Solution Manual For Intermediate Accounting, 11th Edition by
p p p p p p p p
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
p p p p p p
,Chapter 1 Environment and Theoretical Structure of p p p p p p
Financial Accounting p
Question 1–1 p
Financial accounting is concerned with providing relevant financial information ab
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out various kinds of organizations to different types of external users. The primary focus
p p p p p p p p p p p p p p
of financial accounting is on the financial information provided by profit-
p p p p p p p p p p
oriented companies to their present and potential investors and creditors.
p p p p p p p p p p
Question 1–2 p
Resources are efficiently allocated if they are given to enterprises that will use them
p p p p p p p p p p p p p
to provide goods and services desired by society and not to enterprises that will waste th
p p p p p p p p p p p p p p p p
em. The capital markets are the mechanism that fosters this efficient allocation of resour
p p p p p p p p p p p p p
ces.
Question 1–3 p
Two extremely important variables that must be considered in any investment decis
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ion are the expected rate of return and the uncertainty or risk of that expected return.
p p p p p p p p p p p p p p p
Question 1–4 p
In the long run, a company will be able to provide investors and creditors with a rate
p p p p p p p p p p p p p p p p
of return only if it can generate a profit. That is, it must be able to use the resources provi
p p p p p p p p p p p p p p p p p p p p
ded to it to generate cash receipts from selling a product or service thatexceed the cash di
p p p p p p p p p p p p p p p p p
sbursements necessary to provide that product or service. p p p p p p p
Question 1–5 p
The primary objective of financial accounting is to provide investors and creditors
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with information that will help them make investment and credit decisions.
p p p p p p p p p p
Question 1–6 p
Net operating cash flows are the difference between cash receipts and cash disburse
p p p p p p p p p p p p
ments during a period of time from transactions related to providing goods and services
p p p p p p p p p p p p p p
to customers. Net operating cash flows may not be a good indicator of future cash flows
p p p p p p p p p p p p p p p p
because, by ignoring uncompleted transactions, they may not match the accomplishment
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s and sacrifices of the period.
p p p p p
,Question 1–7 p
GAAP (generally accepted accounting principles) are a dynamic set of both broad
p p p p p p p p p p p p
and specific guidelines that a company should follow in measuring and reporting the inf
p p p p p p p p p p p p p
ormation in their financial statements and related notes. It is important that all compani
p p p p p p p p p p p p p
es follow GAAP so that investors can compare financial information across companies t
p p p p p p p p p p p p
o make their resource allocation decisions.
p p p p p
Question 1–8 p
In 1934, Congress created the SEC and gave it the job of setting accounting and rep
p p p p p p p p p p p p p p p
orting standards for companies whose securities are publicly traded. The SEC has retain
p p p p p p p p p p p p
ed the power, but has relied on private sector bodies to create the standards. The current p
p p p p p p p p p p p p p p p p
rivate sector body responsible for setting accounting standards is the FASB.
p p p p p p p p p p
Question 1–9 p
Auditors are independent, professional accountants who examine financial stateme
p p p p p p p p
nts to express an opinion. The opinion reflects the auditors‘ assessment of the statements
p p p p p p p p p p p p p
' fairness, which is determined by the extent to which they are prepared in compliance wi
p p p p p p p p p p p p p p p
th GAAP. The auditor adds credibility to the financial statements, which increases the c
p p p p p p p p p p p p p
onfidence of capital market participants relying on that information.
p p p p p p p p
, Question 1–10 p
Key provisions included in the text are:
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Creation of the Public Company Accounting Oversight Board
p p p p p p p
Regulate types of non-audit audit services p p p p p
Require lead audit partner rotation every 5 year
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Corporate executive accountability p p
Addresses conflicts of interest for security analysts p p p p p p
Internal control reporting and auditor opinion about controls
p p p p p p p
Question 1–11 p
New accounting standards, or changes in standards, can have significant differentia
p p p p p p p p p p
l effects on companies, investors and creditors, and other interest groups by causing redi
p p p p p p p p p p p p p
stribution of wealth. There also is the possibility that standards could harm the economy
p p p p p p p p p p p p p p
as a whole by causing companies to change their behavior.
p p p p p p p p p
Question 1–12 p
The FASB undertakes a series of elaborate information gathering steps before issui
p p p p p p p p p p p
ng an accounting standard to determine consensus as to the preferred method of accounti
p p p p p p p p p p p p p
ng, as well as to anticipate adverse economic consequences.
p p p p p p p p
Question 1–13 p
The purpose of the conceptual framework is to guide the Board in developing accou
p p p p p p p p p p p p p
nting standards by providing an underlying foundation and basic reasoning on which to c
p p p p p p p p p p p p p
onsider merits of alternatives. The framework does not prescribe GAAP.
p p p p p p p p p
p p p p p p p p
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
p p p p p p
,Chapter 1 Environment and Theoretical Structure of p p p p p p
Financial Accounting p
Question 1–1 p
Financial accounting is concerned with providing relevant financial information ab
p p p p p p p p p
out various kinds of organizations to different types of external users. The primary focus
p p p p p p p p p p p p p p
of financial accounting is on the financial information provided by profit-
p p p p p p p p p p
oriented companies to their present and potential investors and creditors.
p p p p p p p p p p
Question 1–2 p
Resources are efficiently allocated if they are given to enterprises that will use them
p p p p p p p p p p p p p
to provide goods and services desired by society and not to enterprises that will waste th
p p p p p p p p p p p p p p p p
em. The capital markets are the mechanism that fosters this efficient allocation of resour
p p p p p p p p p p p p p
ces.
Question 1–3 p
Two extremely important variables that must be considered in any investment decis
p p p p p p p p p p p
ion are the expected rate of return and the uncertainty or risk of that expected return.
p p p p p p p p p p p p p p p
Question 1–4 p
In the long run, a company will be able to provide investors and creditors with a rate
p p p p p p p p p p p p p p p p
of return only if it can generate a profit. That is, it must be able to use the resources provi
p p p p p p p p p p p p p p p p p p p p
ded to it to generate cash receipts from selling a product or service thatexceed the cash di
p p p p p p p p p p p p p p p p p
sbursements necessary to provide that product or service. p p p p p p p
Question 1–5 p
The primary objective of financial accounting is to provide investors and creditors
p p p p p p p p p p p p
with information that will help them make investment and credit decisions.
p p p p p p p p p p
Question 1–6 p
Net operating cash flows are the difference between cash receipts and cash disburse
p p p p p p p p p p p p
ments during a period of time from transactions related to providing goods and services
p p p p p p p p p p p p p p
to customers. Net operating cash flows may not be a good indicator of future cash flows
p p p p p p p p p p p p p p p p
because, by ignoring uncompleted transactions, they may not match the accomplishment
p p p p p p p p p p
s and sacrifices of the period.
p p p p p
,Question 1–7 p
GAAP (generally accepted accounting principles) are a dynamic set of both broad
p p p p p p p p p p p p
and specific guidelines that a company should follow in measuring and reporting the inf
p p p p p p p p p p p p p
ormation in their financial statements and related notes. It is important that all compani
p p p p p p p p p p p p p
es follow GAAP so that investors can compare financial information across companies t
p p p p p p p p p p p p
o make their resource allocation decisions.
p p p p p
Question 1–8 p
In 1934, Congress created the SEC and gave it the job of setting accounting and rep
p p p p p p p p p p p p p p p
orting standards for companies whose securities are publicly traded. The SEC has retain
p p p p p p p p p p p p
ed the power, but has relied on private sector bodies to create the standards. The current p
p p p p p p p p p p p p p p p p
rivate sector body responsible for setting accounting standards is the FASB.
p p p p p p p p p p
Question 1–9 p
Auditors are independent, professional accountants who examine financial stateme
p p p p p p p p
nts to express an opinion. The opinion reflects the auditors‘ assessment of the statements
p p p p p p p p p p p p p
' fairness, which is determined by the extent to which they are prepared in compliance wi
p p p p p p p p p p p p p p p
th GAAP. The auditor adds credibility to the financial statements, which increases the c
p p p p p p p p p p p p p
onfidence of capital market participants relying on that information.
p p p p p p p p
, Question 1–10 p
Key provisions included in the text are:
p p p p p p
Creation of the Public Company Accounting Oversight Board
p p p p p p p
Regulate types of non-audit audit services p p p p p
Require lead audit partner rotation every 5 year
p p p p p p p
Corporate executive accountability p p
Addresses conflicts of interest for security analysts p p p p p p
Internal control reporting and auditor opinion about controls
p p p p p p p
Question 1–11 p
New accounting standards, or changes in standards, can have significant differentia
p p p p p p p p p p
l effects on companies, investors and creditors, and other interest groups by causing redi
p p p p p p p p p p p p p
stribution of wealth. There also is the possibility that standards could harm the economy
p p p p p p p p p p p p p p
as a whole by causing companies to change their behavior.
p p p p p p p p p
Question 1–12 p
The FASB undertakes a series of elaborate information gathering steps before issui
p p p p p p p p p p p
ng an accounting standard to determine consensus as to the preferred method of accounti
p p p p p p p p p p p p p
ng, as well as to anticipate adverse economic consequences.
p p p p p p p p
Question 1–13 p
The purpose of the conceptual framework is to guide the Board in developing accou
p p p p p p p p p p p p p
nting standards by providing an underlying foundation and basic reasoning on which to c
p p p p p p p p p p p p p
onsider merits of alternatives. The framework does not prescribe GAAP.
p p p p p p p p p
