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 gj gj Environment and Theoretical Structure of gj gj gj gj




Financial Accounting gj




Question 1–1 gj



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 gj



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



Two extremely important variables that must be considered in any investment
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decision are the expected rate of return and the uncertainty or risk of that expected
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return.
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Question 1–4 gj



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
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resources provided to it to generate cash receipts from selling a product or service
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that exceed the cash disbursements necessary to provide that product or service.
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Question 1–5 gj



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



Net operating cash flows are the difference between cash receipts and cash
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disbursements during a period of time from transactions related to providing goods
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and services to customers. Net operating cash flows may not be a good indicator of
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future cash flows because, by ignoring uncompleted transactions, they may not
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match the accomplishments and sacrifices of the period.
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,Question 1–7 gj



GAAP (generally accepted accounting principles) are a dynamic set of both
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broad and specific guidelines that a company should follow in measuring and
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reporting the information in their financial statements and related notes. It is
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important that all companies follow GAAP so that investors can compare financial
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information across companies to make their resource allocation decisions.
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Question 1–8 gj



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.
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The current private sector body responsible for setting accounting standards is the
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FASB.
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Question 1–9 gj



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



Key provisions included in the text are:
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 Creation of the Public Company Accounting Oversight Boardgj gj gj gj gj gj gj



 Regulate types of non-audit audit services gj gj gj gj gj



 Require lead audit partner rotation every 5 year gj gj gj gj gj gj gj



 Corporate executive accountability gj gj



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



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



New accounting standards, or changes in standards, can have significant
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differential effects on companies, investors and creditors, and other interest groups
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by causing redistribution of wealth. There also is the possibility that standards
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could harm the economy as a whole by causing companies to change their behavior.
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Question 1–12 gj



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



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