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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,Chapter 1 Environment and Theoretical Structure of xz xz xz xz xz xz




Financial Accounting xz




Question 1–1 xz



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-
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oriented companies to their present and potential investors and creditors.
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Question 1–2 xz



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



Two extremely important variables that must be considered in any investment de
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cision are the expected rate of return and the uncertainty or risk of that expected retur
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n.

Question 1–4 xz



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



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



Net operating cash flows are the difference between cash receipts and cash disbu
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rsements during a period of time from transactions related to providing goods and ser
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vices to customers. Net operating cash flows may not be a good indicator of future ca
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sh flows because, by ignoring uncompleted transactions, they may not match the acco
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mplishments and sacrifices of the period. xz xz xz xz xz

,Question 1–7 xz



GAAP (generally accepted accounting principles) are a dynamic set of both bro
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ad and specific guidelines that a company should follow in measuring and reporting t
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he 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 c
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ompanies to make their resource allocation decisions.
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Question 1–8 xz



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 xz



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



Key provisions included in the text are:
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 Creation of the Public Company Accounting Oversight Board
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 Regulate types of non-audit audit services xz xz xz xz xz



 Require lead audit partner rotation every 5 year
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 Corporate executive accountability xz xz



 Addresses conflicts of interest for security analysts xz xz xz xz xz xz



 Internal control reporting and auditor opinion about controls
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Question 1–11 xz



New accounting standards, or changes in standards, can have significant differen
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tial effects on companies, investors and creditors, and other interest groups by causin
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g 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 xz



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



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