SolutionpoManualpoForpoFinancialpoStatementpoAnalysis,
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapterf 1
Introductf
ionf tof Financialf Reporting
QUESTIONS
1-f1. a.
Thef AICPAf isf anf organizationf off CPAsf thatf priorf tof 1973f acfceptedf th
ef primaryf responsibilityf forf thef developmentf off generallfyfacceptedfa
ccountingfprinciples.f Theirf rolef wasf substantiallyf refducedf inf 1973f whe
nf thef Financialf Accountingf StandardsfffBoardfwasf established.
Theirfrolefwasffurtherfreducedfwithfthefestafblishmentf
off thef Publicf Companyf Accountingf Oversightf Boardf wfasf established
f inf 2002.
b. Thef Financialf Accountingf Standardsf Boardf replacedf thef Accfountin
gf Principlesf Boardf asf thef primaryf rule-
makingf bodyf forf accountingf standards.f Itf isf anf independentforganizatio
nf andf includesf membersf otherf thanf publicf acco
untants.
c. Thef SECf hasf thef authorityf tof determinef generallyf acceptedf afccountin
gf principlesf andf tof regulatef thef accountingf profession.fThef SECf hasf
electedf tof leavef muchf off thef determinationf offgenerallyf acceptedf acco
untingf principlesf tof thef privatef sector.
Thef Financialf Accountingf Standardsf Boardf hasf playedfffthefmajorf r
olef inf establishingf accountingf standardsf sincef 1973.
Rf
egulationf off thef accountingf professionf wasf substantiallyf turnedfoverf t
of thef Publicf Companyf Accountingf Oversightf Boardf inf 2f002.
1-f 2.
Consistencyfisfobtainedfthroughfthefapplicationfoffthefsamefafccountingf p
rinciplef fromf periodf tof period.f Af changef inf principlfef requiresf state
mentf disclosure.
1-f 3.
Thef conceptf off historicalf costf determinesf thef balancef sheetf valuatiofnf of
fland.f Thef realizationf conceptf requiresf thatf af transactionf needsftof occurf
forf thef profitf tof bef recognized.
1-f 4. a. Entity e. Historicalf cost
b. Realization f. Historicalf cost
c. Materiality g. Disclosure
, d. Conservatismf
1-f 5. Entityf concept
, 1-f 6.
Generallyf acceptedf accountingf principlesf dof notf applyf whenf af firmfdoesf n
otf appearf tof bef af goingf concern.
Iffffthefffdecisionfffisfffmadfef th
atf thisf isf notf af goingf concern,f thenf thef usef off GAAPf would
notf bef appropriate.
1-f 7.
Withf thef timef periodf assumption,f inaccuraciesf off accountingf forf thefentity,f
shortf off itsf completef lifef span,f aref accepted.f Thef assumptiofnf isf madef t
hatf thef entityf canf bef accountedf forf reasonablyf accuratfelyf forf af partic
ularf periodf off time. Inf otherf words,f thef decisionf is
madef tof acceptf somef inaccuracyf becausef off incompletef informatiofnfa
boutftheffuturef inf exchangef forf moref timelyf reporting.f Thef statfementsf aref c
onsideredf tof bef meaningfulf becausef materialf inaccuracifesf aref notf accept
able.
1-f8.
Itf isf truef thatf thef onlyf accuratef wayf tof accountf forf thef succesfsf orf
failuref off anf entityf isf tof accumulatef allf transactionsf fromf thefopeningf off bus
inessf untilf thef businessf eventuallyf liquidates. Butf i
tf isf notf necessaryf thatf thef statementsf bef completelyf accuratef inf ofrderf for
f themf tof bef meaningful.
1- 9. a. Af yearf thatf endsf whenf operationsf aref atf af lowf ebbf forf thef year.
b. Thef accountingf timef periodf isf endedf onf Decemberf 31.
c. Af twelve-
monthf accountingf periodf thatf endsf atf thef endf off af monthf othferf th
anf Decemberf 31.
1-10. Money.
1-
11.
Whenfmoneyfdoesfnotfholdfafstablefvalue,fthef financialfstatementsf
canf losef muchf off theirf significance. Tof thef extentf that
moneyf doesf notf remainf stable,f itf losesf usefulnessf asf thef standafrdf for
f measuringf financialf transactions.
1-12.
No.
Theref isf af problemf withf determiningf thef indexf inf orderf tof afdjustf th
ef statements.
Thef itemsf thatf aref includedf inf thef indexf mufstf bef representative.f I
nf addition,f thef pricesf off itemsf changef becaufsef off variousf factors,f suchf
asf quality,f technology,f andf inflation.
Yes.f Af reasonablef adjustmentf tof thef statementsf canf bef madef forf inflation.
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapterf 1
Introductf
ionf tof Financialf Reporting
QUESTIONS
1-f1. a.
Thef AICPAf isf anf organizationf off CPAsf thatf priorf tof 1973f acfceptedf th
ef primaryf responsibilityf forf thef developmentf off generallfyfacceptedfa
ccountingfprinciples.f Theirf rolef wasf substantiallyf refducedf inf 1973f whe
nf thef Financialf Accountingf StandardsfffBoardfwasf established.
Theirfrolefwasffurtherfreducedfwithfthefestafblishmentf
off thef Publicf Companyf Accountingf Oversightf Boardf wfasf established
f inf 2002.
b. Thef Financialf Accountingf Standardsf Boardf replacedf thef Accfountin
gf Principlesf Boardf asf thef primaryf rule-
makingf bodyf forf accountingf standards.f Itf isf anf independentforganizatio
nf andf includesf membersf otherf thanf publicf acco
untants.
c. Thef SECf hasf thef authorityf tof determinef generallyf acceptedf afccountin
gf principlesf andf tof regulatef thef accountingf profession.fThef SECf hasf
electedf tof leavef muchf off thef determinationf offgenerallyf acceptedf acco
untingf principlesf tof thef privatef sector.
Thef Financialf Accountingf Standardsf Boardf hasf playedfffthefmajorf r
olef inf establishingf accountingf standardsf sincef 1973.
Rf
egulationf off thef accountingf professionf wasf substantiallyf turnedfoverf t
of thef Publicf Companyf Accountingf Oversightf Boardf inf 2f002.
1-f 2.
Consistencyfisfobtainedfthroughfthefapplicationfoffthefsamefafccountingf p
rinciplef fromf periodf tof period.f Af changef inf principlfef requiresf state
mentf disclosure.
1-f 3.
Thef conceptf off historicalf costf determinesf thef balancef sheetf valuatiofnf of
fland.f Thef realizationf conceptf requiresf thatf af transactionf needsftof occurf
forf thef profitf tof bef recognized.
1-f 4. a. Entity e. Historicalf cost
b. Realization f. Historicalf cost
c. Materiality g. Disclosure
, d. Conservatismf
1-f 5. Entityf concept
, 1-f 6.
Generallyf acceptedf accountingf principlesf dof notf applyf whenf af firmfdoesf n
otf appearf tof bef af goingf concern.
Iffffthefffdecisionfffisfffmadfef th
atf thisf isf notf af goingf concern,f thenf thef usef off GAAPf would
notf bef appropriate.
1-f 7.
Withf thef timef periodf assumption,f inaccuraciesf off accountingf forf thefentity,f
shortf off itsf completef lifef span,f aref accepted.f Thef assumptiofnf isf madef t
hatf thef entityf canf bef accountedf forf reasonablyf accuratfelyf forf af partic
ularf periodf off time. Inf otherf words,f thef decisionf is
madef tof acceptf somef inaccuracyf becausef off incompletef informatiofnfa
boutftheffuturef inf exchangef forf moref timelyf reporting.f Thef statfementsf aref c
onsideredf tof bef meaningfulf becausef materialf inaccuracifesf aref notf accept
able.
1-f8.
Itf isf truef thatf thef onlyf accuratef wayf tof accountf forf thef succesfsf orf
failuref off anf entityf isf tof accumulatef allf transactionsf fromf thefopeningf off bus
inessf untilf thef businessf eventuallyf liquidates. Butf i
tf isf notf necessaryf thatf thef statementsf bef completelyf accuratef inf ofrderf for
f themf tof bef meaningful.
1- 9. a. Af yearf thatf endsf whenf operationsf aref atf af lowf ebbf forf thef year.
b. Thef accountingf timef periodf isf endedf onf Decemberf 31.
c. Af twelve-
monthf accountingf periodf thatf endsf atf thef endf off af monthf othferf th
anf Decemberf 31.
1-10. Money.
1-
11.
Whenfmoneyfdoesfnotfholdfafstablefvalue,fthef financialfstatementsf
canf losef muchf off theirf significance. Tof thef extentf that
moneyf doesf notf remainf stable,f itf losesf usefulnessf asf thef standafrdf for
f measuringf financialf transactions.
1-12.
No.
Theref isf af problemf withf determiningf thef indexf inf orderf tof afdjustf th
ef statements.
Thef itemsf thatf aref includedf inf thef indexf mufstf bef representative.f I
nf addition,f thef pricesf off itemsf changef becaufsef off variousf factors,f suchf
asf quality,f technology,f andf inflation.
Yes.f Af reasonablef adjustmentf tof thef statementsf canf bef madef forf inflation.
