Solution Manual For Intermediate Accounting, 11th Edition by David Spiceland, Mark Nelson, Verified Chapters 1 - 21 & Appendix A, Complete updated Version

Solution Manual For Intermediate Accounting, 11th
Edition by David Spiceland, Mark Nelson, Wayne
Thomas, Jennifer

,Chapter 1 “ “ Environment “and “Theoretical “Structure
Financial “Accounting

Question “1–1
Financial ―accounting ―is ―concerned ―with ―providing ―relevant ―financial
―information ―about ―various ―kinds ―of ―organizations ―to ―different ―types ―of ―external

―users. ―The ―primary ―focus ―of ―financial ―accounting ―is ―on ―the ―financial ―information

―provided ―by ―profit- ―oriented ―companies ―to ―their ―present ―and ―potential ―investors

―and ―creditors.


Question “1–2
Resources ―are ―efficiently ―allocated ―if ―they ―are ―given ―to ―enterprises ―that ―will
―use ―them ―to ―provide ―goods ―and ―services ―desired ―by ―society ―and ―not ―to ―enterprises

―that ―will ―waste ―them. ―The ―capital ―markets ―are ―the ―mechanism ―that ―fosters ―this
― efficient ―allocation ―of ―resources.


Question “1–3
Two ―extremely ―important ―variables ―that ―must ―be ―considered ―in ―any ―investment
―decision ―are ―the ―expected ―rate ―of ―return ―and ―the ―uncertainty ―or ―risk ―of ―that

―expected ―return.


Question “1–4
In ―the ―long ―run, ―a ―company ―will ―be ―able ―to ―provide ―investors ―and ―creditors
―with ―a ―rate ―of ―return ―only ―if ―it ―can ―generate ―a ―profit. ―That ―is, ―it ―must ―be ―able ―to

―use ―the ―resources ―provided ―to ―it ―to ―generate ―cash ―receipts ―from ―selling ―a ―product
―or ―service ―that ―exceed ―the ―cash ―disbursements ―necessary ―to ―provide ―that ―product

―or ―service.


Question “1–5
The ―primary ―objective ―of ―financial ―accounting ―is ―to ―provide ―investors ― and
―creditors ―with ―information ―that ―will ―help ―them ―make ―investment ―and ―credit

―decisions.


Question “1–6
Net ―operating ―cash ―flows ―are ―the ―difference ―between ―cash ―receipts ―and ―cash
―disbursements ―during ―a ―period ―of ―time ―from ―transactions ― related ―to ―providing

―goods ―and ―services ―to ―customers. ―Net ―operating ―cash ―flows ―may ―not ―be ―a ―good
―indicator ―of ―future ―cash ―flows ―because, ―by ―ignoring ―uncompleted ―transactions, ―they

―may ―not ―match ―the ―accomplishments ―and ―sacrifices ―of ―the ―period.

,Question “1–7
GAAP ―(generally ―accepted ―accounting ―principles) ―are ―a ―dynamic ―set ― of ―both
―broad ―and ―specific ―guidelines ―that ―a ―company ―should ―follow ―in ―measuring ― and

―reporting ―the ―information ―in ―their ―financial ―statements ―and ―related ―notes. ― It ― is

―important ―that ―all ―companies ―follow ―GAAP ―so ―that ―investors ―can ―compare

―financial ―information ―across ―companies ―to ―make ―their ―resource ―allocation

―decisions.


Question “1–8
In ―1934, ―Congress ―created ―the ―SEC ―and ―gave ―it ―the ―job ―of ―setting ―accounting
―and ―reporting ―standards ―for ―companies ―whose ―securities ―are ―publicly ―traded. ―The
―SEC ―has ―retained ―the ―power, ―but ―has ―relied ―on ―private ―sector ―bodies ―to ―create ―the

―standards. ―The ―current ―private ―sector ―body ―responsible ―for ―setting ―accounting
―standards ―is ―the ―FASB.


Question “1–9
Auditors ―are ―independent, ―professional ―accountants ―who ―examine ―financial
―statements ―to ―express ―an ―opinion. ―The ―opinion ―reflects ―the ―auditors‘ ―assessment ―of

―the ―statements' ―fairness, ―which ―is ―determined ―by ―the ―extent ―to ―which ―they ―are
―prepared ―in ―compliance ―with ―GAAP. ― The ―auditor ―adds ―credibility ―to ―the ―financial
―statements, ―which ―increases ―the ―confidence ―of ―capital ―market ―participants ―relying
―on ―that ―information.

, Question “1–10
Key ―provisions ―included ―in ―the ―text ―are:
 Creation ―of ―the ―Public ―Company ―Accounting ―Oversight ―Board
 Regulate ―types ―of ―non-audit ―audit ―services
 Require ―lead ―audit ―partner ―rotation ―every ―5 ―year
 Corporate ―executive ―accountability
 Addresses ―conflicts ―of ―interest ―for ―security ―analysts
 Internal ―control ―reporting ―and ―auditor ―opinion ―about ―controls

Question “1–11
New ―accounting ―standards, ―or ―changes ―in ―standards, ―can ―have ―significant
―differential ―effects ―on ―companies, ―investors ―and ―creditors, ―and ―other ―interest
―groups ―by ―causing ―redistribution ―of ―wealth. ― There ―also ―is ―the ―possibility ―that

―standards ―could ―harm ―the ―economy ―as ―a ―whole ―by ―causing ―companies ―to ―change
―their ―behavior.


Question “1–12
The ―FASB ―undertakes ―a ―series ―of ―elaborate ―information ―gathering ―steps ―before
―issuing ―an ―accounting ―standard ―to ―determine ―consensus ―as ―to ―the ―preferred ―method

―of ―accounting, ―as ―well ―as ―to ―anticipate ―adverse ―economic ―consequences.


Question “1–13
The ―purpose ―of ―the ―conceptual ―framework ―is ―to ―guide ―the ―Board ―in
―developing ―accounting ―standards ―by ―providing ―an ―underlying ―foundation ―and ―basic
―reasoning ―on ―which ―to ―consider ―merits ―of ―alternatives. ― The ―framework ―does ―not

―prescribe ―GAAP.