SOLUTION MANUAL FOR
Financial Accounting 11th Edition
by Robert Libby, All Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
2. Financial accounting involves preparation of the four basic financial statements and
related disclosures for external decision makers. Managerial accounting involves
the preparation of detailed plans, budgets, forecasts, and performance reports for
internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. The
internal groups are comprised of the various managers of the entity. The external
groups include the owners, investors, creditors, governmental agencies, other
interested parties, and the public at large.
4. Investors purchase all or part of a
business and hope to gain by receiving
part of what the company earns and/or
selling their ownership interest in the
company in the future at a higher price
than they paid. Creditors lend money to a company fora specific length of time
and hope to gain by charging interest on the loan.
, 5. In49a49society,49each49organization49can49be49defined49as49a49separate49accountin
g49entity.49An49accounting49entity49is49the49organization49for49which49financial49data
49are49to49be49collected.49Typical49accounting49entities49are49a49business,49a49chur
ch,49a49governmental49unit,49a49university49and49other49nonprofit49organizations49s
uch49as49a49hospital49and49a49welfare49organization.49A49business49typically49is49de
fined49and49treated49as49a49separate49entity49because49the49owners,49creditors,49in
vestors,49and49other49interested49parties49need49to49evaluate49its49performance49an
d49its49potential49separately49from49other49entities49and49from49its49owners.
6. Name49of49Statement Alternative49Title
(a) Income49Statement (a)49Statement49of49Earnings;49Statement49of
Income;49Statement49of49Operations
(b) Balance49Sheet (b)49Statement49of49Financial49Position
(c) Cash49Flow49Statement (c)4 9 Statement49of49Cash49Flows
7. The49heading49of49each49of49the49four49required49financial49statements49should4
9include49the49following:
(a) Name49of49the49entity
(b) Name49of49the49statement
(c) Date49of49the49statement,49or49the49period49of49time
(d) Unit49of49measure
8. (a)
The49purpose49of49the49income49statement49is49to49present49information49a
bout49the49revenues,49expenses,49and49the49net49income49of49an49entity49for
49a49specified49period49of49time.
(b) The49purpose49of49the49balance49sheet49is49to49report49the49financial49position
49of49an49entity49at49a49given49date,49that49is,49to49report49information49about49t
he49assets,49liabilities49and49stockholders’49equity49of49the49entity49as49of49a49
specific49date.
(c) The49purpose49of49the49statement49of49cash49flows49is49to49present49informati
on49about49the49flow49of49cash49into49the49entity49(sources),49the49flow49of49cas
h49out49of49the49entity49(uses),49and49the49net49increase49or49decrease49in49ca
sh49during49the49period.
(d) The49statement49of49stockholders’49equity49reports49the49changes49in49each4
9of49the49company’s49stockholders’49equity49accounts49during49 the49accounti
ng49period,49including49issue49and49repurchase49of49stock49and49the49way49t
hat49net49income49and49distribution49of49dividends49affected49the49retained49
earnings49of49the49company49during49that49period.
9. The49income49statement49and49the49statement49of49cash49flows49are49dated49―F
or49the49Year49Ended49December4931‖49because49they49report49the49inflows49an
d49outflows49of49resources49during49a49period49of49time.49In49contrast,49the49bala
nce49sheet49is49dated49―At49December4931‖49because49it49represents49the49resour
ces,49obligations,49and49stockholders’49equity49at49a49specific49date.
Financial Accounting 11th Edition
by Robert Libby, All Chapters 1 - 13
,TABLE OF CONTENTS
CHAPTER 1: Financial Statements and Business Decisions
Focus Company: Le-Nature’s Inc.
CHAPTER 2: Investing and Financing Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 3: Operating Decisions and the Accounting System
Focus Company: Chipotle Mexican Grill
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
Focus Company: Chipotle Mexican Grill
CHAPTER 5: Communicating and Analyzing Accounting Information
Focus Company: Apple Inc.
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
Focus Company: Skechers U.S.A.
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
Focus Company: Harley-Davidson, Inc.
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
Resources
Focus Company: FedEx Corporation
CHAPTER 9: Reporting and Interpreting Liabilities
Focus Company: Starbucks
CHAPTER 10: Reporting and Interpreting Bond Securities
Focus Company: Amazon
CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
Focus Company: Microsoft
CHAPTER 12: Statement of Cash Flows
Focus Company: National Beverage Corporation
CHAPTER 13: Analyzing Financial Statements
Focus Company: The Home Depot
,Chapter 1
Financial Statements and Business Decisions
ANSWERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
2. Financial accounting involves preparation of the four basic financial statements and
related disclosures for external decision makers. Managerial accounting involves
the preparation of detailed plans, budgets, forecasts, and performance reports for
internal decision makers.
3. Financial reports are used by both internal and external groups and individuals. The
internal groups are comprised of the various managers of the entity. The external
groups include the owners, investors, creditors, governmental agencies, other
interested parties, and the public at large.
4. Investors purchase all or part of a
business and hope to gain by receiving
part of what the company earns and/or
selling their ownership interest in the
company in the future at a higher price
than they paid. Creditors lend money to a company fora specific length of time
and hope to gain by charging interest on the loan.
, 5. In49a49society,49each49organization49can49be49defined49as49a49separate49accountin
g49entity.49An49accounting49entity49is49the49organization49for49which49financial49data
49are49to49be49collected.49Typical49accounting49entities49are49a49business,49a49chur
ch,49a49governmental49unit,49a49university49and49other49nonprofit49organizations49s
uch49as49a49hospital49and49a49welfare49organization.49A49business49typically49is49de
fined49and49treated49as49a49separate49entity49because49the49owners,49creditors,49in
vestors,49and49other49interested49parties49need49to49evaluate49its49performance49an
d49its49potential49separately49from49other49entities49and49from49its49owners.
6. Name49of49Statement Alternative49Title
(a) Income49Statement (a)49Statement49of49Earnings;49Statement49of
Income;49Statement49of49Operations
(b) Balance49Sheet (b)49Statement49of49Financial49Position
(c) Cash49Flow49Statement (c)4 9 Statement49of49Cash49Flows
7. The49heading49of49each49of49the49four49required49financial49statements49should4
9include49the49following:
(a) Name49of49the49entity
(b) Name49of49the49statement
(c) Date49of49the49statement,49or49the49period49of49time
(d) Unit49of49measure
8. (a)
The49purpose49of49the49income49statement49is49to49present49information49a
bout49the49revenues,49expenses,49and49the49net49income49of49an49entity49for
49a49specified49period49of49time.
(b) The49purpose49of49the49balance49sheet49is49to49report49the49financial49position
49of49an49entity49at49a49given49date,49that49is,49to49report49information49about49t
he49assets,49liabilities49and49stockholders’49equity49of49the49entity49as49of49a49
specific49date.
(c) The49purpose49of49the49statement49of49cash49flows49is49to49present49informati
on49about49the49flow49of49cash49into49the49entity49(sources),49the49flow49of49cas
h49out49of49the49entity49(uses),49and49the49net49increase49or49decrease49in49ca
sh49during49the49period.
(d) The49statement49of49stockholders’49equity49reports49the49changes49in49each4
9of49the49company’s49stockholders’49equity49accounts49during49 the49accounti
ng49period,49including49issue49and49repurchase49of49stock49and49the49way49t
hat49net49income49and49distribution49of49dividends49affected49the49retained49
earnings49of49the49company49during49that49period.
9. The49income49statement49and49the49statement49of49cash49flows49are49dated49―F
or49the49Year49Ended49December4931‖49because49they49report49the49inflows49an
d49outflows49of49resources49during49a49period49of49time.49In49contrast,49the49bala
nce49sheet49is49dated49―At49December4931‖49because49it49represents49the49resour
ces,49obligations,49and49stockholders’49equity49at49a49specific49date.
