Solution Manual For Intermediate Accounting 3rd Edition by Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Solution manual for intermediate accounting 3rd edition
elizabeth a gordon jana s raedy alexander j sannella

,CHAPTER 1 j




The Financial Reporting Environment Solutio
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Questions

Q1-
1jFinancialjinformationjisjajmuchjbroaderjconceptjthanjsimplyjthejfinancialjstatementsjandjfootnotesj
tojthejfinancialjstatements.jFinancialjinformationjincludesjitemsjsuchjasjthejPresident‘sjletterjtojthejo
wners,jmanagement‘sjdiscussionjandjanalysis,jthejauditors‘jreport,jthejmanagementjreportjandjpressj
releases.jOfjcourse,jthejbasicjfinancialjstatementsjandjfootnotesjarejincludedjinjthejtermjfinancialjinfo
rmation.jThejbasicjfinancialjstatementsjare:jthejbalancejsheetj(alsoj referredjtojasjthejstatementjofjfina
ncialjposition),jthejstatementjofjcomprehensivejincomej(alsojreferredjtojasjthejstatementjofjnetjincom
ejandjthejstatementjofjcomprehensivejincome),jthejstatementjofjcashjflows,jandjthejstatementjofjshare
holders‘jequity.jFinancialjinformationjisjnotjsynonymousjwithjthejtermjfinancialjstatementsjbecausej
thejfinancialjstatementsjarejajsubsetjofjthejdifferentjtypesjofjfinancialjinformationjprovided.
Q1-
2jThejpurposejofjgeneratingjfinancialjstatementsjisjtojprovidejusefuljinformationjtojusersjtojevaluateje
conomicjentitiesjandjmakejefficientjresourcejallocationjdecisionsjbasedjonjthejrisksjandjreturnsjofjajp
articularjinvestment.jThejFinancialjAccountingjStandardsjBoardj(FASB)jidentifiesjinvestors,jlender
sjandjotherjcreditorsjasjthejprimaryjusersjofjthejfinancialjstatements.jThejfinancialjstatementsjarejthej
culminationjofjthejfinancialjreportingjprocess.
Q1-
3jCapitaljisjajscarcejresource.jInvestorsjandjcreditorsjhavejtojmakejdecisionsjasjtojhowjmuchjcapitaljtoj
investjinjanyjgivenjentity;jtherefore,jtheyjdemandjrelevantjandjfaithfullyjrepresentativejinformationja
boutjthejeconomicjperformancejandjfinancialjpositionjofjajcompany.jThisjinformationjisjprovidedjinjt
hejfinancialjstatements.
Q1-
4jExternaljauditorsjensurejthatjthejmanagementjofjajcompanyjhasjpreparedjfinancialjstatementsjinjac
cordancejwithjGenerallyjAcceptedjAccountingjPrinciplesjandjfairlyjpresentjthejfinancialjpositionjan
djeconomicjperformancejofjajcompany.jInjaddition,jexternaljauditorsjmustjbejanjindependentjpartyja
ndjcannotjbejemployeesjofjthejcompanyjtheyjarejauditing.jExternaljauditorsjprovidejajsignificantjam
ountjofjcredibilityjtojthejfinancialjstatements.
Q1-
5jDatajanalyticsjisjthejprocessjofjanalyzingjlargejdatajsetsjinjorderjtojdrawjusefuljconclusions.jItjinvol
vesjconvertingjrawjdatajintojusefuljknowledge.jInjfinancialjreporting,jdatajanalyticsjcanjbejusedjtojim
provejthejqualityjofjestimatesjandjvaluations.
Q1-
6jStandardjsettersjcreatejaccountingjconcepts,jrules,jandjguidelinesjtojensurejthatjfinancialjstatement
sjaccuratelyjpresentjthejeconomicjperformancejandjfinancialjpositionjofjajfirm.jThejstandardsjencour
agejtransparentjandjtruthfuljreporting.

,
, 1j-j2j SjOjLjUjTjIjOjNjSj MjAjNjUjAjLj FjOjRj IjNjTjEjRjMjEjDjIjAjTjEj AjCjCjOjUjNjTjING j



Q1-
7jU.S.jcompaniesjlistedjonjU.S.jstockjexchangesjdojnotjhavejthejoptionjtojreportjunderjIFRS.jHowev
er,jforeignjcompaniesjthatjtradejinjthejU.S.jexchangesjcanjreportjunderjIFRS.jThejSECjpermitsjthejus
ejofjIFRS-
basedjfinancialjstatementsjbyjinternationaljcompaniesjwithjsharesjtradingjonjU.S.jstockjexchanges.
Q1-
8jThejFASBjseeksjandjwelcomesjcommentsjfromjalljpartiesjinjthejfinancialjreportingjprocessjincludi
ngjmanagers,jinvestors,jaccountants,jpreparers,jcreditors,jlenders,jfinancialjstatementjusers,jgovern
mentaljagencies,jfinancialjanalysts,jindustryjgroups,jandjauditors.jFASBjalsojreceivesjfeedbackjfrom
jpublicjroundtablejdiscussions,jpublicjmeetings,jthejFASAC,jthejPrivatejCompanyjCouncil,jandjEIT

F.
Q1-
9jYes,jthejpromulgationjofjfinancialjaccountingjstandardsjisjajpoliticaljprocess.jTherejarejseveraljgro
upsjthatjinfluencejthejstandardjsettingjprocess.jThejstandardjsettingjprocessjisjajpoliticaljprocessjthatji
sjaffectedjbyjthejimpactjofjseveraljlobbyingjgroups.jThejgovernment,jthroughjthejSEC,jinfluencesjacc
ountingjstandards.jThejSECjhasjthejauthorityjtojissuejaccountingjstandardsjbutjhasjassignedjthisjrespo
nsibilityjtojthejprivatejsector.jNonetheless,jthejSECjcanjexertjpressurejonjthejFASBjtojissuejaccountin
gjstandardsjandjvetojthejstandardsjpromulgatedjbyjthejFASB.jAuditingjfirms,jthejcorporatejsector,jcr
editors,jfinancialjanalysts,jthejfinancialjcommunity,jaccountingjorganizations,jindustryjgroups,jandji
nvestorsjcanjinfluencejthejFASBjbyjwrittenjcommentsjaboutjExposurejDraftsjandjparticipationjinjpu
blicjmeetingsjandjpublicjroundtablesjregardingjajproposedjfinancialjreportingjstandard.

Q1-10jAjprinciples-basedjstandardjisjconsistentjwithjajtheoreticaljframework.jInjcontrast,jajrules-
basedjstandardjdoesjnotjnecessarilyjrelyjonjajconsistentjtheoreticaljframework.jRather,jitjcontainsj
morejspecificjandjprescriptivejrules.
Q1-
11jRecently,jthejFASBjhasjtakenjanjasset/liabilityjapproachjinjsettingjstandards.jWithjthisjapproach,j
ajtransactionjisjrecordedjbasedjonjwhetherjanjassetjorjliabilityjisjcreated.jAnotherjtrendjhasjbeenjthej
movementjtowardjthejusejofjfairjvaluejmeasurementsjasjanjalternativejtojhistoricaljcost.jFASBjhasjal
sojfocusedjonjthejpromulgationjofjprinciples-basedjstandardsjinsteadjofjrules-basedjstandards.

BriefjExercisesjSoluti

onjtojBE1-1

General-
purposejfinancialjstatementsjprovidejgeneraljfinancialjinformationjaboutjanjentityjthatjwilljbejusefuljt
ojmanyjtypesjofjusers.jGeneral-
purposejfinancialjstatementsjprovidejinformationjtojajwidejspectrumjofjuserjgroups:jinvestors,jcredit
ors,jfinancialjanalysts,jcustomers,jemployees,jcompetitors,jsuppliers,junions,jandjgovernmentjagenc
ies.jMostjfinancialjinformationjinjgeneraljpurposejfinancialjstatementsjisjprovidedjtojsatisfyjusersjwit
hjlimitedjabilityjorjauthorityjtojobtainjadditionaljinformation,jwhichjincludesjinvestorsjandjcreditors.j
ThejFinancialjAccountingjStandardsjBoardj(FASB)jidentifiesjinvestors,jlenders,jandjotherjcreditorsj
asjthejprimaryjusersjofjthejfinancialjstatements.



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