Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. Gibson, Verified Chapter's 1 to 13 | Complete

Solution Manual For Financial Statement Analysis,
13th Edition
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete

, ChapterU1U Introductio
nUtoUFinancialUReporting


QUESTIONS

1- 1. a.
TheUAICPAUisUanUorganizationUofUCPAsUthatUpriorUtoU1973UacceptedUtheUpr
imaryUresponsibilityUforUtheUdevelopmentUofUgenerallyUacceptedUaccounting
Uprinciples.UTheirUroleUwasUsubstantiallyUreducedUinU1973UwhenUtheUFinanci

alUAccountingUStandardsUBoardUwasUestablished.U TheirUroleUwasUfurtherUre
ducedUwithUtheUestablishmentUofUtheUPublicUCompanyUAccountingUOversig
htUBoardUwasUestablishedUinU2002.

b. TheUFinancialUAccountingUStandardsUBoardUreplacedUtheUAccountingU
PrinciplesUBoardUasUtheUprimaryUrule-
makingUbodyUforUaccountingUstandards.UItUisUanUindependentUorganizat
ionUandUincludesUmembersUotherUthanUpublicUaccountants.

c. TheUSECUhasUtheUauthorityUtoUdetermineUgenerallyUacceptedUaccountingU
principlesUandUtoUregulateUtheUaccountingUprofession.UTheUSECUhasUelect
edUtoUleaveUmuchUofUtheUdeterminationUofUgenerallyUacceptedUaccountingU
principlesUtoUtheUprivateUsector.U TheUFinancialUAccountingUStandardsUBo
ardUhasUplayedUtheUmajorUroleUinUestablishingUaccountingUstandardsUsinc
eU1973.U RegulationUofUtheUaccountingUprofessionUwasUsubstantiallyUturne
dUoverUtoUtheUPublicUCompanyUAccountingUOversightUBoardUinU2002.

1-U2.
ConsistencyUisUobtainedUthroughUtheUapplicationUofUtheUsameUaccountingU
principleUfromUperiodUtoUperiod.U AUchangeUinUprincipleUrequiresUstatementU
disclosure.

1-U3.
TheUconceptUofUhistoricalUcostUdeterminesUtheUbalanceUsheetUvaluationUofUland.UT
heUrealizationUconceptUrequiresUthatUaUtransactionUneedsUtoUoccurUforUtheUprofitUtoU
beUrecognized.

1-U4. a.U Entity e.U HistoricalUcost

b. Realization f.U HistoricalUcost

c. Materiality g.U Disclosure

d. Conservatism

1-U5. EntityUconcept

,1-U6.
GenerallyUacceptedUaccountingUprinciplesUdoUnotUapplyUwhenUaUfirmUdoesUnotUa
ppearUtoUbeUaUgoingUconcern.U IfUtheUdecisionUisUmadeUthatUthisUisUnotUaUgoingUco
ncern,UthenUtheUuseUofUGAAPUwouldUnotUbeUappropriate.

1-U7.
WithUtheUtimeUperiodUassumption,UinaccuraciesUofUaccountingUforUtheUentity,Ushor
tUofUitsUcompleteUlifeUspan,UareUaccepted.UTheUassumptionUisUmadeUthatUtheUentity
UcanUbeUaccountedUforUreasonablyUaccuratelyUforUaUparticularUperiodUofUtime.U InUo

therUwords,UtheUdecisionUisUmadeUtoUacceptUsomeUinaccuracyUbecauseUofUincom
pleteUinformationUaboutUtheUfutureUinUexchangeUforUmoreUtimelyUreporting.U TheUst
atementsUareUconsideredUtoUbeUmeaningfulUbecauseUmaterialUinaccuraciesUareUn
otUacceptable.

1- 8.U U ItUisUtrueUthatUtheUonlyUaccurateUwayUtoUaccountUforUtheUsuccessUorUfailureUofUanUent
ityUisUtoUaccumulateUallUtransactionsUfromUtheUopeningUofUbusinessUuntilUtheUbusi
nessUeventuallyUliquidates.U ButUitUisUnotUnecessaryUthatUtheUstatementsUbeUcomp
letelyUaccurateUinUorderUforUthemUtoUbeUmeaningful.

1- 9. a. AUyearUthatUendsUwhenUoperationsUareUatUaUlowUebbUforUtheUyear.

b. TheUaccountingUtimeUperiodUisUendedUonUDecemberU31.

c. AUtwelve-
monthUaccountingUperiodUthatUendsUatUtheUendUofUaUmonthUotherUthanUDece
mberU31.
1-10. Money.

1-
11.U U WhenUmoneyUdoesUnotUholdUaUstableUvalue,UtheUfinancialUstatementsUcanU
loseUmuchUofUtheirUsignificance.U ToUtheUextentUthatUmoneyUdoesUnotUremainUsta
ble,UitUlosesUusefulnessUasUtheUstandardUforUmeasuringUfinancialUtransactions.

1-12.
No.U ThereUisUaUproblemUwithUdeterminingUtheUindexUinUorderUtoUadjustUtheUstate
ments.U TheUitemsUthatUareUincludedUinUtheUindexUmustUbeUrepresentative.UInUadd
ition,UtheUpricesUofUitemsUchangeUbecauseUofUvariousUfactors,UsuchUasUquality,Ute
chnology,UandUinflation.

Yes.UAUreasonableUadjustmentUtoUtheUstatementsUcanUbeUmadeUforUinflation.

1-13. False.U AnUarbitraryUwrite-
offUofUinventoryUcannotUbeUjustifiedUunderUtheUconservatismUconcept.U TheUcons
ervatismUconceptUcanUonlyUbeUappliedUwhereUthereUareUalternativeUmeasureme
ntsUandUeachUofUtheseUalternativeUmeasurementsUhasUreasonableUsupport.

, 1-14.
Yes,UinventoryUthatUhasUaUmarketUvalueUbelowUtheUhistoricalUcostUshouldUbeUwri
ttenUdownUinUorderUtoUrecognizeUaUloss.U ThisUisUdoneUbasedUuponUtheUconceptU
ofUconservatism.U LossesUthatUcanUbeUreasonablyUanticipatedUshouldUbeUtakenU
inUorderUtoUreflectUtheUleastUfavorableUeffectUonUnetUincomeUofUtheUcurrentUperio
d.