Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete

Solution Manual For Financial Statement Analysis,
13th Edition
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete

, Chapterh1h Introductio
nhtohFinancialhReporting


QUESTIONS

1- 1. a.
ThehAICPAhishanhorganizationhofhCPAshthathpriorhtoh1973hacceptedhthehpr
imaryhresponsibilityhforhthehdevelopmenthofhgenerallyhacceptedhaccounting
hprinciples.hTheirhrolehwashsubstantiallyhreducedhinh1973hwhenhthehFinanci

alhAccountinghStandardshBoardhwashestablished.h Theirhrolehwashfurtherhre
ducedhwithhthehestablishmenthofhthehPublichCompanyhAccountinghOversig
hthBoardhwashestablishedhinh2002.

b. ThehFinancialhAccountinghStandardshBoardhreplacedhthehAccountingh
PrincipleshBoardhashthehprimaryhrule-
makinghbodyhforhaccountinghstandards.hIthishanhindependenthorganiza
tionhandhincludeshmembershotherhthanhpublichaccountants.

c. ThehSEChhashthehauthorityhtohdeterminehgenerallyhacceptedhaccountingh
principleshandhtohregulatehthehaccountinghprofession.hThehSEChhashelect
edhtohleavehmuchhofhthehdeterminationhofhgenerallyhacceptedhaccountingh
principleshtohthehprivatehsector.h ThehFinancialhAccountinghStandardshBo
ardhhashplayedhthehmajorhrolehinhestablishinghaccountinghstandardshsinc
eh1973.h Regulationhofhthehaccountinghprofessionhwashsubstantiallyhturne
dhoverhtohthehPublichCompanyhAccountinghOversighthBoardhinh2002.

1-h2.
Consistencyhishobtainedhthroughhthehapplicationhofhthehsamehaccountingh
principlehfromhperiodhtohperiod.h Ahchangehinhprinciplehrequireshstatementh
disclosure.

1-h3.
Thehconcepthofhhistoricalhcosthdetermineshthehbalancehsheethvaluationhofhland.hT
hehrealizationhconcepthrequireshthathahtransactionhneedshtohoccurhforhthehprofithtoh
behrecognized.

1-h4. a.h Entity e.h Historicalhcost

b. Realization f.h Historicalhcost

c. Materiality g.h Disclosure

d. Conservatism

1-h5. Entityhconcept

,1-h6.
Generallyhacceptedhaccountinghprincipleshdohnothapplyhwhenhahfirmhdoeshnoth
appearhtohbehahgoinghconcern.h Ifhthehdecisionhishmadehthaththishishnothahgoinghc
oncern,hthenhthehusehofhGAAPhwouldhnothbehappropriate.

1-h7.
Withhthehtimehperiodhassumption,hinaccuracieshofhaccountinghforhthehentity,hshor
thofhitshcompletehlifehspan,harehaccepted.hThehassumptionhishmadehthaththehentity
hcanhbehaccountedhforhreasonablyhaccuratelyhforhahparticularhperiodhofhtime.h Inh

otherhwords,hthehdecisionhishmadehtohaccepthsomehinaccuracyhbecausehofhinco
mpletehinformationhabouththehfuturehinhexchangehforhmorehtimelyhreporting.h Theh
statementsharehconsideredhtohbehmeaningfulhbecausehmaterialhinaccuracieshare
hnothacceptable.




1- 8.h h Ithishtruehthaththehonlyhaccuratehwayhtohaccounthforhthehsuccesshorhfailurehofhanhent
ityhishtohaccumulatehallhtransactionshfromhthehopeninghofhbusinesshuntilhthehbusi
nessheventuallyhliquidates.h Buthithishnothnecessaryhthaththehstatementshbehcom
pletelyhaccuratehinhorderhforhthemhtohbehmeaningful.

1- 9. a. Ahyearhthathendshwhenhoperationsharehathahlowhebbhforhthehyear.

b. ThehaccountinghtimehperiodhishendedhonhDecemberh31.

c. Ahtwelve-
monthhaccountinghperiodhthathendshaththehendhofhahmonthhotherhthanhDece
mberh31.
1-10. Money.

1-
11.h h Whenhmoneyhdoeshnothholdhahstablehvalue,hthehfinancialhstatementshcanh
losehmuchhofhtheirhsignificance.h Tohthehextenththathmoneyhdoeshnothremainhsta
ble,hithloseshusefulnesshashthehstandardhforhmeasuringhfinancialhtransactions.

1-12.
No.h Therehishahproblemhwithhdetermininghthehindexhinhorderhtohadjusththehstate
ments.h Thehitemshthatharehincludedhinhthehindexhmusthbehrepresentative.hInhadd
ition,hthehpriceshofhitemshchangehbecausehofhvarioushfactors,hsuchhashquality,hte
chnology,handhinflation.

Yes.hAhreasonablehadjustmenthtohthehstatementshcanhbehmadehforhinflation.

1-13. False.h Anharbitraryhwrite-
offhofhinventoryhcannothbehjustifiedhunderhthehconservatismhconcept.h Thehcons
ervatismhconcepthcanhonlyhbehappliedhwherehthereharehalternativehmeasureme
ntshandheachhofhthesehalternativehmeasurementshhashreasonablehsupport.

, 1-14.
Yes,hinventoryhthathhashahmarkethvaluehbelowhthehhistoricalhcosthshouldhbehwri
ttenhdownhinhorderhtohrecognizehahloss.h Thishishdonehbasedhuponhthehconcepth
ofhconservatism.h Losseshthathcanhbehreasonablyhanticipatedhshouldhbehtakenh
inhorderhtohreflecththehleasthfavorableheffecthonhnethincomehofhthehcurrenthperio
d.