,TABLE OF CONTENTS oc oc oc
CHAPTER 1: Financial Statements and Business Decisions
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Focus Company: Le-Nature’s Inc.
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CHAPTER 2: Investing and Financing Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 3: Operating Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
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Focus Company: Chipotle Mexican Grill
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CHAPTER 5: Communicating and Analyzing Accounting Information
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Focus Company: Apple Inc.
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CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
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Focus Company: Skechers U.S.A.
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CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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Focus Company: Harley-Davidson, Inc.
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CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural R
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esources
Focus Company: FedEx Corporation
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CHAPTER 9: Reporting and Interpreting Liabilities
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Focus Company: Starbucks
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CHAPTER 10: Reporting and Interpreting Bond Securities
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Focus Company: Amazon
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CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
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Focus Company: Microsoft
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CHAPTER 12: Statement of Cash Flows
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Focus Company: National Beverage Corporation
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CHAPTER 13: Analyzing Financial Statements
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Focus Company: The Home Depot
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,Chapter 1 oc
Financial Statements and Business Decisions oc oc oc oc
ANSWERS TO QUESTIONS oc oc
1. Accounting is a system that collects and processes (analyzes, measures, and rec
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ords) financial information about an organization and reports that information tode
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cision makers. oc
2. Financial accounting involves preparation of the four basic financial statements and
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related disclosures for external decision makers. Managerial accounting involves th
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e preparation of detailed plans, budgets, forecasts, and performance reports for int
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ernal decision makers.
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3. Financial reports are used by both internal and external groups and individuals. The
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internal groups are comprised of the various managers of the entity. The external gr
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oups include the owners, investors, creditors, governmental agencies, other interes
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ted parties, and the public at large.
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4. Investors purchase all or part of a business and hope to gain by receiving part of
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what the company earns and/or selling their ownership interest in the company in
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the future at a higher price than they paid. Creditors lend money to a company for
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a specific length of time and hope to gain by charging interest on the loan.
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, 5. In a society, each organization can be defined as a separate accounting entity. An a
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ccounting entity is the organization for which financial data are to be collected. Typi
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cal accounting entities are a business, a church, a governmental unit, a university a
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nd other nonprofit organizations such as a hospital and a welfare organization. A b
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usiness typically is defined and treated as a separate entity because the owners, cr
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editors, investors, and other interested parties need to evaluate its performance an
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d its potential separately from other entities and from itsowners.
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6. Name of Statement oc oc Alternative Title oc
(a) Income Statement oc (a) Statement of Earnings; Statement of
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Income; Statement of Operations oc oc oc
(b) Balance Sheet oc (b) Statement of Financial Position
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(c) Cash Flow Statement oc oc (c) Statement of Cash Flows
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7. The heading of each of the four required financial statements should include the
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following:
(a) Name of the entity oc oc oc
(b) Name of the statement oc oc oc
(c) Date of the statement, or the period of time
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(d) Unit of measure oc oc
8. (a)
The purpose of the income statement is to present information about the re
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venues, expenses, and the net income of an entity for a specified period ofti
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me.
(b) The purpose of the balance sheet is to report the financial position of an entity
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at a given date, that is, to report information about the assets, liabilities and st
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ockholders’ equity of the entity as of a specific date. oc oc oc oc oc oc oc oc oc
(c) The purpose of the statement of cash flows is to present information about the
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flow of cash into the entity (sources), the flow of cash out of the entity (uses),
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and the net increase or decrease in cash during the period.
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(d) The statement of stockholders’ equity reports the changes in each of the com
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pany’s stockholders’ equity accounts during the accounting period, including i
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ssue and repurchase of stock and the way that net income and distribution of
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dividends affected the retained earnings of the company duringthat period.
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9. The income statement and the statement of cash flows are dated ―For the Year
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Ended December 31‖ because they report the inflows and outflows of resources
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during a period of time. In contrast, the balance sheet is dated ―At December 31‖
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because it represents the resources, obligations, and stockholders’ equity at a s
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pecific date. oc
CHAPTER 1: Financial Statements and Business Decisions
oc oc oc oc oc oc
Focus Company: Le-Nature’s Inc.
oc oc oc
CHAPTER 2: Investing and Financing Decisions and the Accounting System
oc oc oc oc oc oc oc oc oc
Focus Company: Chipotle Mexican Grill
oc oc oc oc
CHAPTER 3: Operating Decisions and the Accounting System
oc oc oc oc oc oc oc
Focus Company: Chipotle Mexican Grill
oc oc oc oc
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
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Focus Company: Chipotle Mexican Grill
oc oc oc oc
CHAPTER 5: Communicating and Analyzing Accounting Information
oc oc oc oc oc oc
Focus Company: Apple Inc.
oc oc oc
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
oc oc oc oc oc oc oc oc oc
Focus Company: Skechers U.S.A.
oc oc oc
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
oc oc oc oc oc oc oc oc oc oc
Focus Company: Harley-Davidson, Inc.
oc oc oc
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural R
oc oc oc oc oc oc oc oc oc oc oc oc
esources
Focus Company: FedEx Corporation
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CHAPTER 9: Reporting and Interpreting Liabilities
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Focus Company: Starbucks
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CHAPTER 10: Reporting and Interpreting Bond Securities
oc oc oc oc oc oc
Focus Company: Amazon
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CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
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Focus Company: Microsoft
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CHAPTER 12: Statement of Cash Flows
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Focus Company: National Beverage Corporation
oc oc oc oc
CHAPTER 13: Analyzing Financial Statements
oc oc oc oc
Focus Company: The Home Depot
oc oc oc oc
,Chapter 1 oc
Financial Statements and Business Decisions oc oc oc oc
ANSWERS TO QUESTIONS oc oc
1. Accounting is a system that collects and processes (analyzes, measures, and rec
oc oc oc oc oc oc oc oc oc oc oc
ords) financial information about an organization and reports that information tode
oc oc oc oc oc oc oc oc oc oc co
cision makers. oc
2. Financial accounting involves preparation of the four basic financial statements and
oc oc oc oc oc oc oc oc oc oc co
related disclosures for external decision makers. Managerial accounting involves th
oc oc oc oc oc oc oc oc oc
e preparation of detailed plans, budgets, forecasts, and performance reports for int
oc oc oc oc oc oc oc oc oc oc oc
ernal decision makers.
oc oc
3. Financial reports are used by both internal and external groups and individuals. The
oc oc oc oc oc oc oc oc oc oc oc oc co
internal groups are comprised of the various managers of the entity. The external gr
oc oc oc oc oc oc oc oc oc oc oc oc oc
oups include the owners, investors, creditors, governmental agencies, other interes
oc oc oc oc oc oc oc oc oc
ted parties, and the public at large.
oc oc oc oc oc oc
4. Investors purchase all or part of a business and hope to gain by receiving part of
oc oc oc oc oc oc oc oc oc oc oc oc oc oc oc oc
what the company earns and/or selling their ownership interest in the company in
oc oc oc oc oc oc oc oc oc oc oc oc oc
the future at a higher price than they paid. Creditors lend money to a company for
oc oc oc oc oc oc oc oc oc oc oc oc oc oc oc co
a specific length of time and hope to gain by charging interest on the loan.
oc oc oc oc oc oc oc oc oc oc oc oc oc oc
, 5. In a society, each organization can be defined as a separate accounting entity. An a
oc oc oc oc oc oc oc oc oc oc oc oc oc oc
ccounting entity is the organization for which financial data are to be collected. Typi
oc oc oc oc oc oc oc oc oc oc oc oc oc
cal accounting entities are a business, a church, a governmental unit, a university a
oc oc oc oc oc oc oc oc oc oc oc oc oc
nd other nonprofit organizations such as a hospital and a welfare organization. A b
oc oc oc oc oc oc oc oc oc oc oc oc oc
usiness typically is defined and treated as a separate entity because the owners, cr
oc oc oc oc oc oc oc oc oc oc oc oc oc
editors, investors, and other interested parties need to evaluate its performance an
oc oc oc oc oc oc oc oc oc oc oc
d its potential separately from other entities and from itsowners.
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6. Name of Statement oc oc Alternative Title oc
(a) Income Statement oc (a) Statement of Earnings; Statement of
oc oc oc oc oc
Income; Statement of Operations oc oc oc
(b) Balance Sheet oc (b) Statement of Financial Position
oc oc oc oc
(c) Cash Flow Statement oc oc (c) Statement of Cash Flows
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7. The heading of each of the four required financial statements should include the
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following:
(a) Name of the entity oc oc oc
(b) Name of the statement oc oc oc
(c) Date of the statement, or the period of time
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(d) Unit of measure oc oc
8. (a)
The purpose of the income statement is to present information about the re
oc oc oc oc oc oc oc oc oc oc oc oc
venues, expenses, and the net income of an entity for a specified period ofti
oc oc oc oc oc oc oc oc oc oc oc oc oc co
me.
(b) The purpose of the balance sheet is to report the financial position of an entity
oc oc oc oc oc oc oc oc oc oc oc oc oc oc co
at a given date, that is, to report information about the assets, liabilities and st
oc oc oc oc oc oc oc oc oc oc oc oc oc oc
ockholders’ equity of the entity as of a specific date. oc oc oc oc oc oc oc oc oc
(c) The purpose of the statement of cash flows is to present information about the
oc oc oc oc oc oc oc oc oc oc oc oc oc co
flow of cash into the entity (sources), the flow of cash out of the entity (uses),
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and the net increase or decrease in cash during the period.
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(d) The statement of stockholders’ equity reports the changes in each of the com
oc oc oc oc oc oc oc oc oc oc oc oc
pany’s stockholders’ equity accounts during the accounting period, including i
oc oc oc oc oc oc oc oc oc
ssue and repurchase of stock and the way that net income and distribution of
oc oc oc oc oc oc oc oc oc oc oc oc oc o
dividends affected the retained earnings of the company duringthat period.
c oc oc oc oc oc oc oc oc co oc
9. The income statement and the statement of cash flows are dated ―For the Year
oc oc oc oc oc oc oc oc oc oc oc oc oc oc
Ended December 31‖ because they report the inflows and outflows of resources
oc oc oc oc oc oc oc oc oc oc oc oc
during a period of time. In contrast, the balance sheet is dated ―At December 31‖
oc oc oc oc oc oc oc oc oc oc oc oc oc oc co
because it represents the resources, obligations, and stockholders’ equity at a s
oc oc oc oc oc oc oc oc oc oc oc
pecific date. oc
