Solution Manual for Financial Accounting 11th Edition Robert Libby, Patricia Libby, All Chapters 1-13 || Latest Edition

Solution Manual for Financial Accounting 11th EditionR
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obert Libby, Patricia Libby, Frank Hodge
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,SOLUTION MANUAL FOR v v




Financial Accounting 11th Edition Robert Libby,Patricia
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v Libby, Frank Hodge Chapter 1-13
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With Appendix A Solution Manual &M
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BA Supplement Solutions Manual
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Chapter 1 v



Financial Statements and Business Decisions
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ANSWERS TO QUESTIONS v v




1. Accountingvisvavsystemvthatvcollectsvandvprocessesv(analyzes,vmeasures,vandvrecor
ds)vfinancialvinformationvaboutvanvorganizationvandvreportsvthatvinformationvtovdecisi
onvmakers.

2. Financialvaccountingvinvolvesvpreparationvofvthevfourvbasicvfinancialvstatementsvandvr
elatedvdisclosuresvforvexternalvdecisionvmakers.vManagerialvaccountingvinvolvesvthev
preparationvofvdetailedvplans,vbudgets,vforecasts,vandvperformancevreportsvforvintern
alvdecisionvmakers.

3. Financialvreportsvarevusedvbyvbothvinternalvandvexternalvgroupsvandvindividuals.vThevin
ternalvgroupsvarevcomprisedvofvthevvariousvmanagersvofvtheventity.vThevexternalvgrou
psvincludevthevowners,vinvestors,vcreditors,vgovernmentalvagencies,vothervinterestedv
parties,vandvthevpublicvatvlarge.

4. Investorsvpurchasevallvorvpartvofvavbusinessvandvhopevtovgainvbyvreceivingvpartvofvwh
atvthevcompanyvearnsvand/orvsellingvtheirvownershipvinterestvinvthevcompanyvinvthevfu
turevatvavhighervpricevthanvtheyvpaid.vvCreditorsvlendvmoneyvtovavcompanyvforvavspecifi
cvlengthvofvtimevandvhopevtovgainvbyvchargingvinterestvonvthevloan.




Financialv Accounting,v11/e 2-1
©vMcGrawvHillvLLC.v Allvrightsvreserved.vNov reproductionv orv distributionvwithoutvthevpriorvwrittenv consentvofvMcGrawvHillv
LLC.

,5. Invavsociety,veachvorganizationvcanvbevdefinedvasvavseparatevaccountingventity.vAnvac
countingventityvisvthevorganizationvforvwhichvfinancialvdatavarevtovbevcollected.vTypicalv
accountingventitiesvarevavbusiness,vavchurch,vavgovernmentalvunit,vavuniversityvandvot
hervnonprofitvorganizationsvsuchvasvavhospitalvandvavwelfarevorganization.vAvbusinessv
typicallyvisvdefinedvandvtreatedvasvavseparateventityvbecausevthevowners,vcreditors,vin
vestors,vandvothervinterestedvpartiesvneedvtovevaluatevitsvperformancevandvitsvpotenti
alvseparatelyvfromvotherventitiesvandvfromvitsvowners.

6. NamevofvStatement AlternativevTitle
(a) IncomevStatement (a)v StatementvofvEarnings;vStatementvof
Income;vStatementvofvOperations
(b) BalancevSheet (b)v StatementvofvFinancialvPosition
(c) CashvFlowvStatement (c)v StatementvofvCashvFlows

7. Thevheadingvofveachvofvthevfourvrequiredvfinancialvstatementsvshouldvincludevthevfo
llowing:
(a) Namevofvtheventity
(b) Namevofvthevstatement
(c) Datevofvthevstatement,vorvthevperiodvofvtime
(d) Unitvofvmeasure

8. (a)
Thevpurposevofvthevincomevstatementvisvtovpresentvinformationvaboutvthevr
evenues,vexpenses,vandvthevnetvincomevofvanventityvforvavspecifiedvperiodvofvti
me.
(b) Thevpurposevofvthevbalancevsheetvisvtovreportvthevfinancialvpositionvofvanventityvatv
avgivenvdate,vthatvis,vtovreportvinformationvaboutvthevassets,vliabilitiesvandvstockh
olders’vequityvofvtheventityvasvofvavspecificvdate.
(c) Thevpurposevofvthevstatementvofvcashvflowsvisvtovpresentvinformationvaboutvthevfl
owvofvcashvintovtheventityv(sources),vthevflowvofvcashvoutvofvtheventityv(uses),vandv
thevnetvincreasevorvdecreasevinvcashvduringvthevperiod.
(d) Thevstatementvofvstockholders’vequityvreportsvthevchangesvinveachvofvthevcomp
any’svstockholders’vequityvaccountsvduringvthevaccountingvperiod,vincludingviss
uevandvrepurchasevofvstockvandvthevwayvthatvnetvincomevandvdistributionvofvdivi
dendsvaffectedvthevretainedvearningsvofvthevcompanyvduringvthatvperiod.

9. Thevincomevstatementvandvthevstatementvofvcashvflowsvarevdatedv―ForvthevYearvEn
dedvDecemberv31‖vbecausevtheyvreportvthevinflowsvandvoutflowsvofvresourcesvduring
vavperiodv ofvtime.vInvcontrast,vthevbalancev sheetvisvdatedv―Atv Decemberv31‖vbecause

vitv representsvthevresources,vobligations,v andvstockholders’vequityvatvavspecificvdate.




2-2 SolutionsvManual



©vMcGrawvHillvLLC.v Allvrightsvreserved.vNov reproductionv orv distributionvwithoutvthevpriorvwrittenv consentvofvMcGrawvHillv
LLC.

, 10. Assetsvarevimportantvtovcreditorsvandvinvestorsvbecausevassetsvprovidevavbasisvforvju
dgingvwhethervsufficientvresourcesvarevavailablevtovoperatevthevcompany.v Assetsvarev
alsovimportantvbecausevtheyvcouldvbevsoldvforvcashvinvtheveventvthevcompanyvgoesvo
utvofvbusiness.vLiabilitiesvarevimportantvtovcreditorsvandvinvestorsvbecausevthevcomp
anyvmustvbevablevtov generatevsufficientvcashvfromvoperationsvorvfurthervborrowingvtov
meetvthevpaymentsvrequiredvbyvdebtvagreements.vIfvavbusinessvdoesvnotvpayvitsvcredi
tors,vthevlawvmayvgivevthevcreditorsvthevrightvtovforcevthevsalevofvassetsvsufficientvtovm
eetvtheirvclaims.

11. Netvincomevisvthevexcessvofvtotalvrevenuesvovervtotalvexpenses.vNetvlossvisvthevex
cessvofvtotalvexpensesvovervtotalvrevenues.

12. ThevequationvforvthevincomevstatementvisvRevenuesv-
vExpensesv =vNetvIncomev (orv NetvLossvifvthevamountvisvnegative).vThus,vthevthreevmaj
orvitemsvreportedvonvthevincomevstatementvarev(1)vrevenues,v(2)vexpenses,vandv(3)v
netvincome.
13. Thevequationvforvthevbalancevsheetv(alsovknownvasvthevbasicvaccountingvequation)vis:
vAssetsv=vLiabilitiesv +vStockholders’vEquity.v Assetsvarevthevprobablev(expected)vfutur

eveconomicvbenefitsvownedvbyvtheventityvasvavresultvofvpastvtransactions.vTheyvarevthe
v resourcesvownedvbyvthevbusinessvatvavgivenvpointv invtimevsuchvasvcash,v receivables,v

inventory,vmachinery,vbuildings,vland,vandvpatents.vLiabilitiesvarevprobablev(expected
)vdebtsvorvobligationsvofvtheventityvasvavresultvofvpastvtransactionsvthatvwillvbevpaidvwith
vassetsvorvservicesv invthevfuture.vTheyv arevthevobligationsvofvtheventityv suchvasvaccoun

tsvpayable,vnotesvpayable,vandvbondsvpayable.vStockholders’vequityvisvfinancingvprov
idedvbyvownersvofvthevbusinessvandvoperations.vItvisvthevclaimvofvthevownersvtovthevass
etsvofvthevbusinessvaftervthevcreditors’vclaimsvhavevbeenvsatisfied.vItvmayvbevthoughtvo
fvasvthevresidualvinterestvbecausevitvrepresentsvassetsvminusvliabilities.

14. Thevequationvforvthevstatementvofvcashvflowsvis:vCashvflowsvfromvoperatingvactivities
+vCashvflowsvfromvinvestingvactivitiesv+vCashvflowsvfromvfinancingvactivitiesv=vChan
gevinvcashvforvthevperiod.vThevnetvcashvflowsvforvthevperiodvrepresentvthevincreasev
orvdecreasevinvcashvthatvoccurredvduringvthevperiod.vCashvflowsvfromvoperatingvact
ivitiesvarevcashvflowsvdirectlyvrelatedvtovearningvincomev(normalvbusinessvactivityvin
cludingvinterestvpaidvandvincomevtaxesvpaid).vCashvflowsvfromvinvestingvactivitiesvin
cludevcashvflowsvthatvarevrelatedvtovthevacquisitionvorvsalevofvproductivevassetsvuse
dvbyvthevcompany.vCashvflowsvfromvfinancingvactivitiesvarevdirectlyvrelatedvtovthevfin
ancingvofvtheventerprisevitself.

15. Thevretainedvearningsvequationvis:vBeginningvRetainedvEarningsv+vNetvIncomev-
vDividendsv=vEndingv RetainedvEarnings.vItvbeginsv withvbeginning-of-the-

yearvRetainedvEarningsvwhichvisvthevpriorvyear’svendingvretainedvearningsvreporte
dvonvthevbalancevsheet.vThevcurrentvyear'svNetvIncomev reportedvonvthevincomevstat
ementvisvaddedvandvthevcurrentvyear'svDividendsvarevsubtractedvfromvthisvamount.v
ThevendingvRetainedvEarningsvamountvisvreportedvonvthevend-of-
periodvbalancevsheet.


FinancialvAccounting,v11/e 2-3
©vMcGrawvHillvLLC.v Allvrightsvreserved.vNov reproductionv orv distributionvwithoutvthevpriorvwrittenv consentvofvMcGrawvHillv
LLC.