Solution Manual For Financial Statement Analysis,
uu uu uu uu uu
13th Edition
uu
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete
uu uu uu uu uu uu uu uu uu uu uu
, Chapter uu1
uu Introduction uuto uuFinancial
uuReporting
QUESTIONS
1- 1. a. The uuAICPA uuis uuan uuorganization uuof uuCPAs uuthat uuprior uuto uu1973
uuaccepted uuthe uuprimary uuresponsibility uufor uuthe uudevelopment uuof
uugenerally uuaccepted uuaccounting uuprinciples. uuTheir uurole uuwas
uusubstantially uureduced uuin uu1973 uuwhen uuthe uuFinancial uuAccounting
uuStandards uuBoard uuwas uuestablished. u u Their uurole uuwas uufurther
uureduced uuwith uuthe uuestablishment uuof uuthe uuPublic uuCompany
uuAccounting uuOversight uuBoard uuwas uuestablished uuin uu2002.
b. The uuFinancial uuAccounting uuStandards uuBoard uureplaced uuthe
uuAccounting uuPrinciples uuBoard uuas uuthe uuprimary uurule-making
uubody uufor uuaccounting uustandards. uuIt uuis uuan uuindependent
uuorganization uuand uuincludes uumembers uuother uuthan uupublic
uuaccountants.
c. The uuSEC uuhas uuthe uuauthority uuto uudetermine uugenerally uuaccepted
uuaccounting uuprinciples uuand uuto uuregulate uuthe uuaccounting
uuprofession. uuThe uuSEC uuhas uuelected uuto uuleave uumuch uuof uuthe
uudetermination uuof uugenerally uuaccepted uuaccounting uuprinciples uuto
uuthe uuprivate uusector. u u The uuFinancial uuAccounting uuStandards uuBoard
uuhas uuplayed uuthe uumajor uurole uuin uuestablishing uuaccounting uustandards
uusince uu1973. u u Regulation uuof uuthe uuaccounting uuprofession uuwas
uusubstantially uuturned uuover uuto uuthe uuPublic uuCompany uuAccounting
uuOversight uuBoard uuin uu2002.
1- uu2. Consistency uuis uuobtained uuthrough uuthe uuapplication uuof uuthe uusame
uuaccounting uuprinciple uufrom uuperiod uuto uuperiod. u u A uuchange uuin
uuprinciple uurequires uustatement uudisclosure.
1- uu3. The uuconcept uuof uuhistorical uucost uudetermines uuthe uubalance uusheet uuvaluation
uuof uuland. uuThe uurealization uuconcept uurequires uuthat uua uutransaction uuneeds uuto
uuoccur uufor uuthe uuprofit uuto uube uurecognized.
1- uu4. a. u u Entity e. u u Historical uucost
b. Realization f. u u Historical uucost
c. Materiality g. u u Disclosure
d. Conservatism
,1- uu5. Entity uuconcept
, 1- uu6. Generally uuaccepted uuaccounting uuprinciples uudo uunot uuapply uuwhen uua uufirm
uudoes uunot uuappear uuto uube uua uugoing uuconcern. u u If uuthe uudecision uuis uumade
uuthat uuthis uuis uunot uua uugoing uuconcern, uuthen uuthe uuuse uuof uuGAAP uuwould
uunot uube uuappropriate.
1- uu7. With uuthe uutime uuperiod uuassumption, uuinaccuracies uuof uuaccounting uufor uuthe
uuentity, uushort uuof uuits uucomplete uulife uuspan, uuare uuaccepted. uuThe uuassumption
uuis uumade uuthat uuthe uuentity uucan uube uuaccounted uufor uureasonably uuaccurately
uufor uua uuparticular uuperiod uuof uutime. u u In uuother uuwords, uuthe uudecision uuis
uumade uuto uuaccept uusome uuinaccuracy uubecause uuof uuincomplete uuinformation
uuabout uuthe uufuture uuin uuexchange uufor uumore uutimely uureporting. u u The
uustatements uuare uuconsidered uuto uube uumeaningful uubecause uumaterial
uuinaccuracies uuare uunot uuacceptable.
1- 8. u u u u It uuis uutrue uuthat uuthe uuonly uuaccurate uuway uuto uuaccount uufor uuthe
uusuccess uuor uufailure uuof uuan uuentity uuis uuto uuaccumulate uuall uutransactions
uufrom uuthe uuopening uuof uubusiness uuuntil uuthe uubusiness uueventually
uuliquidates. u u But uuit uuis uunot uunecessary uuthat uuthe uustatements uube
uucompletely uuaccurate uuin uuorder uufor uuthem uuto uube uumeaningful.
1- 9. a. A uuyear uuthat uuends uuwhen uuoperations uuare uuat uua uulow uuebb uufor uuthe uuyear.
b. The uuaccounting uutime uuperiod uuis uuended uuon uuDecember uu31.
c. A uutwelve-month uuaccounting uuperiod uuthat uuends uuat uuthe uuend uuof uua
uumonth uuother uuthan uuDecember uu31.
1-10. Money.
1-11. u u u u When uumoney uudoes uunot uuhold uua uustable uuvalue, uuthe uufinancial
uustatements uucan uulose uumuch uuof uutheir uusignificance. u u To uuthe uuextent uuthat
uumoney uudoes uunot uuremain uustable, uuit uuloses uuusefulness uuas uuthe uustandard
uufor uumeasuring uufinancial uutransactions.
1-12. No. u u There uuis uua uuproblem uuwith uudetermining uuthe uuindex uuin uuorder uuto
uuadjust uuthe uustatements. u u The uuitems uuthat uuare uuincluded uuin uuthe uuindex
uumust uube uurepresentative. uuIn uuaddition, uuthe uuprices uuof uuitems uuchange
uubecause uuof uuvarious uufactors, uusuch uuas uuquality, uutechnology, uuand
uuinflation.
Yes. uuA uureasonable uuadjustment uuto uuthe uustatements uucan uube uumade uufor uuinflation.
1-13. False. u u An uuarbitrary uuwrite-off uuof uuinventory uucannot uube uujustified uuunder
uuthe uuconservatism uuconcept. u u The uuconservatism uuconcept uucan uuonly uube
uuapplied uuwhere uuthere uuare uualternative uumeasurements uuand uueach uuof
uuthese uualternative uumeasurements uuhas uureasonable uusupport.
uu uu uu uu uu
13th Edition
uu
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete
uu uu uu uu uu uu uu uu uu uu uu
, Chapter uu1
uu Introduction uuto uuFinancial
uuReporting
QUESTIONS
1- 1. a. The uuAICPA uuis uuan uuorganization uuof uuCPAs uuthat uuprior uuto uu1973
uuaccepted uuthe uuprimary uuresponsibility uufor uuthe uudevelopment uuof
uugenerally uuaccepted uuaccounting uuprinciples. uuTheir uurole uuwas
uusubstantially uureduced uuin uu1973 uuwhen uuthe uuFinancial uuAccounting
uuStandards uuBoard uuwas uuestablished. u u Their uurole uuwas uufurther
uureduced uuwith uuthe uuestablishment uuof uuthe uuPublic uuCompany
uuAccounting uuOversight uuBoard uuwas uuestablished uuin uu2002.
b. The uuFinancial uuAccounting uuStandards uuBoard uureplaced uuthe
uuAccounting uuPrinciples uuBoard uuas uuthe uuprimary uurule-making
uubody uufor uuaccounting uustandards. uuIt uuis uuan uuindependent
uuorganization uuand uuincludes uumembers uuother uuthan uupublic
uuaccountants.
c. The uuSEC uuhas uuthe uuauthority uuto uudetermine uugenerally uuaccepted
uuaccounting uuprinciples uuand uuto uuregulate uuthe uuaccounting
uuprofession. uuThe uuSEC uuhas uuelected uuto uuleave uumuch uuof uuthe
uudetermination uuof uugenerally uuaccepted uuaccounting uuprinciples uuto
uuthe uuprivate uusector. u u The uuFinancial uuAccounting uuStandards uuBoard
uuhas uuplayed uuthe uumajor uurole uuin uuestablishing uuaccounting uustandards
uusince uu1973. u u Regulation uuof uuthe uuaccounting uuprofession uuwas
uusubstantially uuturned uuover uuto uuthe uuPublic uuCompany uuAccounting
uuOversight uuBoard uuin uu2002.
1- uu2. Consistency uuis uuobtained uuthrough uuthe uuapplication uuof uuthe uusame
uuaccounting uuprinciple uufrom uuperiod uuto uuperiod. u u A uuchange uuin
uuprinciple uurequires uustatement uudisclosure.
1- uu3. The uuconcept uuof uuhistorical uucost uudetermines uuthe uubalance uusheet uuvaluation
uuof uuland. uuThe uurealization uuconcept uurequires uuthat uua uutransaction uuneeds uuto
uuoccur uufor uuthe uuprofit uuto uube uurecognized.
1- uu4. a. u u Entity e. u u Historical uucost
b. Realization f. u u Historical uucost
c. Materiality g. u u Disclosure
d. Conservatism
,1- uu5. Entity uuconcept
, 1- uu6. Generally uuaccepted uuaccounting uuprinciples uudo uunot uuapply uuwhen uua uufirm
uudoes uunot uuappear uuto uube uua uugoing uuconcern. u u If uuthe uudecision uuis uumade
uuthat uuthis uuis uunot uua uugoing uuconcern, uuthen uuthe uuuse uuof uuGAAP uuwould
uunot uube uuappropriate.
1- uu7. With uuthe uutime uuperiod uuassumption, uuinaccuracies uuof uuaccounting uufor uuthe
uuentity, uushort uuof uuits uucomplete uulife uuspan, uuare uuaccepted. uuThe uuassumption
uuis uumade uuthat uuthe uuentity uucan uube uuaccounted uufor uureasonably uuaccurately
uufor uua uuparticular uuperiod uuof uutime. u u In uuother uuwords, uuthe uudecision uuis
uumade uuto uuaccept uusome uuinaccuracy uubecause uuof uuincomplete uuinformation
uuabout uuthe uufuture uuin uuexchange uufor uumore uutimely uureporting. u u The
uustatements uuare uuconsidered uuto uube uumeaningful uubecause uumaterial
uuinaccuracies uuare uunot uuacceptable.
1- 8. u u u u It uuis uutrue uuthat uuthe uuonly uuaccurate uuway uuto uuaccount uufor uuthe
uusuccess uuor uufailure uuof uuan uuentity uuis uuto uuaccumulate uuall uutransactions
uufrom uuthe uuopening uuof uubusiness uuuntil uuthe uubusiness uueventually
uuliquidates. u u But uuit uuis uunot uunecessary uuthat uuthe uustatements uube
uucompletely uuaccurate uuin uuorder uufor uuthem uuto uube uumeaningful.
1- 9. a. A uuyear uuthat uuends uuwhen uuoperations uuare uuat uua uulow uuebb uufor uuthe uuyear.
b. The uuaccounting uutime uuperiod uuis uuended uuon uuDecember uu31.
c. A uutwelve-month uuaccounting uuperiod uuthat uuends uuat uuthe uuend uuof uua
uumonth uuother uuthan uuDecember uu31.
1-10. Money.
1-11. u u u u When uumoney uudoes uunot uuhold uua uustable uuvalue, uuthe uufinancial
uustatements uucan uulose uumuch uuof uutheir uusignificance. u u To uuthe uuextent uuthat
uumoney uudoes uunot uuremain uustable, uuit uuloses uuusefulness uuas uuthe uustandard
uufor uumeasuring uufinancial uutransactions.
1-12. No. u u There uuis uua uuproblem uuwith uudetermining uuthe uuindex uuin uuorder uuto
uuadjust uuthe uustatements. u u The uuitems uuthat uuare uuincluded uuin uuthe uuindex
uumust uube uurepresentative. uuIn uuaddition, uuthe uuprices uuof uuitems uuchange
uubecause uuof uuvarious uufactors, uusuch uuas uuquality, uutechnology, uuand
uuinflation.
Yes. uuA uureasonable uuadjustment uuto uuthe uustatements uucan uube uumade uufor uuinflation.
1-13. False. u u An uuarbitrary uuwrite-off uuof uuinventory uucannot uube uujustified uuunder
uuthe uuconservatism uuconcept. u u The uuconservatism uuconcept uucan uuonly uube
uuapplied uuwhere uuthere uuare uualternative uumeasurements uuand uueach uuof
uuthese uualternative uumeasurements uuhas uureasonable uusupport.
