Solution Manual For Intermediate Accounting, 11th Edition by David Spiceland, Mark Nelson, Verified Chapters 1 - 21 & Appendix A, Complete Newest Version

Solution Manual For Intermediate Accounting, 11th Edition by
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David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
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,Chapter1 Environment and Theoretical Structure of f f f f f f




FinancialAccounting f




Question 1–1 f




Financial accounting is concerned with providing relevant financial information
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about various kinds of organizations to different types of external users. The primary
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focus of financial accounting is on the financial information provided by profit- oriented
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companies to their present and potential investors and creditors.
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Question 1–2 f




Resources are efficiently allocated if they are given to enterprises that will use them
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to provide goods and services desired by society and not to enterprises that will waste
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them. The capital markets are the mechanism that fosters this efficient allocation of
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resources.
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Question 1–3 f




Two extremely important variables that must be considered in any investment
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decision are the expected rate of return and the uncertainty or risk of that expected return.
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Question 1–4 f




In the long run, a company will be able to provide investors and creditors with a rate
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of return only if it can generate a profit. That is, it must be able to use the resources
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provided to it to generate cash receipts from selling a product or service that exceed the
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cash disbursements necessary to provide that product or service.
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Question 1–5 f




The primary objective of financial accounting is to provide investors and creditors
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with information that will help them make investment and credit decisions.
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Question 1–6 f




Net operating cash flows are the difference between cash receipts and cash
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disbursements during a period of time from transactions related to providing goods and
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services to customers. Net operating cash flows may not be a good indicator of future cash
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flows because, by ignoring uncompleted transactions, they may not match the
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accomplishments and sacrifices of the period.
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,Question 1–7 f




GAAP (generally accepted accounting principles) are a dynamic set of both broad
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and specific guidelines that a company should follow in measuring and reporting the
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information in their financial statements and related notes. It is important that all
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companies follow GAAP so that investors can compare financial information across
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companies to make their resource allocation decisions.
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Question 1–8 f




In 1934, Congress created the SEC and gave it the job of setting accounting and
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reporting standards for companies whose securities are publicly traded. The SEC has
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retained the power, but has relied on private sector bodies to create the standards. The
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current private sector body responsible for setting accounting standards is the FASB.
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Question 1–9 f




Auditors are independent, professional accountants who examine financial
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statements to express an opinion. The opinion reflects the auditors‗ assessment of the
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statements' fairness, which is determined by the extent to which they are prepared in
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compliance with GAAP. The auditor adds credibility to the financial statements, which
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increases the confidence of capital market participants relying on that information.
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, Question 1–10 f




Keyprovisions included inthe text are:
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 Creationofthe Public Company Accounting Oversight Board
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 Regulate types ofnon-audit audit services f f f f f




 Require lead audit partner rotation every5 year f f f f f f f




 Corporateexecutiveaccountability f f




 Addresses conflicts ofinterest for securityanalysts f f f f f f




 Internalcontrol reportingand auditor opinion about controls
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Question 1–11 f




New accounting standards, or changes in standards, can have significant differential
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effects on companies, investors and creditors, and other interest groups by causing
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redistribution of wealth. There also is the possibility that standards could harm the
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economy as a whole by causing companies to change their behavior.
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Question 1–12 f




The FASB undertakes a series of elaborate information gathering steps before
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issuing an accounting standard to determine consensus as to the preferred method of
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accounting, as well as to anticipate adverse economic consequences.
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Question 1–13 f




The purpose of the conceptual framework is to guide the Board in developing
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accounting standards by providing an underlying foundation and basic reasoning on
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which to consider merits of alternatives. The framework does not prescribe GAAP.
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