SOLUTION MANUAL FOR
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Financial Accounting 11th Edition
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by Robert Libby, All Chapters 1 - 13
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,TABLE OF CONTENTS aj aj aj
CHAPTER 1: Financial Statements and Business Decisions
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Focus Company: Le-Nature’s Inc.
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CHAPTER 2: Investing and Financing Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 3: Operating Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
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Focus Company: Chipotle Mexican Grill
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CHAPTER 5: Communicating and Analyzing Accounting Information
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Focus Company: Apple Inc.
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CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
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Focus Company: Skechers U.S.A.
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CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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Focus Company: Harley-Davidson, Inc.
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CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
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aj Resources
Focus Company: FedEx Corporation
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CHAPTER 9: Reporting and Interpreting Liabilities
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Focus Company: Starbucks
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CHAPTER 10: Reporting and Interpreting Bond Securities
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Focus Company: Amazon
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CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
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Focus Company: Microsoft
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CHAPTER 12: Statement of Cash Flows
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Focus Company: National Beverage Corporation
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CHAPTER 13: Analyzing Financial Statements
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Focus Company: The Home Depot
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,Chapter 1 aj
Financial Statements and Business Decisions aj aj aj aj
ANSWERS TO QUESTIONS aj aj
1. Accounting is a system that collects and processes (analyzes, measures, and
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records) financial information about an organization and reports that information
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todecision makers.
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2. Financial accounting involves preparation of the four basic financial statements
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andrelated disclosures for external decision makers. Managerial accounting
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involves the preparation of detailed plans, budgets, forecasts, and performance
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reports for internal decision makers.
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3. Financial reports are used by both internal and external groups and individuals.
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Theinternal groups are comprised of the various managers of the entity. The
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external groups include the owners, investors, creditors, governmental agencies,
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other interested parties, and the public at large.
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4. Investors purchase all or part of a business and hope to gain by receiving part of
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what the company earns and/or selling their ownership interest in the company in
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the future at a higher price than they paid. Creditors lend money to a company
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fora specific length of time and hope to gain by charging interest on the loan.
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, 5. In a society, each organization can be defined as a separate accounting entity. An
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accounting entity is the organization for which financial data are to be collected.
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Typical accounting entities are a business, a church, a governmental unit, a
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university and other nonprofit organizations such as a hospital and a welfare
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organization. A business typically is defined and treated as a separate entity
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because the owners, creditors, investors, and other interested parties need to
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evaluate its performance and its potential separately from other entities and from
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itsowners.
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6. Name of Statement aj aj Alternative Title aj
(a) Income Statement aj (a) Statement of Earnings; Statement of
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Income; Statement of Operations aj aj aj
(b) Balance Sheet aj (b) Statement of Financial Position
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(c) Cash Flow Statement aj aj (c) Statement of Cash Flows
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7. The heading of each of the four required financial statements should include
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thefollowing:
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(a) Name of the entity aj aj aj
(b) Name of the statement aj aj aj
(c) Date of the statement, or the period of timeaj aj aj aj aj aj aj aj
(d) Unit of measure aj aj
8. (a) The purpose of the income statement is to present information about the
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revenues, expenses, and the net income of an entity for a specified period
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oftime.
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(b) The purpose of the balance sheet is to report the financial position of an
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entityat a given date, that is, to report information about the assets, liabilities
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and stockholders’ equity of the entity as of a specific date.
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(c) The purpose of the statement of cash flows is to present information about
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theflow of cash into the entity (sources), the flow of cash out of the entity
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(uses), and the net increase or decrease in cash during the period.
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(d) The statement of stockholders’ equity reports the changes in each of the
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company’s stockholders’ equity accounts during the accounting period,
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including issue and repurchase of stock and the way that net income and
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distribution of dividends affected the retained earnings of the company
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duringthat period.
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9. The income statement and the statement of cash flows are dated ―For the Year
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Ended December 31‖ because they report the inflows and outflows of resources
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during a period of time. In contrast, the balance sheet is dated ―At December
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31‖because it represents the resources, obligations, and stockholders’ equity at
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a specific date.
aj aj aj
aj aj
Financial Accounting 11th Edition
aj aj aj aj
by Robert Libby, All Chapters 1 - 13
aj aj aj aj aj aj aj
,TABLE OF CONTENTS aj aj aj
CHAPTER 1: Financial Statements and Business Decisions
aj aj aj aj aj aj
Focus Company: Le-Nature’s Inc.
aj aj aj
CHAPTER 2: Investing and Financing Decisions and the Accounting System
aj aj aj aj aj aj aj aj aj
Focus Company: Chipotle Mexican Grill
aj aj aj aj
CHAPTER 3: Operating Decisions and the Accounting System
aj aj aj aj aj aj aj
Focus Company: Chipotle Mexican Grill
aj aj aj aj
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
aj aj aj aj aj aj aj aj
Focus Company: Chipotle Mexican Grill
aj aj aj aj
CHAPTER 5: Communicating and Analyzing Accounting Information
aj aj aj aj aj aj
Focus Company: Apple Inc.
aj aj aj
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
aj aj aj aj aj aj aj aj aj
Focus Company: Skechers U.S.A.
aj aj aj
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
aj aj aj aj aj aj aj aj aj aj
Focus Company: Harley-Davidson, Inc.
aj aj aj
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
aj aj aj aj aj aj aj aj aj aj aj
aj Resources
Focus Company: FedEx Corporation
aj aj aj
CHAPTER 9: Reporting and Interpreting Liabilities
aj aj aj aj aj
Focus Company: Starbucks
aj aj
CHAPTER 10: Reporting and Interpreting Bond Securities
aj aj aj aj aj aj
Focus Company: Amazon
aj aj
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
aj aj aj aj aj aj
Focus Company: Microsoft
aj aj
CHAPTER 12: Statement of Cash Flows
aj aj aj aj aj
Focus Company: National Beverage Corporation
aj aj aj aj
CHAPTER 13: Analyzing Financial Statements
aj aj aj aj
Focus Company: The Home Depot
aj aj aj aj
,Chapter 1 aj
Financial Statements and Business Decisions aj aj aj aj
ANSWERS TO QUESTIONS aj aj
1. Accounting is a system that collects and processes (analyzes, measures, and
aj aj aj aj aj aj aj aj aj aj
records) financial information about an organization and reports that information
aj aj aj aj aj aj aj aj aj aj
todecision makers.
aj ja aj
2. Financial accounting involves preparation of the four basic financial statements
aj aj aj aj aj aj aj aj aj
andrelated disclosures for external decision makers. Managerial accounting
aj ja aj aj aj aj aj aj aj
involves the preparation of detailed plans, budgets, forecasts, and performance
aj aj aj aj aj aj aj aj aj aj
reports for internal decision makers.
aj aj aj aj aj
3. Financial reports are used by both internal and external groups and individuals.
aj aj aj aj aj aj aj aj aj aj aj
Theinternal groups are comprised of the various managers of the entity. The
aj ja aj aj aj aj aj aj aj aj aj aj aj
external groups include the owners, investors, creditors, governmental agencies,
aj aj aj aj aj aj aj aj aj
other interested parties, and the public at large.
aj aj aj aj aj aj aj aj
4. Investors purchase all or part of a business and hope to gain by receiving part of
aj aj aj aj aj aj aj aj aj aj aj aj aj aj aj
what the company earns and/or selling their ownership interest in the company in
aj aj aj aj aj aj aj aj aj aj aj aj aj
the future at a higher price than they paid. Creditors lend money to a company
aj aj aj aj aj aj aj aj aj aj aj aj aj aj aj
fora specific length of time and hope to gain by charging interest on the loan.
aj ja aj aj aj aj aj aj aj aj aj aj aj aj aj aj
, 5. In a society, each organization can be defined as a separate accounting entity. An
aj aj aj aj aj aj aj aj aj aj aj aj aj
accounting entity is the organization for which financial data are to be collected.
aj aj aj aj aj aj aj aj aj aj aj aj aj
Typical accounting entities are a business, a church, a governmental unit, a
aj aj aj aj aj aj aj aj aj aj aj aj
university and other nonprofit organizations such as a hospital and a welfare
aj aj aj aj aj aj aj aj aj aj aj aj
organization. A business typically is defined and treated as a separate entity
aj aj aj aj aj aj aj aj aj aj aj aj
because the owners, creditors, investors, and other interested parties need to
aj aj aj aj aj aj aj aj aj aj aj
evaluate its performance and its potential separately from other entities and from
aj aj aj aj aj aj aj aj aj aj aj aj
itsowners.
aj ja
6. Name of Statement aj aj Alternative Title aj
(a) Income Statement aj (a) Statement of Earnings; Statement of
aj aj aj aj aj
Income; Statement of Operations aj aj aj
(b) Balance Sheet aj (b) Statement of Financial Position
aj aj aj aj
(c) Cash Flow Statement aj aj (c) Statement of Cash Flows
aj aj aj aj
7. The heading of each of the four required financial statements should include
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thefollowing:
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(a) Name of the entity aj aj aj
(b) Name of the statement aj aj aj
(c) Date of the statement, or the period of timeaj aj aj aj aj aj aj aj
(d) Unit of measure aj aj
8. (a) The purpose of the income statement is to present information about the
aj aj aj aj aj aj aj aj aj aj aj
revenues, expenses, and the net income of an entity for a specified period
aj aj aj aj aj aj aj aj aj aj aj aj aj
oftime.
aj ja
(b) The purpose of the balance sheet is to report the financial position of an
aj aj aj aj aj aj aj aj aj aj aj aj aj
entityat a given date, that is, to report information about the assets, liabilities
aj ja aj aj aj aj aj aj aj aj aj aj aj aj
and stockholders’ equity of the entity as of a specific date.
aj aj aj aj aj aj aj aj aj aj aj
(c) The purpose of the statement of cash flows is to present information about
aj aj aj aj aj aj aj aj aj aj aj aj
theflow of cash into the entity (sources), the flow of cash out of the entity
aj ja aj aj aj aj aj aj aj aj aj aj aj aj aj aj
(uses), and the net increase or decrease in cash during the period.
aj aj aj aj aj aj aj aj aj aj aj aj
(d) The statement of stockholders’ equity reports the changes in each of the
aj aj aj aj aj aj aj aj aj aj aj
company’s stockholders’ equity accounts during the accounting period,
aj aj aj aj aj aj aj aj
including issue and repurchase of stock and the way that net income and
aj aj aj aj aj aj aj aj aj aj aj aj aj
distribution of dividends affected the retained earnings of the company
aj aj aj aj aj aj aj aj aj aj
duringthat period.
aj ja aj
9. The income statement and the statement of cash flows are dated ―For the Year
aj aj aj aj aj aj aj aj aj aj aj aj aj
Ended December 31‖ because they report the inflows and outflows of resources
aj aj aj aj aj aj aj aj aj aj aj aj
during a period of time. In contrast, the balance sheet is dated ―At December
aj aj aj aj aj aj aj aj aj aj aj aj aj aj
31‖because it represents the resources, obligations, and stockholders’ equity at
aj ja aj aj aj aj aj aj aj aj aj
a specific date.
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