Solution Manual For Financial Statement Analysis,
13th Edition By Charles
Verified Chapters 1-13 Complete
,
, Chapterk1k Introductionkt
okFinancialkReporting
QUESTIONS
1- 1. a.
ThekAICPAkiskankorganizationkofkCPAskthatkpriorktok1973kacceptedkthekpri
marykresponsibilitykforkthekdevelopmentkofkgenerallykacceptedkaccountingkpr
inciples.kTheirkrolekwasksubstantiallykreducedkink1973kwhenkthekFinancialkAcc
ountingkStandardskBoardkwaskestablished.k Theirkrolekwaskfurtherkreducedkwi
thkthekestablishmentkofkthekPublickCompanykAccountingkOversightkBoardkwas
kestablishedkink2002.
b. ThekFinancialkAccountingkStandardskBoardkreplacedkthekAccountingkPrinc
ipleskBoardkaskthekprimarykrule-
makingkbodykforkaccountingkstandards.kItkiskankindependentkorganizatio
nkandkincludeskmemberskotherkthankpublickaccountants.
c. ThekSECkhaskthekauthorityktokdeterminekgenerallykacceptedkaccountingkprin
cipleskandktokregulatekthekaccountingkprofession.kThekSECkhaskelectedktokle
avekmuchkofkthekdeterminationkofkgenerallykacceptedkaccountingkprinciples
ktokthekprivateksector.k ThekFinancialkAccountingkStandardskBoardkhaskplay
edkthekmajorkrolekinkestablishingkaccountingkstandardsksincek1973.k Regulat
ionkofkthekaccountingkprofessionkwasksubstantiallykturnedkoverktokthekPublic
kCompanykAccountingkOversightkBoardkink2002.
1-k2.
Consistencykiskobtainedkthroughkthekapplicationkofktheksamekaccountingkprinc
iplekfromkperiodktokperiod.k Akchangekinkprinciplekrequireskstatementkdisclos
ure.
1-k3.
Thekconceptkofkhistoricalkcostkdetermineskthekbalanceksheetkvaluationkofkland.kThek
realizationkconceptkrequireskthatkaktransactionkneedsktokoccurkforkthekprofitktokbek
recognized.
1-k4. a.k Entity e.k Historicalkcost
b. Realization f.k Historicalkcost
c. Materiality g.k Disclosure
d. Conservatism
1-k5. Entitykconcept
, 1-k6.
Generallykacceptedkaccountingkprincipleskdoknotkapplykwhenkakfirmkdoesknotka
ppearktokbekakgoingkconcern.k Ifkthekdecisionkiskmadekthatkthiskisknotkakgoingkc
oncern,kthenkthekusekofkGAAPkwouldknotkbekappropriate.
1-k7.
Withkthektimekperiodkassumption,kinaccuracieskofkaccountingkforkthekentity,kshortko
fkitskcompleteklifekspan,karekaccepted.kThekassumptionkiskmadekthatkthekentitykcan
kbekaccountedkforkreasonablykaccuratelykforkakparticularkperiodkofktime.k Inkothe
rkwords,kthekdecisionkiskmadektokacceptksomekinaccuracykbecausekofkincompletekin
formationkaboutkthekfuturekinkexchangekforkmorektimelykreporting.k Thekstatements
karekconsideredktokbekmeaningfulkbecausekmaterialkinaccuracieskareknotkacceptab
le.
1- 8.k k Itkisktruekthatkthekonlykaccuratekwayktokaccountkforktheksuccesskorkfailurekofkanke
ntitykisktokaccumulatekallktransactionskfromkthekopeningkofkbusinesskuntilkthekbusin
esskeventuallykliquidates.k Butkitkisknotknecessarykthatkthekstatementskbekcompletel
ykaccuratekinkorderkforkthemktokbekmeaningful.
1- 9. a. Akyearkthatkendskwhenkoperationskarekatkaklowkebbkforkthekyear.
b. ThekaccountingktimekperiodkiskendedkonkDecemberk31.
c. Aktwelve-
monthkaccountingkperiodkthatkendskatkthekendkofkakmonthkotherkthankDecem
berk31.
1-10. Money.
1-
11.k k Whenkmoneykdoesknotkholdkakstablekvalue,kthekfinancialkstatementskcankl
osekmuchkofktheirksignificance.k Tokthekextentkthatkmoneykdoesknotkremainkstable,
kitkloseskusefulnesskaskthekstandardkforkmeasuringkfinancialktransactions.
1-12.
No.k Therekiskakproblemkwithkdeterminingkthekindexkinkorderktokadjustkthekstatem
ents.k Thekitemskthatkarekincludedkinkthekindexkmustkbekrepresentative.kInkaddition
,kthekpriceskofkitemskchangekbecausekofkvariouskfactors,ksuchkaskquality,ktechnolo
gy,kandkinflation.
Yes.kAkreasonablekadjustmentktokthekstatementskcankbekmadekforkinflation.
1-13. False.k Ankarbitrarykwrite-
offkofkinventorykcannotkbekjustifiedkunderkthekconservatismkconcept.k Thekconserva
tismkconceptkcankonlykbekappliedkwherektherekarekalternativekmeasurementskand
keachkofkthesekalternativekmeasurementskhaskreasonableksupport.
1-14.
Yes,kinventorykthatkhaskakmarketkvaluekbelowkthekhistoricalkcostkshouldkbekwritt
enkdownkinkorderktokrecognizekakloss.k Thiskiskdonekbasedkuponkthekconceptkofk
13th Edition By Charles
Verified Chapters 1-13 Complete
,
, Chapterk1k Introductionkt
okFinancialkReporting
QUESTIONS
1- 1. a.
ThekAICPAkiskankorganizationkofkCPAskthatkpriorktok1973kacceptedkthekpri
marykresponsibilitykforkthekdevelopmentkofkgenerallykacceptedkaccountingkpr
inciples.kTheirkrolekwasksubstantiallykreducedkink1973kwhenkthekFinancialkAcc
ountingkStandardskBoardkwaskestablished.k Theirkrolekwaskfurtherkreducedkwi
thkthekestablishmentkofkthekPublickCompanykAccountingkOversightkBoardkwas
kestablishedkink2002.
b. ThekFinancialkAccountingkStandardskBoardkreplacedkthekAccountingkPrinc
ipleskBoardkaskthekprimarykrule-
makingkbodykforkaccountingkstandards.kItkiskankindependentkorganizatio
nkandkincludeskmemberskotherkthankpublickaccountants.
c. ThekSECkhaskthekauthorityktokdeterminekgenerallykacceptedkaccountingkprin
cipleskandktokregulatekthekaccountingkprofession.kThekSECkhaskelectedktokle
avekmuchkofkthekdeterminationkofkgenerallykacceptedkaccountingkprinciples
ktokthekprivateksector.k ThekFinancialkAccountingkStandardskBoardkhaskplay
edkthekmajorkrolekinkestablishingkaccountingkstandardsksincek1973.k Regulat
ionkofkthekaccountingkprofessionkwasksubstantiallykturnedkoverktokthekPublic
kCompanykAccountingkOversightkBoardkink2002.
1-k2.
Consistencykiskobtainedkthroughkthekapplicationkofktheksamekaccountingkprinc
iplekfromkperiodktokperiod.k Akchangekinkprinciplekrequireskstatementkdisclos
ure.
1-k3.
Thekconceptkofkhistoricalkcostkdetermineskthekbalanceksheetkvaluationkofkland.kThek
realizationkconceptkrequireskthatkaktransactionkneedsktokoccurkforkthekprofitktokbek
recognized.
1-k4. a.k Entity e.k Historicalkcost
b. Realization f.k Historicalkcost
c. Materiality g.k Disclosure
d. Conservatism
1-k5. Entitykconcept
, 1-k6.
Generallykacceptedkaccountingkprincipleskdoknotkapplykwhenkakfirmkdoesknotka
ppearktokbekakgoingkconcern.k Ifkthekdecisionkiskmadekthatkthiskisknotkakgoingkc
oncern,kthenkthekusekofkGAAPkwouldknotkbekappropriate.
1-k7.
Withkthektimekperiodkassumption,kinaccuracieskofkaccountingkforkthekentity,kshortko
fkitskcompleteklifekspan,karekaccepted.kThekassumptionkiskmadekthatkthekentitykcan
kbekaccountedkforkreasonablykaccuratelykforkakparticularkperiodkofktime.k Inkothe
rkwords,kthekdecisionkiskmadektokacceptksomekinaccuracykbecausekofkincompletekin
formationkaboutkthekfuturekinkexchangekforkmorektimelykreporting.k Thekstatements
karekconsideredktokbekmeaningfulkbecausekmaterialkinaccuracieskareknotkacceptab
le.
1- 8.k k Itkisktruekthatkthekonlykaccuratekwayktokaccountkforktheksuccesskorkfailurekofkanke
ntitykisktokaccumulatekallktransactionskfromkthekopeningkofkbusinesskuntilkthekbusin
esskeventuallykliquidates.k Butkitkisknotknecessarykthatkthekstatementskbekcompletel
ykaccuratekinkorderkforkthemktokbekmeaningful.
1- 9. a. Akyearkthatkendskwhenkoperationskarekatkaklowkebbkforkthekyear.
b. ThekaccountingktimekperiodkiskendedkonkDecemberk31.
c. Aktwelve-
monthkaccountingkperiodkthatkendskatkthekendkofkakmonthkotherkthankDecem
berk31.
1-10. Money.
1-
11.k k Whenkmoneykdoesknotkholdkakstablekvalue,kthekfinancialkstatementskcankl
osekmuchkofktheirksignificance.k Tokthekextentkthatkmoneykdoesknotkremainkstable,
kitkloseskusefulnesskaskthekstandardkforkmeasuringkfinancialktransactions.
1-12.
No.k Therekiskakproblemkwithkdeterminingkthekindexkinkorderktokadjustkthekstatem
ents.k Thekitemskthatkarekincludedkinkthekindexkmustkbekrepresentative.kInkaddition
,kthekpriceskofkitemskchangekbecausekofkvariouskfactors,ksuchkaskquality,ktechnolo
gy,kandkinflation.
Yes.kAkreasonablekadjustmentktokthekstatementskcankbekmadekforkinflation.
1-13. False.k Ankarbitrarykwrite-
offkofkinventorykcannotkbekjustifiedkunderkthekconservatismkconcept.k Thekconserva
tismkconceptkcankonlykbekappliedkwherektherekarekalternativekmeasurementskand
keachkofkthesekalternativekmeasurementskhaskreasonableksupport.
1-14.
Yes,kinventorykthatkhaskakmarketkvaluekbelowkthekhistoricalkcostkshouldkbekwritt
enkdownkinkorderktokrecognizekakloss.k Thiskiskdonekbasedkuponkthekconceptkofk
