Solution Manual For Intermediate Accounting, 11th Edition by David Spiceland, Mark Nelson, Verified Chapters 1 - 21 & Appendix A, Complete solution | Graded A+.

Solution Manual For Intermediate Accounting, 11th Edition b
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y David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
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,Chapter 1 Environment and Theoretical Structure of mi mi mi mi mi mi




Financial Accounting mi




Question 1–1 mi



Financial accounting is concerned with providing relevant financial information
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about various kinds of organizations to different types of external users. The primary
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focus of financial accounting is on the financial information provided by profit-
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oriented companies to their present and potential investors and creditors.
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Question 1–2 mi



Resources are efficiently allocated if they are given to enterprises that will use t
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hem to provide goods and services desired by society and not to enterprises that will
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waste them. The capital markets are the mechanism that fosters this efficient allocat
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ion of resources.
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Question 1–3 mi



Two extremely important variables that must be considered in any investment d
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ecision are the expected rate of return and the uncertainty or risk of that expected ret
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urn.

Question 1–4 mi



In the long run, a company will be able to provide investors and creditors with
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a rate of return only if it can generate a profit. That is, it must be able to use the res
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ources provided to it to generate cash receipts from selling a product or service that e
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xceed the cash disbursements necessary to provide that product or service.
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Question 1–5 mi



The primary objective of financial accounting is to provide investors and credit
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ors with information that will help them make investment and credit decisions.
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Question 1–6 mi



Net operating cash flows are the difference between cash receipts and cash disb
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ursements during a period of time from transactions related to providing goods and
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services to customers. Net operating cash flows may not be a good indicator of futur
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e cash flows because, by ignoring uncompleted transactions, they may not match the
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accomplishments and sacrifices of the period. mi mi mi mi mi

,Question 1–7 mi



GAAP (generally accepted accounting principles) are a dynamic set of both bro
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ad and specific guidelines that a company should follow in measuring and reporting
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the information in their financial statements and related notes. It is important that a
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ll companies follow GAAP so that investors can compare financial information acros
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s companies to make their resource allocation decisions.
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Question 1–8 mi



In 1934, Congress created the SEC and gave it the job of setting accounting and
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reporting standards for companies whose securities are publicly traded. The SEC ha
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s retained the power, but has relied on private sector bodies to create the standards.
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The current private sector body responsible for setting accounting standards is the F
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ASB.

Question 1–9 mi



Auditors are independent, professional accountants who examine financial state
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ments to express an opinion. The opinion reflects the auditors‗ assessment of the stat
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ements' fairness, which is determined by the extent to which they are prepared in co
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mpliance with GAAP. The auditor adds credibility to the financial statements, whic
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h increases the confidence of capital market participants relying on that information.
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, Question 1–10 mi



Key provisions included in the text are:
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 Creation of the Public Company Accounting Oversight Board
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 Regulate types of non-audit audit services mi mi mi mi mi



 Require lead audit partner rotation every 5 year
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 Corporate executive accountability mi mi



 Addresses conflicts of interest for security analysts mi mi mi mi mi mi



 Internal control reporting and auditor opinion about controls
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Question 1–11 mi



New accounting standards, or changes in standards, can have significant differe
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ntial effects on companies, investors and creditors, and other interest groups by causi
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ng redistribution of wealth. There also is the possibility that standards could harm th
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e economy as a whole by causing companies to change their behavior.
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Question 1–12 mi



The FASB undertakes a series of elaborate information gathering steps before is
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suing an accounting standard to determine consensus as to the preferred method of a
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ccounting, as well as to anticipate adverse economic consequences.
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Question 1–13 mi



The purpose of the conceptual framework is to guide the Board in developing a
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ccounting standards by providing an underlying foundation and basic reasoning on w
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hich to consider merits of alternatives. The framework does not prescribe GAAP.
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