Solution Manual For Intermediate Accounting, 11th Edition by
f f f f f f f f
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
f f f f f f
,Chapter 1 Environment and Theoretical Structure Fin
f f f f f f
ancialfAccounting
Questionf1–1
Financialfaccountingfisfconcernedfwithfprovidingfrelevantffinancialfinformationfa
boutfvariousfkindsfofforganizationsftofdifferentftypesfoffexternalfusers.fThefprimaryffo
cusfofffinancialfaccountingfisfonftheffinancialfinformationfprovidedfbyfprofit-
foriented fcompanies fto ftheirfpresentfand fpotential finvestorsfand fcreditors.
Questionf1–2
Resourcesfarefefficientlyfallocatedfifftheyfarefgivenftofenterprisesfthatfwillfusefthe
mftofprovidefgoodsfandfservicesfdesiredfbyfsocietyfandfnotftofenterprisesfthatfwillfwast
efthem.fThefcapitalfmarketsfarefthefmechanismfthatffostersfthisfefficientfallocationfoffr
esources.
Questionf1–3
Twofextremelyfimportantfvariablesfthatfmustfbefconsideredfinfanyfinvestmentfde
cisionfarefthefexpectedfratefoffreturnfandfthefuncertaintyforfriskfoffthatfexpectedfreturn.
Questionf1–4
Inftheflongfrun,fafcompanyfwillfbefableftofprovidefinvestorsfandfcreditorsfwithfafr
atefoffreturnfonlyfiffitfcanfgeneratefafprofit.fThatfis,fitfmustfbefableftofusefthefresourcesf
providedftofitftofgeneratefcashfreceiptsffromfsellingfafproductforfservicefthatfexceedfthef
cashfdisbursementsfnecessaryftofprovidefthatfproductforfservice.
Questionf1–5
Thefprimaryfobjectivefofffinancialfaccountingfisftofprovidefinvestorsfandfcreditor
sfwithfinformationfthatfwillfhelpfthemfmakefinvestmentfandfcreditfdecisions.
Questionf1–6
Netfoperatingfcashfflowsfarefthefdifferencefbetweenfcashfreceiptsfandfcashfdisbur
sementsfduringfafperiodfofftimeffromftransactionsf relatedftofprovidingfgoodsfandfservi
cesftofcustomers.fNetfoperatingfcashfflowsfmayfnotfbefafgoodfindicatorfofffuturefcashff
lowsfbecause,fbyfignoringfuncompletedftransactions,ftheyfmayfnotfmatchfthefaccompli
shmentsfandfsacrificesfoffthefperiod.
,Questionf1–7
GAAPf(generallyfacceptedfaccountingfprinciples)farefafdynamicfsetf offbothfbroa
dfandfspecificfguidelinesfthatfafcompanyfshouldffollowfinfmeasuringfandfreportingfthef
informationfinftheirffinancialfstatementsfandfrelatedfnotes.fItfisfimportantfthatfallfcomp
aniesffollowfGAAPfsofthatfinvestorsfcanfcompareffinancialfinformationfacrossfcompa
niesftofmakeftheirfresourcefallocationfdecisions.
Questionf1–8
Inf1934,fCongressfcreatedfthefSECfandfgavefitfthefjobfoffsettingfaccountingfandfre
portingfstandardsfforfcompaniesfwhosefsecuritiesfarefpubliclyftraded.fThefSECfhasfret
ainedfthefpower,fbutfhasfreliedfonfprivatefsectorfbodiesftofcreatefthefstandards.fThefcurr
entfprivatefsectorfbodyfresponsiblefforfsettingfaccountingfstandardsfisfthefFASB.
Questionf1–9
Auditorsfarefindependent,fprofessionalfaccountantsfwhofexamineffinancialfstatem
entsftofexpressfanfopinion.fThefopinionfreflectsfthefauditors‘fassessmentfoffthefstateme
nts'ffairness,fwhichfisfdeterminedfbyfthefextentftofwhichftheyfarefpreparedfinfcomplian
cefwithfGAAP.fThefauditorfaddsfcredibilityftoftheffinancialfstatements,fwhichfincrease
sfthefconfidencefoffcapitalfmarketfparticipantsfrelyingfonfthatfinformation.
, Questionf1–10
Keyfprovisionsfincludedfinftheftextfare:
CreationfoffthefPublicfCompanyfAccountingfOversightfBoard
Regulateftypesfoffnon-auditfauditfservices
Requirefleadfauditfpartnerfrotationfeveryf5fyear
Corporatef executivef accountability
Addressesfconflictsfoffinterestfforfsecurityfanalysts
Internalfcontrolfreportingfandfauditorfopinionfaboutfcontrols
Questionf1–11
Newfaccountingfstandards,forfchangesfinfstandards,fcanfhavefsignificantfdifferent
ialfeffectsfonfcompanies,finvestorsfandfcreditors,fandfotherfinterestfgroupsfbyfcausingfr
edistributionfoffwealth.f Therefalsofisfthefpossibilityfthatfstandardsfcouldfharmfthefeco
nomyfasfafwholefbyfcausingfcompaniesftofchangeftheirfbehavior.
Questionf1–12
ThefFASBfundertakesfafseriesfoffelaboratefinformationfgatheringfstepsfbeforefiss
uingfanfaccountingfstandardftofdeterminefconsensusfasftofthefpreferredfmethodfoffacco
unting,fasfwellfasftofanticipatefadversefeconomicfconsequences.
Questionf1–13
ThefpurposefoffthefconceptualfframeworkfisftofguidefthefBoardfinfdevelopingfacc
ountingfstandardsfbyfprovidingfanfunderlyingffoundationfandfbasicfreasoningfonfwhic
hftofconsiderfmeritsfoffalternatives.f ThefframeworkfdoesfnotfprescribefGAAP.
f f f f f f f f
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
f f f f f f
,Chapter 1 Environment and Theoretical Structure Fin
f f f f f f
ancialfAccounting
Questionf1–1
Financialfaccountingfisfconcernedfwithfprovidingfrelevantffinancialfinformationfa
boutfvariousfkindsfofforganizationsftofdifferentftypesfoffexternalfusers.fThefprimaryffo
cusfofffinancialfaccountingfisfonftheffinancialfinformationfprovidedfbyfprofit-
foriented fcompanies fto ftheirfpresentfand fpotential finvestorsfand fcreditors.
Questionf1–2
Resourcesfarefefficientlyfallocatedfifftheyfarefgivenftofenterprisesfthatfwillfusefthe
mftofprovidefgoodsfandfservicesfdesiredfbyfsocietyfandfnotftofenterprisesfthatfwillfwast
efthem.fThefcapitalfmarketsfarefthefmechanismfthatffostersfthisfefficientfallocationfoffr
esources.
Questionf1–3
Twofextremelyfimportantfvariablesfthatfmustfbefconsideredfinfanyfinvestmentfde
cisionfarefthefexpectedfratefoffreturnfandfthefuncertaintyforfriskfoffthatfexpectedfreturn.
Questionf1–4
Inftheflongfrun,fafcompanyfwillfbefableftofprovidefinvestorsfandfcreditorsfwithfafr
atefoffreturnfonlyfiffitfcanfgeneratefafprofit.fThatfis,fitfmustfbefableftofusefthefresourcesf
providedftofitftofgeneratefcashfreceiptsffromfsellingfafproductforfservicefthatfexceedfthef
cashfdisbursementsfnecessaryftofprovidefthatfproductforfservice.
Questionf1–5
Thefprimaryfobjectivefofffinancialfaccountingfisftofprovidefinvestorsfandfcreditor
sfwithfinformationfthatfwillfhelpfthemfmakefinvestmentfandfcreditfdecisions.
Questionf1–6
Netfoperatingfcashfflowsfarefthefdifferencefbetweenfcashfreceiptsfandfcashfdisbur
sementsfduringfafperiodfofftimeffromftransactionsf relatedftofprovidingfgoodsfandfservi
cesftofcustomers.fNetfoperatingfcashfflowsfmayfnotfbefafgoodfindicatorfofffuturefcashff
lowsfbecause,fbyfignoringfuncompletedftransactions,ftheyfmayfnotfmatchfthefaccompli
shmentsfandfsacrificesfoffthefperiod.
,Questionf1–7
GAAPf(generallyfacceptedfaccountingfprinciples)farefafdynamicfsetf offbothfbroa
dfandfspecificfguidelinesfthatfafcompanyfshouldffollowfinfmeasuringfandfreportingfthef
informationfinftheirffinancialfstatementsfandfrelatedfnotes.fItfisfimportantfthatfallfcomp
aniesffollowfGAAPfsofthatfinvestorsfcanfcompareffinancialfinformationfacrossfcompa
niesftofmakeftheirfresourcefallocationfdecisions.
Questionf1–8
Inf1934,fCongressfcreatedfthefSECfandfgavefitfthefjobfoffsettingfaccountingfandfre
portingfstandardsfforfcompaniesfwhosefsecuritiesfarefpubliclyftraded.fThefSECfhasfret
ainedfthefpower,fbutfhasfreliedfonfprivatefsectorfbodiesftofcreatefthefstandards.fThefcurr
entfprivatefsectorfbodyfresponsiblefforfsettingfaccountingfstandardsfisfthefFASB.
Questionf1–9
Auditorsfarefindependent,fprofessionalfaccountantsfwhofexamineffinancialfstatem
entsftofexpressfanfopinion.fThefopinionfreflectsfthefauditors‘fassessmentfoffthefstateme
nts'ffairness,fwhichfisfdeterminedfbyfthefextentftofwhichftheyfarefpreparedfinfcomplian
cefwithfGAAP.fThefauditorfaddsfcredibilityftoftheffinancialfstatements,fwhichfincrease
sfthefconfidencefoffcapitalfmarketfparticipantsfrelyingfonfthatfinformation.
, Questionf1–10
Keyfprovisionsfincludedfinftheftextfare:
CreationfoffthefPublicfCompanyfAccountingfOversightfBoard
Regulateftypesfoffnon-auditfauditfservices
Requirefleadfauditfpartnerfrotationfeveryf5fyear
Corporatef executivef accountability
Addressesfconflictsfoffinterestfforfsecurityfanalysts
Internalfcontrolfreportingfandfauditorfopinionfaboutfcontrols
Questionf1–11
Newfaccountingfstandards,forfchangesfinfstandards,fcanfhavefsignificantfdifferent
ialfeffectsfonfcompanies,finvestorsfandfcreditors,fandfotherfinterestfgroupsfbyfcausingfr
edistributionfoffwealth.f Therefalsofisfthefpossibilityfthatfstandardsfcouldfharmfthefeco
nomyfasfafwholefbyfcausingfcompaniesftofchangeftheirfbehavior.
Questionf1–12
ThefFASBfundertakesfafseriesfoffelaboratefinformationfgatheringfstepsfbeforefiss
uingfanfaccountingfstandardftofdeterminefconsensusfasftofthefpreferredfmethodfoffacco
unting,fasfwellfasftofanticipatefadversefeconomicfconsequences.
Questionf1–13
ThefpurposefoffthefconceptualfframeworkfisftofguidefthefBoardfinfdevelopingfacc
ountingfstandardsfbyfprovidingfanfunderlyingffoundationfandfbasicfreasoningfonfwhic
hftofconsiderfmeritsfoffalternatives.f ThefframeworkfdoesfnotfprescribefGAAP.
