SOLUTION MANUAL FOR Financial
Accounting 11th Edition by Robert Libby, All
Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and records) financial
information about an organization and reports that information todecision makers.
2. Financial accounting involves preparation of the four basic financial statements andrelated
disclosures for external decision makers. Managerial accounting involves the preparation of
detailed plans, budgets, forecasts, and performance reports for internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. Theinternal
groups are comprised of the various managers of the entity. The external groups include the
owners, investors, creditors, governmental agencies, other interested parties, and the public at
large.
4. Investors purchase all or part of a business and hope to gain by receiving part of what the
company earns and/or selling their ownership interest in the company in the future at a
higher price than they paid. Creditors lend money to a company fora specific length of time
and hope to gain by charging interest on the loan.
, 5. In a society, each organization can be defined as a separate accounting entity. An accounting
entity is the organization for which financial data are to be collected. Typical accounting
entities are a business, a church, a governmental unit, a university and other nonprofit
organizations such as a hospital and a welfare organization. A business typically is defined and
treated as a separate entity because the owners, creditors, investors, and other interested parties
need to evaluate its performance and its potential separately from other entities and from its
owners.
6. Name of Statement Alternative Title
(a) Income Statement (a) Statement of Earnings; Statement of
Income; Statement of Operations
(b) Balance Sheet (b) Statement of Financial Position
(c) Cash Flow Statement (c) Statement of Cash Flows
7. The heading of each of the four required financial statements should include thefollowing:
(a) Name of the entity
(b) Name of the statement
(c) Date of the statement, or the period of time
(d) Unit of measure
8. (a) The purpose of the income statement is to present information about the revenues,
expenses, and the net income of an entity for a specified period oftime.
(b) The purpose of the balance sheet is to report the financial position of an entityat a given
date, that is, to report information about the assets, liabilities and stockholders’ equity of
the entity as of a specific date.
(c) The purpose of the statement of cash flows is to present information about theflow of
cash into the entity (sources), the flow of cash out of the entity (uses), and the net
increase or decrease in cash during the period.
(d) The statement of stockholders’ equity reports the changes in each of the company’s
stockholders’ equity accounts during the accounting period, including issue and
repurchase of stock and the way that net income and distribution of dividends affected
the retained earnings of the company duringthat period.
9. The income statement and the statement of cash flows are dated ―For the Year Ended
December 31‖ because they report the inflows and outflows of resources during a period of
time. In contrast, the balance sheet is dated ―At December 31‖because it represents the
resources, obligations, and stockholders’ equity at a specific date.
Accounting 11th Edition by Robert Libby, All
Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and records) financial
information about an organization and reports that information todecision makers.
2. Financial accounting involves preparation of the four basic financial statements andrelated
disclosures for external decision makers. Managerial accounting involves the preparation of
detailed plans, budgets, forecasts, and performance reports for internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. Theinternal
groups are comprised of the various managers of the entity. The external groups include the
owners, investors, creditors, governmental agencies, other interested parties, and the public at
large.
4. Investors purchase all or part of a business and hope to gain by receiving part of what the
company earns and/or selling their ownership interest in the company in the future at a
higher price than they paid. Creditors lend money to a company fora specific length of time
and hope to gain by charging interest on the loan.
, 5. In a society, each organization can be defined as a separate accounting entity. An accounting
entity is the organization for which financial data are to be collected. Typical accounting
entities are a business, a church, a governmental unit, a university and other nonprofit
organizations such as a hospital and a welfare organization. A business typically is defined and
treated as a separate entity because the owners, creditors, investors, and other interested parties
need to evaluate its performance and its potential separately from other entities and from its
owners.
6. Name of Statement Alternative Title
(a) Income Statement (a) Statement of Earnings; Statement of
Income; Statement of Operations
(b) Balance Sheet (b) Statement of Financial Position
(c) Cash Flow Statement (c) Statement of Cash Flows
7. The heading of each of the four required financial statements should include thefollowing:
(a) Name of the entity
(b) Name of the statement
(c) Date of the statement, or the period of time
(d) Unit of measure
8. (a) The purpose of the income statement is to present information about the revenues,
expenses, and the net income of an entity for a specified period oftime.
(b) The purpose of the balance sheet is to report the financial position of an entityat a given
date, that is, to report information about the assets, liabilities and stockholders’ equity of
the entity as of a specific date.
(c) The purpose of the statement of cash flows is to present information about theflow of
cash into the entity (sources), the flow of cash out of the entity (uses), and the net
increase or decrease in cash during the period.
(d) The statement of stockholders’ equity reports the changes in each of the company’s
stockholders’ equity accounts during the accounting period, including issue and
repurchase of stock and the way that net income and distribution of dividends affected
the retained earnings of the company duringthat period.
9. The income statement and the statement of cash flows are dated ―For the Year Ended
December 31‖ because they report the inflows and outflows of resources during a period of
time. In contrast, the balance sheet is dated ―At December 31‖because it represents the
resources, obligations, and stockholders’ equity at a specific date.
