buy, and WalMart. U U U U U



6.
The internal role of accounting is to serve the organization’s internal operating fun
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ctions. It does this by providing useful information for internal users in completing th
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eir tasks more effectively and efficiently. By providing this information, accounting h
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elps the organization reach its overall goals.
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,7.
Accounting professionals offer many services including auditing, management ad
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vice, tax planning, business valuation, and money management.
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8.
Marketing managers are likely interested in information such as sales volume, adv
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ertising costs, promotion costs, salaries of sales personnel, and sales commissions.
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2 FinancialU&UManagerialUAccounting,U7thUEdition

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U9.
Accounting is described as a service activity because it serves decision makers b
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y providing information to help them make better business decisions.
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10. Some accounting- U


related professions include consultant, financial analyst, underwriter, financial plann
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er, appraiser, FBI investigator, market researcher, and system designer.
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11.
Ethics rules require that auditors avoid auditing clients in which they have a direct
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investment, or if the auditor’s fee is dependent on the figures in the client’s reports.
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This will help prevent others from doubting the quality of the auditor’s report.
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12.
In addition to preparing tax returns, tax accountants help companies and individua
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ls plan future transactions to minimize the amount of tax to be paid. They are also ac
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tively involved in estate planning and in helping set up organizations. Some tax acco
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untants work for regulatory agencies such as the IRS or the various state department
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s of revenue. These tax accountants help to enforce tax laws.
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13.
The objectivity concept means that financial statement information is supported b
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y independent, unbiased evidence other than someone’s opinion or imagination. Thi
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s concept increases the reliability and verifiability of financial statement information.
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14. This treatment is justified by both the cost principle and the going-
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concern assumption. U



15.
The revenue recognition principle provides guidance for managers and auditors so t
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hey know when to recognize revenue. If revenue is recognized too early, the busines
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s looks more profitable than it is. On the other hand, if revenue is recognized too late
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Uthe business looks less profitable than it is. This principle demands that revenue be
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recognized when it is both earned (when service or product provided) and can be me
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asured reliably. The amount of revenue should equal the value of the assets received
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Uor expected to be received from the business’s operating activities covering a specif
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ic time period.
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16.
Business organizations can be organized in one of three basic forms: sole propriet
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orship, partnership, or corporation. These forms have implications for legal liability, t
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axation, continuity, number of owners, and legal status as follows:
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Proprietorship UUUU Partnership UUUU Corporation
Business entity U yes yes yes
Legal entity U no no yes
Limited liability U no* no* yes
Unlimited life U no no yes
Business taxed U no no yes
One owner allowed U U yes no yes
*Proprietorships and partnerships that are set up as LLCs provide limited liability.U U U U U U U U U U U



17.
(a) Assets are resources owned or controlled by a company that are expected to yi
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eld future benefits. (b) Liabilities are creditors’ claims on assets that reflect obligatio
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SolutionsUManual,UChapterU1 3

, ns to provide assets, products, or services to others. (c) Equity is the owner’s claim
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on assets and is equal to assets minus liabilities. (d) Net assets refer to equity.
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18.
Equity is increased by investments from owners (stock issuances) and by net inco
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me (which is the excess of revenues over expenses). It is decreased by dividends an
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d by a net loss (which is the excess of expenses over revenues).
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HillUEducation.UUThisUisUproprietaryUmaterialUsolelyUforUauthorizedUinstructorUuse.UNotUauthorizedUforUsaleUorUdistributionUinUanyUmanner.UThisUdo
cumentUmayUnotUbeUcopied,Uscanned,Uduplicated,Uforwarded,Udistributed,UorUpostedUonUaUwebsite,UinUwholeUorUpart.

4 FinancialU&UManagerialUAccounting,U7thUEdition