Solutions Manual
Financial Accounting 5th Edition
By
Dyckman,
Hanlon,
Magee,
Pfeiffer
( All Chapters Included - 100% Verified Solutions )
1
,Chapter 1
Introducing Financial Accounting
Learning Objectives – coverage by question
Cases
Mini-
Exercises Problems and
Exercises
Projects
LO1 – Identify the users of
accounting information and
25 28, 34 49, 50
discuss the costs and benefits
of disclosure.
LO2 – Describe a company’s
27, 29, 32,
business activities and explain
19, 20, 21 36, 37, 38 47
how these activities are
33
represented by the accounting
equation.
LO3 – Introduce the four key
financial statements including 37, 38, 39,
the balance sheet, income 22, 23, 24 29, 30, 31 40, 41, 42, 46, 47, 49
statement, statement of
stockholders’ equity and 43, 44, 45
statement of cash flows.
LO4 – Describe the institutions
that regulate financial
26 34 50
accounting and their role in
establishing generally accepted
accounting principles.
46, 47, 48,
36, 43, 44,
LO5 – Compute two key ratios 32, 33
that are commonly used to 45 49
assess profitability and risk –
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-1
2
,return on equity and the debt-
to-equity ratio.
LO6 – Appendix 1A – Explain
35
the conceptual framework for
financial reporting.
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-2
3
, QUESTIONS
Q1-1. Organizations undertake planning activities that subsequently shape
three major activities: financing, investing, and operating. Financing is
the means used to pay for resources. Investing refers to the buying and
selling of resources necessary to carry out the organization’s plans.
Operating activities are the actual carrying out of these plans. (Planning
is the glue that connects these activities, including the organization’s
ideas, goals and strategies.)
Q1-2. An organization’s financing activities (liabilities and equity = sources of
funds) pay for investing activities (assets = uses of funds). An
organization cannot have more or less assets than its liabilities and
equity combined and, similarly, it cannot have more or less liabilities and
equity than its total assets. This means: assets = liabilities + equity. This
relation is called the accounting equation (sometimes called the balance
sheet equation, or BSE), and it applies to all organizations at all times.
Q1-3. The four main financial statements are: income statement, balance
sheet, statement of stockholders’ equity, and statement of cash flows.
The income statement provides information relating to the company’s
revenues, expenses and profitability over a period of time. The balance
sheet lists the company’s assets (what it owns), liabilities (what it owes),
and stockholders’ equity (the residual claims of its owners) as of a point
in time. The statement of stockholders’ equity reports on the changes to
each stockholders’ equity account during the year. Some changes to
stockholders’ equity, such as those resulting from the payment of
dividends and unrealized gains (losses) on marketable securities, can
only be found in this statement as they are not included in the
computation of net income. The statement of cash flows identifies the
sources (inflows) and uses (outflows) of cash, that is, from what sources
the company has derived its cash and how that cash has been used. All
four statements are necessary in order to provide a complete picture of
the financial condition of the company.
Q1-4. The balance sheet provides information that helps users understand a
company’s resources (assets) and claims to those resources (liabilities
and stockholders’ equity) as of a given point in time.
An income statement reports whether the business has earned a net
income (also called profit or earnings) or a net loss. Importantly, the
income statement lists the types and amounts of revenues and
expenses making up net income or net loss. The income statement
covers a period of time.
Q1-5. Your authors would agree with Mr. Buffett. A recent study of top financial
officers suggests they find earnings and the year-to-year changes in
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-3
4
Financial Accounting 5th Edition
By
Dyckman,
Hanlon,
Magee,
Pfeiffer
( All Chapters Included - 100% Verified Solutions )
1
,Chapter 1
Introducing Financial Accounting
Learning Objectives – coverage by question
Cases
Mini-
Exercises Problems and
Exercises
Projects
LO1 – Identify the users of
accounting information and
25 28, 34 49, 50
discuss the costs and benefits
of disclosure.
LO2 – Describe a company’s
27, 29, 32,
business activities and explain
19, 20, 21 36, 37, 38 47
how these activities are
33
represented by the accounting
equation.
LO3 – Introduce the four key
financial statements including 37, 38, 39,
the balance sheet, income 22, 23, 24 29, 30, 31 40, 41, 42, 46, 47, 49
statement, statement of
stockholders’ equity and 43, 44, 45
statement of cash flows.
LO4 – Describe the institutions
that regulate financial
26 34 50
accounting and their role in
establishing generally accepted
accounting principles.
46, 47, 48,
36, 43, 44,
LO5 – Compute two key ratios 32, 33
that are commonly used to 45 49
assess profitability and risk –
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-1
2
,return on equity and the debt-
to-equity ratio.
LO6 – Appendix 1A – Explain
35
the conceptual framework for
financial reporting.
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-2
3
, QUESTIONS
Q1-1. Organizations undertake planning activities that subsequently shape
three major activities: financing, investing, and operating. Financing is
the means used to pay for resources. Investing refers to the buying and
selling of resources necessary to carry out the organization’s plans.
Operating activities are the actual carrying out of these plans. (Planning
is the glue that connects these activities, including the organization’s
ideas, goals and strategies.)
Q1-2. An organization’s financing activities (liabilities and equity = sources of
funds) pay for investing activities (assets = uses of funds). An
organization cannot have more or less assets than its liabilities and
equity combined and, similarly, it cannot have more or less liabilities and
equity than its total assets. This means: assets = liabilities + equity. This
relation is called the accounting equation (sometimes called the balance
sheet equation, or BSE), and it applies to all organizations at all times.
Q1-3. The four main financial statements are: income statement, balance
sheet, statement of stockholders’ equity, and statement of cash flows.
The income statement provides information relating to the company’s
revenues, expenses and profitability over a period of time. The balance
sheet lists the company’s assets (what it owns), liabilities (what it owes),
and stockholders’ equity (the residual claims of its owners) as of a point
in time. The statement of stockholders’ equity reports on the changes to
each stockholders’ equity account during the year. Some changes to
stockholders’ equity, such as those resulting from the payment of
dividends and unrealized gains (losses) on marketable securities, can
only be found in this statement as they are not included in the
computation of net income. The statement of cash flows identifies the
sources (inflows) and uses (outflows) of cash, that is, from what sources
the company has derived its cash and how that cash has been used. All
four statements are necessary in order to provide a complete picture of
the financial condition of the company.
Q1-4. The balance sheet provides information that helps users understand a
company’s resources (assets) and claims to those resources (liabilities
and stockholders’ equity) as of a given point in time.
An income statement reports whether the business has earned a net
income (also called profit or earnings) or a net loss. Importantly, the
income statement lists the types and amounts of revenues and
expenses making up net income or net loss. The income statement
covers a period of time.
Q1-5. Your authors would agree with Mr. Buffett. A recent study of top financial
officers suggests they find earnings and the year-to-year changes in
©Cambridge Business Publishers, 2017
Solutions Manual, Chapter 1 1-3
4
