SolutionManualFor Intermediate Accounting, 11thEdition by
cxf cxcf cxcf cxcf cxcf cxf cx cf cxcf
David Spiceland,MarkNelson,WayneThomas,Jennifer
cxcf cxcf cxcf cxcf cxcf cxcf cxcf
, Chapter1 cxf c x c f Environment andTheoretical Structure of cx cf cxf cxcf cxcf
FinancialAccounting cxf
Question1–1 cxf
Financial accounting is concerned with providing relevant financial information cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
cxcf about various kinds of organizations to different types of external users. The primary
cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf focus of financial accounting is on the financial information provided by profit- oriented
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf
cxcf companies to their present and potential investors and creditors. cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf
Question1–2 cxf
Resources are efficiently allocated if they are given to enterprises that will use them cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx c f cx cf
cxcf to provide goods and services desired by society and not to enterprises that will waste
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf them. The capital markets are the mechanism that fosters this efficient allocation of
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cxcf resources.
Question1–3 cxf
Two extremely important variables that must be considered in any investment
cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf
cxcf decision are the expected rate of return and the uncertainty or risk of that expected return.
cxcf cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
Question1–4 cxf
In the long run, a company will be able to provide investors and creditors with a rate
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf of return only if it can generate a profit. That is, it must be able to use the resources
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cxcf
cxcf provided to it to generate cash receipts from selling a product or service that exceed the
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf cash disbursements necessary to provide that product or service.
cx cf cxcf cxcf cx cf cx cf cx cf cx cf cxcf
Question1–5 cxf
The primary objective of financial accounting is to provide investors and creditors
cxcf cxcf cxcf cxcf cx cf cx cf cxcf cxcf cx cf c x c f cx cf
cxcf with information that will help them make investment and credit decisions.
cx cf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cxcf cx cf
Question1–6 cxf
Net operating cash flows are the difference between cash receipts and cash
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf disbursements during a period of time from transactions related to providing goods and cxcf cxcf cxcf cx cf cx cf cx cf cx cf c x c f cx cf cx cf cx cf cx cf
cxcf services to customers. Net operating cash flows may not be a good indicator of future cash
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf flows because, by ignoring uncompleted transactions, they may not match the
cxcf cxcf cxcf cx cf cx cf cxcf cx cf cx cf cx cf cx cf
cxcf accomplishments and sacrifices of the period. cxcf cxcf cxcf cx cf cx cf
,Question1–7 cxf
GAAP (generally accepted accounting principles) are a dynamic set of both broad
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cx cf and specific guidelines that a company should follow in measuring and reporting the
cx cf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cx cf information in their financial statements and related notes. It is important that all
cxcf cxcf cxcf cxcf cx cf cx cf cx cf c x c f c x c f cx cf cx cf cx cf
cx cf companies follow GAAP so that investors can compare financial information across
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cxcf cx cf cx cf
cx cf companies to make their resource allocation decisions.
cxcf cxcf cxcf cxcf cxcf cx cf
Question1–8 cxf
In 1934, Congress created the SEC and gave it the job of setting accounting and
cxcf cx cf cxcf cx cf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf reporting standards for companies whose securities are publicly traded. The SEC has
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf retained the power, but has relied on private sector bodies to create the standards. The
cxcf cx cf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf current private sector body responsible for setting accounting standards is the FASB.
cxcf cxcf cxcf cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf
Question1–9 cxf
Auditors are independent, professional accountants who examine financial cxcf cxcf cxcf cx cf cx cf cx cf cx cf
cx cf statements to express an opinion. The opinion reflects the auditors‘ assessment of the
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cxcf cx cf cx cf
cx cf statements' fairness, which is determined by the extent to which they are prepared in
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf compliance with GAAP. The auditor adds credibility to the financial statements, which
cxcf cxcf c x c f cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf increases the confidence of capital market participants relying on that information.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
, Question1–10 cxcf
Keyprovisions included inthe textare:
cxf cx cf cx cf cxf cxcf cxcf
CreationofthePublicCompanyAccountingOversightBoard cxf cxf cxcf cxcf cxf cxf cxcf
Regulatetypes ofnon-auditauditservices cxf cxcf cxf cxf cxf
Require lead auditpartnerrotationevery5 year cxcf cxcf cxcf cxf cxf cxf cx cf
Corporateexecutiveaccountability cxf cxf
Addressesconflictsofinterest forsecurityanalysts cxf cxcf cxf cxcf cxf cxf
Internalcontrolreportingand auditoropinionabout controls cxf cxcf cxf cxcf cxf cxf cxcf
Question1–11 cxcf
New accounting standards, or changes in standards, can have significant differential
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf effects on companies, investors and creditors, and other interest groups by causing
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cxcf cx cf
cxcf redistribution of wealth. There also is the possibility that standards could harm the
cxcf cxcf c x c f cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf cxcf
cxcf economy as a whole by causing companies to change their behavior.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
Question1–12 cxcf
The FASB undertakes a series of elaborate information gathering steps before
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf issuing an accounting standard to determine consensus as to the preferred method of
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf accounting, as well as to anticipate adverse economic consequences.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf
Question1–13 cxcf
The purpose of the conceptual framework is to guide the Board in developing
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf cxcf
cxcf accounting standards by providing an underlying foundation and basic reasoning on
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf which to consider merits ofalternatives. The framework does not prescribe GAAP.
cxcf cxcf cxcf cxcf cxcf c x c f cx cf cx cf cx cf cx cf cx cf
cxf cxcf cxcf cxcf cxcf cxf cx cf cxcf
David Spiceland,MarkNelson,WayneThomas,Jennifer
cxcf cxcf cxcf cxcf cxcf cxcf cxcf
, Chapter1 cxf c x c f Environment andTheoretical Structure of cx cf cxf cxcf cxcf
FinancialAccounting cxf
Question1–1 cxf
Financial accounting is concerned with providing relevant financial information cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
cxcf about various kinds of organizations to different types of external users. The primary
cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf focus of financial accounting is on the financial information provided by profit- oriented
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf
cxcf companies to their present and potential investors and creditors. cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf
Question1–2 cxf
Resources are efficiently allocated if they are given to enterprises that will use them cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx c f cx cf
cxcf to provide goods and services desired by society and not to enterprises that will waste
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf them. The capital markets are the mechanism that fosters this efficient allocation of
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cxcf resources.
Question1–3 cxf
Two extremely important variables that must be considered in any investment
cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf
cxcf decision are the expected rate of return and the uncertainty or risk of that expected return.
cxcf cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
Question1–4 cxf
In the long run, a company will be able to provide investors and creditors with a rate
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf of return only if it can generate a profit. That is, it must be able to use the resources
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cxcf
cxcf provided to it to generate cash receipts from selling a product or service that exceed the
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf cash disbursements necessary to provide that product or service.
cx cf cxcf cxcf cx cf cx cf cx cf cx cf cxcf
Question1–5 cxf
The primary objective of financial accounting is to provide investors and creditors
cxcf cxcf cxcf cxcf cx cf cx cf cxcf cxcf cx cf c x c f cx cf
cxcf with information that will help them make investment and credit decisions.
cx cf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cxcf cx cf
Question1–6 cxf
Net operating cash flows are the difference between cash receipts and cash
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf disbursements during a period of time from transactions related to providing goods and cxcf cxcf cxcf cx cf cx cf cx cf cx cf c x c f cx cf cx cf cx cf cx cf
cxcf services to customers. Net operating cash flows may not be a good indicator of future cash
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf flows because, by ignoring uncompleted transactions, they may not match the
cxcf cxcf cxcf cx cf cx cf cxcf cx cf cx cf cx cf cx cf
cxcf accomplishments and sacrifices of the period. cxcf cxcf cxcf cx cf cx cf
,Question1–7 cxf
GAAP (generally accepted accounting principles) are a dynamic set of both broad
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cx cf and specific guidelines that a company should follow in measuring and reporting the
cx cf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf c x c f cx cf cx cf
cx cf information in their financial statements and related notes. It is important that all
cxcf cxcf cxcf cxcf cx cf cx cf cx cf c x c f c x c f cx cf cx cf cx cf
cx cf companies follow GAAP so that investors can compare financial information across
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cxcf cx cf cx cf
cx cf companies to make their resource allocation decisions.
cxcf cxcf cxcf cxcf cxcf cx cf
Question1–8 cxf
In 1934, Congress created the SEC and gave it the job of setting accounting and
cxcf cx cf cxcf cx cf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf reporting standards for companies whose securities are publicly traded. The SEC has
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf retained the power, but has relied on private sector bodies to create the standards. The
cxcf cx cf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf current private sector body responsible for setting accounting standards is the FASB.
cxcf cxcf cxcf cxcf cxcf cx cf cxcf cx cf cx cf cx cf cx cf
Question1–9 cxf
Auditors are independent, professional accountants who examine financial cxcf cxcf cxcf cx cf cx cf cx cf cx cf
cx cf statements to express an opinion. The opinion reflects the auditors‘ assessment of the
cxcf cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cxcf cx cf cx cf
cx cf statements' fairness, which is determined by the extent to which they are prepared in
cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf compliance with GAAP. The auditor adds credibility to the financial statements, which
cxcf cxcf c x c f cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf
cx cf increases the confidence of capital market participants relying on that information.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
, Question1–10 cxcf
Keyprovisions included inthe textare:
cxf cx cf cx cf cxf cxcf cxcf
CreationofthePublicCompanyAccountingOversightBoard cxf cxf cxcf cxcf cxf cxf cxcf
Regulatetypes ofnon-auditauditservices cxf cxcf cxf cxf cxf
Require lead auditpartnerrotationevery5 year cxcf cxcf cxcf cxf cxf cxf cx cf
Corporateexecutiveaccountability cxf cxf
Addressesconflictsofinterest forsecurityanalysts cxf cxcf cxf cxcf cxf cxf
Internalcontrolreportingand auditoropinionabout controls cxf cxcf cxf cxcf cxf cxf cxcf
Question1–11 cxcf
New accounting standards, or changes in standards, can have significant differential
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf effects on companies, investors and creditors, and other interest groups by causing
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cxcf cx cf
cxcf redistribution of wealth. There also is the possibility that standards could harm the
cxcf cxcf c x c f cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf cxcf
cxcf economy as a whole by causing companies to change their behavior.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf
Question1–12 cxcf
The FASB undertakes a series of elaborate information gathering steps before
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf issuing an accounting standard to determine consensus as to the preferred method of
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf accounting, as well as to anticipate adverse economic consequences.
cxcf cxcf cxcf cxcf cxcf cx cf cx cf cx cf
Question1–13 cxcf
The purpose of the conceptual framework is to guide the Board in developing
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cxcf cx cf cx cf cx cf cxcf
cxcf accounting standards by providing an underlying foundation and basic reasoning on
cxcf cxcf cxcf cx cf cx cf cx cf cx cf cx cf cx cf cx cf
cxcf which to consider merits ofalternatives. The framework does not prescribe GAAP.
cxcf cxcf cxcf cxcf cxcf c x c f cx cf cx cf cx cf cx cf cx cf
