SOLUTION MANUAL FOR
Financial Accounting 11th Edition
by Robert Libby, All Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
2. Financial accounting involves preparation of the four basic financial statements and
related disclosures for external decision makers. Managerial accounting involves
the preparation of detailed plans, budgets, forecasts, and performance reports for
internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. The
internal groups are comprised of the various managers of the entity. The external
groups include the owners, investors, creditors, governmental agencies, other
interested parties, and the public at large.
4. Investors purchase all or part of a business and hope to gain by receiving part of
what the company earns and/or selling their ownership interest in the company in
the future at a higher price than they paid. Creditors lend money to a company for
a specific length of time and hope to gain by charging interest on the loan.
, 5. In ia isociety, ieach iorganization ican ibe idefined ias ia iseparate iaccounting ientity.
iAn iaccounting ientity iis ithe iorganization ifor iwhich ifinancial idata iare ito ibe
icollected. iTypical iaccounting ientities iare ia ibusiness, ia ichurch, ia igovernmental
iunit, ia iuniversity iand iother inonprofit iorganizations isuch ias ia ihospital iand ia
iwelfare iorganization. iA ibusiness itypically iis idefined iand itreated ias ia iseparate
ientity ibecause ithe iowners, icreditors, iinvestors, iand iother iinterested iparties ineed
ito ievaluate iits iperformance iand iits ipotential iseparately ifrom iother ientities iand
ifrom iitsiowners.
6. Name iof iStatement Alternative iTitle
(a) Income iStatement (a) iStatement iof iEarnings; iStatement iof
Income; iStatement iof iOperations
(b) Balance iSheet (b) iStatement iof iFinancial iPosition
(c) Cash iFlow iStatement (c) i Statement iof iCash iFlows
7. The iheading iof ieach iof ithe ifour irequired ifinancial istatements ishould iinclude
itheifollowing:
(a) Name iof ithe ientity
(b) Name iof ithe istatement
(c) Date iof ithe istatement, ior ithe iperiod iof itime
(d) Unit iof imeasure
8. (a) The ipurpose iof ithe iincome istatement iis ito ipresent iinformation iabout ithe
irevenues, iexpenses, iand ithe inet iincome iof ian ientity ifor ia ispecified iperiod
iofitime.
(b) The ipurpose iof ithe ibalance isheet iis ito ireport ithe ifinancial iposition iof ian
ientityiat ia igiven idate, ithat iis, ito ireport iinformation iabout ithe iassets,
iliabilities iand istockholders’ iequity iof ithe ientity ias iof ia ispecific idate.
(c) The ipurpose iof ithe istatement iof icash iflows iis ito ipresent iinformation iabout
itheiflow iof icash iinto ithe ientity i(sources), ithe iflow iof icash iout iof ithe ientity
i(uses), iand ithe inet iincrease ior idecrease iin icash iduring ithe iperiod.
(d) The istatement iof istockholders’ iequity ireports ithe ichanges iin ieach iof ithe
icompany’s istockholders’ iequity iaccounts iduring ithe iaccounting iperiod,
iincluding iissue iand irepurchase iof istock iand ithe iway ithat inet iincome iand
idistribution iof idividends iaffected ithe iretained iearnings iof ithe icompany
iduringithat iperiod.
9. The iincome istatement iand ithe istatement iof icash iflows iare idated i―For ithe
iYear iEnded iDecember i31‖ ibecause ithey ireport ithe iinflows iand ioutflows iof
iresources iduring ia iperiod iof itime. iIn icontrast, ithe ibalance isheet iis idated i―At
iDecember i31‖ibecause iit irepresents ithe iresources, iobligations, iand
istockholders’ iequity iat ia ispecific idate.
Financial Accounting 11th Edition
by Robert Libby, All Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
2. Financial accounting involves preparation of the four basic financial statements and
related disclosures for external decision makers. Managerial accounting involves
the preparation of detailed plans, budgets, forecasts, and performance reports for
internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. The
internal groups are comprised of the various managers of the entity. The external
groups include the owners, investors, creditors, governmental agencies, other
interested parties, and the public at large.
4. Investors purchase all or part of a business and hope to gain by receiving part of
what the company earns and/or selling their ownership interest in the company in
the future at a higher price than they paid. Creditors lend money to a company for
a specific length of time and hope to gain by charging interest on the loan.
, 5. In ia isociety, ieach iorganization ican ibe idefined ias ia iseparate iaccounting ientity.
iAn iaccounting ientity iis ithe iorganization ifor iwhich ifinancial idata iare ito ibe
icollected. iTypical iaccounting ientities iare ia ibusiness, ia ichurch, ia igovernmental
iunit, ia iuniversity iand iother inonprofit iorganizations isuch ias ia ihospital iand ia
iwelfare iorganization. iA ibusiness itypically iis idefined iand itreated ias ia iseparate
ientity ibecause ithe iowners, icreditors, iinvestors, iand iother iinterested iparties ineed
ito ievaluate iits iperformance iand iits ipotential iseparately ifrom iother ientities iand
ifrom iitsiowners.
6. Name iof iStatement Alternative iTitle
(a) Income iStatement (a) iStatement iof iEarnings; iStatement iof
Income; iStatement iof iOperations
(b) Balance iSheet (b) iStatement iof iFinancial iPosition
(c) Cash iFlow iStatement (c) i Statement iof iCash iFlows
7. The iheading iof ieach iof ithe ifour irequired ifinancial istatements ishould iinclude
itheifollowing:
(a) Name iof ithe ientity
(b) Name iof ithe istatement
(c) Date iof ithe istatement, ior ithe iperiod iof itime
(d) Unit iof imeasure
8. (a) The ipurpose iof ithe iincome istatement iis ito ipresent iinformation iabout ithe
irevenues, iexpenses, iand ithe inet iincome iof ian ientity ifor ia ispecified iperiod
iofitime.
(b) The ipurpose iof ithe ibalance isheet iis ito ireport ithe ifinancial iposition iof ian
ientityiat ia igiven idate, ithat iis, ito ireport iinformation iabout ithe iassets,
iliabilities iand istockholders’ iequity iof ithe ientity ias iof ia ispecific idate.
(c) The ipurpose iof ithe istatement iof icash iflows iis ito ipresent iinformation iabout
itheiflow iof icash iinto ithe ientity i(sources), ithe iflow iof icash iout iof ithe ientity
i(uses), iand ithe inet iincrease ior idecrease iin icash iduring ithe iperiod.
(d) The istatement iof istockholders’ iequity ireports ithe ichanges iin ieach iof ithe
icompany’s istockholders’ iequity iaccounts iduring ithe iaccounting iperiod,
iincluding iissue iand irepurchase iof istock iand ithe iway ithat inet iincome iand
idistribution iof idividends iaffected ithe iretained iearnings iof ithe icompany
iduringithat iperiod.
9. The iincome istatement iand ithe istatement iof icash iflows iare idated i―For ithe
iYear iEnded iDecember i31‖ ibecause ithey ireport ithe iinflows iand ioutflows iof
iresources iduring ia iperiod iof itime. iIn icontrast, ithe ibalance isheet iis idated i―At
iDecember i31‖ibecause iit irepresents ithe iresources, iobligations, iand
istockholders’ iequity iat ia ispecific idate.
