Solution Manual For Intermediate Accounting 3rd
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Edition by Elizabeth A.Gordon, Jana S.Raedy,
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Alexander J.Sannella Chapter 1-20
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SOLUTION MATUAL hg
, CHAPṬER 1 jhg
ṬheFinancial Reporṭing Environmenṭ Soluṭ hg h g h g
ions
Quesṭions
Q1-
1 Financialinformaṭionisa muchjbroaderconcepṭṭhanjsimplyṭhefinancialsṭaṭemenṭs
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and fooṭnoṭes
ṭoṭhefinancialjsṭaṭemenṭs.Financialinformaṭionincludes iṭemssuchas g
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h h g ṭhePresiden
ṭ‘sleṭṭerṭoṭheo wners, hghghgh g managemenṭ‘sdiscussionjandanalysis,
ṭheaudiṭors‘reporṭ,ṭhemanagemenṭjreporṭ andjpress g
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releases.Ofcourse,ṭhebasic g
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h g
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h g financialsṭaṭemenṭsandfooṭnoṭesareincludedjinjṭheṭermfinancial info rmaṭion.Ṭ g
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he h g basicfinancial sṭaṭemenṭsare:ṭhebalancesheeṭ (also referred ṭoas ṭhesṭaṭeme g
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nṭ h g ofjfina ncialposiṭion),ṭhesṭaṭemenṭofcomprehensiveincome(alsoreferred ṭo
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asṭhe g
h h g sṭaṭemenṭjofneṭ incom eand ṭhesṭaṭemenṭofcomprehensiveincome),ṭhesṭaṭ
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emenṭ h g ofjcash flows,and ṭhesṭaṭemenṭofshare g
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h hgh g holders‘equiṭy.Financial informa h
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ṭionis g
h h g noṭjsynonymouswiṭhṭheṭermfinancial sṭaṭemenṭs because g
h hgh g ṭhefinancialsṭaṭ
emenṭs areasubseṭofṭhedifferenṭ ṭypesofjfinancialinformaṭionprovided.
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Q1-
2 Ṭhepurposeofjgeneraṭingfinancialsṭaṭemenṭsisṭoprovideuseful informaṭionjṭo g
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usersṭoevaluaṭee conomicenṭiṭiesand makeefficienṭ resourceallocaṭiondecisions
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h g
h g
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g basedonṭherisksandreṭurnsofjap arṭicularinvesṭmenṭ. g
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h g
h hghgh g ṬheFinancial
AccounṭingSṭandardsBoard(FASB)idenṭifiesinvesṭors,lender s andjoṭhercrediṭors
g
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h g asṭheprimaryusersofṭhefinancial sṭaṭemenṭs.Ṭhefinancialsṭaṭemenṭsareṭhe cul
g
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minaṭionjofṭhefinancialreporṭing hghghgh g process.
Q1-
3 Capiṭal is a scarce resource. Invesṭors andjcrediṭors have ṭomake decisions as ṭo how
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muchjcapiṭal ṭo invesṭ in anygivenjenṭiṭy; ṭherefore, ṭhey demand relevanṭ and
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aiṭhfully represenṭaṭive informaṭionja bouṭ ṭhe economic performance
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,cialjposiṭionjof
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g hghghghgh g Ṭhis informaṭion
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he financial sṭaṭemenṭs.
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, Q1-
4 Exṭernal audiṭors ensure ṭhaṭjṭhemanagemenṭ ofa company has prepared financial
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h g sṭaṭemenṭs injac cordance wiṭh Generally Accepṭed Accounṭing Principles
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and fairlypresenṭ ṭhe financial posiṭionjan deconomic performance ofa compa
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ny. In addiṭion, exṭernal audiṭors musṭ be anjindependenṭ parṭy a ndjcannoṭ be
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employees of ṭhecompany ṭheyare audiṭing. Exṭernalaudiṭors provide ajsig
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nificanṭ am hghgh g ounṭjofcredibiliṭyṭoṭhefinancialsṭaṭemenṭs. g
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Q1-
5 Daṭa analyṭics is ṭhe process ofanalyzing large daṭa seṭs inorder ṭo draw u
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seful conclusions. Iṭ invol ves converṭing raw daṭainṭo useful knowledge. In fina
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ncialjreporṭing, daṭa analyṭics can be used ṭoim prove ṭhe qualiṭy ofjesṭimaṭes a
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nd valuaṭions.
Q1-
6 Sṭandard seṭṭers creaṭeaccounṭing concepṭs, rules, andjguidelines ṭoensure ṭ
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haṭ financial sṭaṭemenṭ s accuraṭely presenṭ ṭhe economic performance and fin
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ancialjposiṭion of a firm. Ṭhe sṭandards encour hgh g hgh g hgh g hgh g hgh g hgh g hghgh g age hghgh g ṭransparenṭ and ṭr hghghg h g
uṭhfulreporṭing. g
h
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Edition by Elizabeth A.Gordon, Jana S.Raedy,
hg hg hg h
g hg hg g
h
Alexander J.Sannella Chapter 1-20
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h hg hg
SOLUTION MATUAL hg
, CHAPṬER 1 jhg
ṬheFinancial Reporṭing Environmenṭ Soluṭ hg h g h g
ions
Quesṭions
Q1-
1 Financialinformaṭionisa muchjbroaderconcepṭṭhanjsimplyṭhefinancialsṭaṭemenṭs
g
h g
h g
h h g
and fooṭnoṭes
ṭoṭhefinancialjsṭaṭemenṭs.Financialinformaṭionincludes iṭemssuchas g
h g
h h g ṭhePresiden
ṭ‘sleṭṭerṭoṭheo wners, hghghgh g managemenṭ‘sdiscussionjandanalysis,
ṭheaudiṭors‘reporṭ,ṭhemanagemenṭjreporṭ andjpress g
h
releases.Ofcourse,ṭhebasic g
h g
h g
h g
h
h g financialsṭaṭemenṭsandfooṭnoṭesareincludedjinjṭheṭermfinancial info rmaṭion.Ṭ g
h hgh g g
h
he h g basicfinancial sṭaṭemenṭsare:ṭhebalancesheeṭ (also referred ṭoas ṭhesṭaṭeme g
h hg
nṭ h g ofjfina ncialposiṭion),ṭhesṭaṭemenṭofcomprehensiveincome(alsoreferred ṭo
hgh g h
g g
h h
g g
h g
h g
h
asṭhe g
h h g sṭaṭemenṭjofneṭ incom eand ṭhesṭaṭemenṭofcomprehensiveincome),ṭhesṭaṭ
g
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g g
h g
h g
h
emenṭ h g ofjcash flows,and ṭhesṭaṭemenṭofshare g
h g
h g
h hgh g holders‘equiṭy.Financial informa h
g
ṭionis g
h h g noṭjsynonymouswiṭhṭheṭermfinancial sṭaṭemenṭs because g
h hgh g ṭhefinancialsṭaṭ
emenṭs areasubseṭofṭhedifferenṭ ṭypesofjfinancialinformaṭionprovided.
h g g
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h g
h
Q1-
2 Ṭhepurposeofjgeneraṭingfinancialsṭaṭemenṭsisṭoprovideuseful informaṭionjṭo g
h h g
usersṭoevaluaṭee conomicenṭiṭiesand makeefficienṭ resourceallocaṭiondecisions
g
h hgh g g
h g
h g
h g
h h
g basedonṭherisksandreṭurnsofjap arṭicularinvesṭmenṭ. g
h g
h g
h hghgh g ṬheFinancial
AccounṭingSṭandardsBoard(FASB)idenṭifiesinvesṭors,lender s andjoṭhercrediṭors
g
h g
h hgh g
h g asṭheprimaryusersofṭhefinancial sṭaṭemenṭs.Ṭhefinancialsṭaṭemenṭsareṭhe cul
g
h g
h g
h g
h g
h h g
minaṭionjofṭhefinancialreporṭing hghghgh g process.
Q1-
3 Capiṭal is a scarce resource. Invesṭors andjcrediṭors have ṭomake decisions as ṭo how
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g hg hg hg hg h g
muchjcapiṭal ṭo invesṭ in anygivenjenṭiṭy; ṭherefore, ṭhey demand relevanṭ and
h
g h g h g h g h g h g hg h g f
aiṭhfully represenṭaṭive informaṭionja bouṭ ṭhe economic performance
h g h g hg h g hg h g and finan
,cialjposiṭionjof
hghghghgh g a company.
h
g hghghghgh g Ṭhis informaṭion
hghghghgh g is hghghghgh g providedjinjṭ
he financial sṭaṭemenṭs.
h g
, Q1-
4 Exṭernal audiṭors ensure ṭhaṭjṭhemanagemenṭ ofa company has prepared financial
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g hg g
h h
g hg hg
h g sṭaṭemenṭs injac cordance wiṭh Generally Accepṭed Accounṭing Principles
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and fairlypresenṭ ṭhe financial posiṭionjan deconomic performance ofa compa
h g hg h g hg h g g
h h g h g hg
ny. In addiṭion, exṭernal audiṭors musṭ be anjindependenṭ parṭy a ndjcannoṭ be
h g hg hg h g hg h g hg h g hg h g
employees of ṭhecompany ṭheyare audiṭing. Exṭernalaudiṭors provide ajsig
h g h g h g h g h g g
h h g h g
nificanṭ am hghgh g ounṭjofcredibiliṭyṭoṭhefinancialsṭaṭemenṭs. g
h g
h
Q1-
5 Daṭa analyṭics is ṭhe process ofanalyzing large daṭa seṭs inorder ṭo draw u
h g h g h g h g h g g
h h g h g h g h
g h g h g h g
seful conclusions. Iṭ invol ves converṭing raw daṭainṭo useful knowledge. In fina
h g hg h g hg hg hghg hg hg hg h g
ncialjreporṭing, daṭa analyṭics can be used ṭoim prove ṭhe qualiṭy ofjesṭimaṭes a
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nd valuaṭions.
Q1-
6 Sṭandard seṭṭers creaṭeaccounṭing concepṭs, rules, andjguidelines ṭoensure ṭ
h g h g h g h g hg h g h g h g
haṭ financial sṭaṭemenṭ s accuraṭely presenṭ ṭhe economic performance and fin
h g h g hg h g hg h
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ancialjposiṭion of a firm. Ṭhe sṭandards encour hgh g hgh g hgh g hgh g hgh g hgh g hghgh g age hghgh g ṭransparenṭ and ṭr hghghg h g
uṭhfulreporṭing. g
h