SOLUTION MANUAL Financial Accounting 13th Edition by Weygandt and Kimmel all Chapters 1-13 Complete.pdf

SOLUTION MANUAL FOR
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Financial Accounting 11th Edition
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Robert Libby, Patricia Libby, Frank Hodge
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,SOLUTION MANUAL FOR m m




Financial Accounting 11th Edition Robert Libby, Patri
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cia Libby, Frank Hodge
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Chapter 1 m




Financial Statements and Business Decisions
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ANSWERS TO QUESTIONS
m m




1. Accountingmismamsystemmthatmcollectsmandmprocessesm(analyzes,mmeasures,mandmre
cords)mfinancial minformationmaboutmanmorganizationmandmreportsmthatminformationmto
mdecision mmakers.




2. Financial maccountingminvolvesmpreparationmofmthemfourmbasicmfinancial mstatementsma
ndmrelatedmdisclosuresmformexternalmdecisionmmakers.mManagerial maccountingminvol
vesmthempreparationmofmdetailedmplans,mbudgets,mforecasts,mandmperformancemreport
smforminternalmdecisionmmakers.

3. Financial mreportsmaremusedmbymbothminternalmandmexternalmgroupsmandmindividuals.mT
heminternalmgroupsmaremcomprisedmofmthemvariousmmanagersmofmthementity.mThemexte
rnalmgroupsmincludemthemowners,minvestors,mcreditors,mgovernmentalmagencies,mothe
rminterestedmparties,mandmthempublicmatmlarge.

4. Investorsmpurchasemallmormpartmofmambusinessmandmhopemtomgainmbymreceivingmpartm
ofmwhatmthemcompanymearnsmand/ormsellingmtheirmownershipminterestminmthemcompa
nyminmthemfuturematmamhighermpricemthanmtheympaid.mCreditorsmlendmmoneymtomamcom
panymformamspecificmlengthmofmtimemandmhopemtomgainmbymchargingminterestmonmtheml
oan.

,5. Inmamsociety,meachmorganizationmcanmbemdefinedmasmamseparatemaccountingmentity.mA
nmaccountingmentitymismthemorganizationmformwhichmfinancialmdatamaremtombemcollected
.mTypical maccountingmentitiesmaremambusiness,mamchurch,mamgovernmental munit,mamuni
versitymandmothermnonprofitmorganizationsmsuchmasmamhospitalmandmamwelfaremorgani
zation.mAmbusinessmtypicallymismdefinedmandmtreatedmasmamseparatementitymbecausemt
hemowners,mcreditors,minvestors,mandmotherminterestedmpartiesmneedmtomevaluatemitsm
performancemandmitsmpotentialmseparatelymfrommothermentitiesmandmfrommitsmowners.

6. NamemofmStatement AlternativemTitle
(a) IncomemStatement (a)mStatementmofmEarnings;mStatementmof
Income;mStatementmofmOperations
(b) BalancemSheet (b)mStatementmofmFinancial mPosition
(c) CashmFlow mStatement (c)m StatementmofmCashmFlows

7. Themheadingmofmeachmofmthemfourmrequiredmfinancialmstatementsmshouldmincludemt
hemfollowing:
(a) Namemofmthementity
(b) Namemofmthemstatement
(c) Datemofmthemstatement,mormthemperiodmofmtime
(d) Unitmofmmeasure

8. (a)
Thempurposemofmthemincomemstatementmismtompresentminformationmaboutmthemr
evenues,mexpenses,mandmthemnetmincomemofmanmentitymformamspecifiedmperiodm
ofmtime.
(b) Thempurposemofmthembalancemsheetmismtomreportmthemfinancialmpositionmofmanment
itymatmamgivenmdate,mthatmis,mtomreportminformationmaboutmthemassets,mliabilitiesm
andmstockholders’ mequitymofmthementitymasmofmamspecificmdate.
(c) Thempurposemofmthemstatementmofmcashmflowsmismtompresentminformationmaboutmt
hemflow mofmcashmintomthementitym(sources),mthemflow mofmcashmoutmofmthementitym(u
ses),mandmthemnetmincreasemormdecreaseminmcashmduringmthemperiod.
(d) Themstatementmofmstockholders’ mequitymreportsmthemchangesminmeachmofmthemc
ompany’smstockholders’ mequitymaccountsmduringmthemaccountingmperiod,minclu
dingmissuemandmrepurchasemofmstockmandmthemwaymthatmnetmincomemandmdistrib
utionmofmdividendsmaffectedmthemretainedmearningsmofmthemcompanymduringmthat
mperiod.




9. Themincomemstatementmandmthemstatementmofmcashmflowsmaremdatedm―FormthemYe
armEndedmDecemberm31‖mbecausemtheymreportmtheminflowsmandmoutflowsmofmresou
rcesmduringmamperiodmofmtime.mInmcontrast,mthembalancemsheetmismdatedm―AtmDece
mberm31‖mbecausemitmrepresentsmthemresources,mobligations,mandmstockholders’ me
quitymatmamspecificmdate.

, 10. Assetsmaremimportantmtomcreditorsmandminvestorsmbecausemassetsmprovidemambasismf
ormjudgingmwhethermsufficientmresourcesmaremavailablemtomoperatemthemcompany.mA
ssetsmaremalsomimportantmbecausemtheymcouldmbemsoldmformcashminmthemeventmthemc
ompanymgoesmoutmofmbusiness.mLiabilitiesmaremimportantmtomcreditorsmandminvestors
mbecausemthemcompanymmustmbemablemtomgenerate msufficientmcashmfrommoperations

mormfurthermborrowing mtommeetmthempaymentsmrequired mbymdebtmagreements.mIfmamb

usinessmdoesmnotmpaymitsmcreditors,mthemlawmmaymgivemthemcreditorsmthemrightmtomfor
cemthemsalemofmassetsmsufficientmtommeetmtheirmclaims.

11. Netmincomemismthemexcessmofmtotalmrevenuesmovermtotalmexpenses.mNetmlossmismt
hemexcessmofmtotalmexpensesmovermtotalmrevenues.

12. ThemequationmformthemincomemstatementmismRevenuesm-
mExpensesm=mNetmIncomem(ormNetmLossmifmthemamountmismnegative).mThus,mthemthre

emmajormitemsmreportedmonmthemincomemstatementmarem(1)mrevenues,m(2)mexpense
s,mandm(3)mnetmincome.
13. Themequationmformthembalancemsheetm(alsomknownmasmthembasicmaccountingmequatio
n)mis:mAssetsm=mLiabilitiesm+mStockholders’ mEquity.mAssetsmaremthemprobablem(expect
ed)mfuturemeconomicmbenefitsmownedmbymthementitymasmamresultmofmpastmtransactions.
m Theymaremthemresourcesmownedmbymthembusinessmatmamgivenmpointminmtimemsuchmas

mcash,mreceivables,minventory,mmachinery,mbuildings,mland,mandmpatents.mLiabilitiesm

aremprobablem(expected)mdebtsmormobligationsmofmthementitymasmamresultmofmpastmtran
sactionsmthatmwillmbempaidmwithmassetsmormservicesminmthemfuture.mTheymaremthemoblig
ationsmofmthementitymsuchmasmaccountsmpayable,mnotesmpayable,mandmbondsmpayable
.mStockholders’ mequitymismfinancingmprovidedmbymownersmofmthembusinessmandmopera
tions.mItmismthemclaimmofmthemownersmtomthemassetsmofmthembusinessmaftermthemcreditor
s’mclaimsmhavembeenmsatisfied.mItmmaymbemthoughtmofmasmthemresidualminterestmbecau
semitmrepresentsmassetsmminusmliabilities.

14. Themequationmformthemstatementmofmcashmflowsmis:mCashmflowsmfrommoperatingmactivities
+mCashmflowsmfromminvestingmactivitiesm+mCashmflowsmfrommfinancingmactivitiesm=mCh
angeminmcashmformthemperiod.mThemnetmcashmflowsmformthemperiodmrepresentmthemincre
asemormdecreaseminmcashmthatmoccurredmduringmthemperiod.mCashmflowsmfrommoperati
ngmactivitiesmaremcashmflowsmdirectlymrelatedmtomearningmincomem(normalmbusinessma
ctivitymincludingminterestmpaidmandmincomemtaxesmpaid).mCashmflowsmfromminvestingma
ctivitiesmincludemcashmflowsmthatmaremrelatedmtomthemacquisitionmormsalemofmproductivem
assetsmusedmbymthemcompany.mCashmflowsmfrommfinancingmactivitiesmaremdirectlymrela
tedmtomthemfinancingmofmthementerprisemitself.

15. Themretainedmearningsmequationmis:mBeginningmRetainedmEarningsm+mNetmIncome
m-mDividendsm=mEndingmRetained mEarnings.mItmbeginsmwithmbeginning-of-the-

yearmRetainedmEarningsmwhichmismthempriormyear’smendingmretainedmearningsmrepo
rtedmonmthembalancemsheet.m Themcurrentmyear'smNetmIncomemreportedmonmtheminco
memstatementmismaddedmandmthemcurrentmyear'smDividendsmaremsubtractedmfrommt
hismamount.mThemendingmRetainedmEarningsmamountmismreportedmonmthemend-of-
periodmbalancemsheet.