Complete Solution Manual for Intermediate Accounting, 11th Edition
SOLUTION MANUAL
EDITION BY DAVID
SPICELAND LATEST
Solutions Manual, Chapter 2 2–1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Chapter 1 Environment And Theoretical Structure Of
Financial Accounting
Answers to Questions (continued)
Question 1–1
Financial Accounting Is Concerned With Providing Relevant Financial
Information About Various Kinds Of Organizations To Different Types Of External
Users. The Primary Focus Of Financial Accounting Is On The Financial Information
Provided By Profit- Oriented Companies To Their Present And Potential Investors
And Creditors.
Question 1–2
Resources Are Efficiently Allocated If They Are Given To Enterprises That Will
Use Them To Provide Goods And Services Desired By Society And Not To
Enterprises That Will Waste Them. The Capital Markets Are The Mechanism That
Fosters This Efficient Allocation Of Resources.
Question 1–3
Two Extremely Important Variables That Must Be Considered In Any
Investment Decision Are The Expected Rate Of Return And The Uncertainty Or Risk
Of That Expected Return.
Question 1–4
In The Long Run, A Company Will Be Able To Provide Investors And Creditors
With A Rate Of Return Only If It Can Generate A Profit. That Is, It Must Be Able To
Use The Resources Provided To It To Generate Cash Receipts From Selling A
Product Or Service That Exceed The Cash Disbursements Necessary To Provide That
Product Or Service.
Question 1–5
The Primary Objective Of Financial Accounting Is To Provide Investors And
Creditors With Information That Will Help Them Make Investment And Credit
Decisions.
Question 1–6
Net Operating Cash Flows Are The Difference Between Cash Receipts And Cash
Disbursements During A Period Of Time From Transactions Related To Providing
Goods And Services To Customers. Net Operating Cash Flows May Not Be A Good
Indicator Of Future Cash Flows Because, By Ignoring Uncompleted Transactions,
They May Not Match The Accomplishments And Sacrifices Of The Period.
2–2 Intermediate Accounting, 11/e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Complete Solution Manual for Intermediate Accounting, 11th Edition
Question 1–7
GAAP (Generally Accepted Accounting Principles) Are A Dynamic Set Of Both
Broad And Specific Guidelines That A Company Should Follow In Measuring And
Reporting The Information In Their Financial Statements And Related Notes. It Is
Important That All Companies Follow GAAP So That Investors Can Compare
Financial Information Across Companies To Make Their Resource Allocation
Decisions.
Question 1–8
In 1934, Congress Created The SEC And Gave It The Job Of Setting Accounting
And Reporting Standards For Companies Whose Securities Are Publicly Traded. The
SEC Has Retained The Power, But Has Relied On Private Sector Bodies To Create
The Standards. The Current Private Sector Body Responsible For Setting Accounting
Standards Is The FASB.
Question 1–9
Auditors Are Independent, Professional Accountants Who Examine Financial
Statements To Express An Opinion. The Opinion Reflects The Auditors‘ Assessment
Of The Statements' Fairness, Which Is Determined By The Extent To Which They
Are Prepared In Compliance With GAAP. The Auditor Adds Credibility To The
Financial Statements, Which Increases The Confidence Of Capital Market Participants
Relying On That Information.
Solutions Manual, Chapter 2 2–3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, AnswersAnswers To Questions
to Questions (Continued)
(continued)
Question 1–10
Key Provisions Included In The Text Are:
Creation Of The Public Company Accounting Oversight Board
Regulate Types Of Non-Audit Audit Services
Require Lead Audit Partner Rotation Every 5 Year
Corporate Executive Accountability
Addresses Conflicts Of Interest For Security Analysts
Internal Control Reporting And Auditor Opinion About Controls
Question 1–11
New Accounting Standards, Or Changes In Standards, Can Have Significant
Differential Effects On Companies, Investors And Creditors, And Other Interest
Groups By Causing Redistribution Of Wealth. There Also Is The Possibility That
Standards Could Harm The Economy As A Whole By Causing Companies To Change
Their Behavior.
Question 1–12
The FASB Undertakes A Series Of Elaborate Information Gathering Steps
Before Issuing An Accounting Standard To Determine Consensus As To The
Preferred Method Of Accounting, As Well As To Anticipate Adverse Economic
Consequences.
Question 1–13
The Purpose Of The Conceptual Framework Is To Guide The Board In
Developing Accounting Standards By Providing An Underlying Foundation And
Basic Reasoning On Which To Consider Merits Of Alternatives. The Framework
Does Not Prescribe GAAP.
2–4 Intermediate Accounting, 11/e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
SOLUTION MANUAL
EDITION BY DAVID
SPICELAND LATEST
Solutions Manual, Chapter 2 2–1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Chapter 1 Environment And Theoretical Structure Of
Financial Accounting
Answers to Questions (continued)
Question 1–1
Financial Accounting Is Concerned With Providing Relevant Financial
Information About Various Kinds Of Organizations To Different Types Of External
Users. The Primary Focus Of Financial Accounting Is On The Financial Information
Provided By Profit- Oriented Companies To Their Present And Potential Investors
And Creditors.
Question 1–2
Resources Are Efficiently Allocated If They Are Given To Enterprises That Will
Use Them To Provide Goods And Services Desired By Society And Not To
Enterprises That Will Waste Them. The Capital Markets Are The Mechanism That
Fosters This Efficient Allocation Of Resources.
Question 1–3
Two Extremely Important Variables That Must Be Considered In Any
Investment Decision Are The Expected Rate Of Return And The Uncertainty Or Risk
Of That Expected Return.
Question 1–4
In The Long Run, A Company Will Be Able To Provide Investors And Creditors
With A Rate Of Return Only If It Can Generate A Profit. That Is, It Must Be Able To
Use The Resources Provided To It To Generate Cash Receipts From Selling A
Product Or Service That Exceed The Cash Disbursements Necessary To Provide That
Product Or Service.
Question 1–5
The Primary Objective Of Financial Accounting Is To Provide Investors And
Creditors With Information That Will Help Them Make Investment And Credit
Decisions.
Question 1–6
Net Operating Cash Flows Are The Difference Between Cash Receipts And Cash
Disbursements During A Period Of Time From Transactions Related To Providing
Goods And Services To Customers. Net Operating Cash Flows May Not Be A Good
Indicator Of Future Cash Flows Because, By Ignoring Uncompleted Transactions,
They May Not Match The Accomplishments And Sacrifices Of The Period.
2–2 Intermediate Accounting, 11/e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Complete Solution Manual for Intermediate Accounting, 11th Edition
Question 1–7
GAAP (Generally Accepted Accounting Principles) Are A Dynamic Set Of Both
Broad And Specific Guidelines That A Company Should Follow In Measuring And
Reporting The Information In Their Financial Statements And Related Notes. It Is
Important That All Companies Follow GAAP So That Investors Can Compare
Financial Information Across Companies To Make Their Resource Allocation
Decisions.
Question 1–8
In 1934, Congress Created The SEC And Gave It The Job Of Setting Accounting
And Reporting Standards For Companies Whose Securities Are Publicly Traded. The
SEC Has Retained The Power, But Has Relied On Private Sector Bodies To Create
The Standards. The Current Private Sector Body Responsible For Setting Accounting
Standards Is The FASB.
Question 1–9
Auditors Are Independent, Professional Accountants Who Examine Financial
Statements To Express An Opinion. The Opinion Reflects The Auditors‘ Assessment
Of The Statements' Fairness, Which Is Determined By The Extent To Which They
Are Prepared In Compliance With GAAP. The Auditor Adds Credibility To The
Financial Statements, Which Increases The Confidence Of Capital Market Participants
Relying On That Information.
Solutions Manual, Chapter 2 2–3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, AnswersAnswers To Questions
to Questions (Continued)
(continued)
Question 1–10
Key Provisions Included In The Text Are:
Creation Of The Public Company Accounting Oversight Board
Regulate Types Of Non-Audit Audit Services
Require Lead Audit Partner Rotation Every 5 Year
Corporate Executive Accountability
Addresses Conflicts Of Interest For Security Analysts
Internal Control Reporting And Auditor Opinion About Controls
Question 1–11
New Accounting Standards, Or Changes In Standards, Can Have Significant
Differential Effects On Companies, Investors And Creditors, And Other Interest
Groups By Causing Redistribution Of Wealth. There Also Is The Possibility That
Standards Could Harm The Economy As A Whole By Causing Companies To Change
Their Behavior.
Question 1–12
The FASB Undertakes A Series Of Elaborate Information Gathering Steps
Before Issuing An Accounting Standard To Determine Consensus As To The
Preferred Method Of Accounting, As Well As To Anticipate Adverse Economic
Consequences.
Question 1–13
The Purpose Of The Conceptual Framework Is To Guide The Board In
Developing Accounting Standards By Providing An Underlying Foundation And
Basic Reasoning On Which To Consider Merits Of Alternatives. The Framework
Does Not Prescribe GAAP.
2–4 Intermediate Accounting, 11/e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
