Solution Manual For Intermediate Accounting, 11th Edition
- - - - - -
by David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
- - - - - - -
, Chapter 1 Environment and Theoretical Structure of
- - - - - - -
Financial-Accounting
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.
,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.
, 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.
- - - - - -
by David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
- - - - - - -
, Chapter 1 Environment and Theoretical Structure of
- - - - - - -
Financial-Accounting
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.
,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.
, 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.
