ALL 13 CHAPTERS COVERED
SOLUTIONS MANUAL
,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
,SOLUTION MANUAL FOR
Financial Accounting 11th Edition Robert Libby,Patricia Libby, Frank Hodge
Chapter 1
Financial Statements and Business Decisions
ANSẄERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and records) financial
information about an organization and reports that information todecision makers.
2. Financial accounting involves preparation of the four basic financial statements andrelated
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. Theinternal groups
are comprised of the various managers of the entity. The external groups include the oẅners,
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 ẅhat the company
earns and/or selling their oẅnership 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. In a society, each organization can be defined as a separate accounting entity. An accounting entity
is the organization for ẅhich financial data are to be collected. Typical accounting entities are a
business, a church, a governmental unit, a university and other nonprofit organizations such as a
hospital and a ẅelfare organization. A business typically is defined and treated as a separate entity
because the oẅners, creditors, investors, and other interested parties need to evaluate its
performance and its potential separately from other entities and from itsoẅners.
6. Name of Statement Alternative Title
(a) Income Statement (a) Statement of Earnings; Statement of
Income; Statement of Operations
(b) Balance Sheet (b) Statement of Financial Position
(c) Cash Floẅ Statement (c) Statement of Cash Floẅs
7. The heading of each of the four required financial statements should include the folloẅing:
(a) Name of the entity
(b) Name of the statement
(c) Date of the statement, or the period of time
(d) Unit of measure
8. (a) The purpose of the income statement is to present information about the revenues,
expenses, and the net income of an entity for a specified period oftime.
(b) The purpose of the balance sheet is to report the financial position of an entityat a given date,
that is, to report information about the assets, liabilities and stockholders’ equity of the entity
as of a specific date.
(c) The purpose of the statement of cash floẅs is to present information about thefloẅ of cash
into the entity (sources), the floẅ of cash out of the entity (uses), and the net increase or
decrease in cash during the period.
(d) The statement of stockholders’ equity reports the changes in each of the company’s
stockholders’ equity accounts during the accounting period, including issue and repurchase
of stock and the ẅay that net income and distribution of dividends affected the retained
earnings of the company duringthat period.
9. The income statement and the statement of cash floẅs are dated ―For the Year Ended December
31‖ because they report the infloẅs and outfloẅs of resources during a period of time. In
contrast, the balance sheet is dated ―At December 31‖because it represents the resources,
obligations, and stockholders’ equity at a specific date.
SOLUTIONS MANUAL
,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
,SOLUTION MANUAL FOR
Financial Accounting 11th Edition Robert Libby,Patricia Libby, Frank Hodge
Chapter 1
Financial Statements and Business Decisions
ANSẄERS TO QUESTIONS
1. Accounting is a system that collects and processes (analyzes, measures, and records) financial
information about an organization and reports that information todecision makers.
2. Financial accounting involves preparation of the four basic financial statements andrelated
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. Theinternal groups
are comprised of the various managers of the entity. The external groups include the oẅners,
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 ẅhat the company
earns and/or selling their oẅnership 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. In a society, each organization can be defined as a separate accounting entity. An accounting entity
is the organization for ẅhich financial data are to be collected. Typical accounting entities are a
business, a church, a governmental unit, a university and other nonprofit organizations such as a
hospital and a ẅelfare organization. A business typically is defined and treated as a separate entity
because the oẅners, creditors, investors, and other interested parties need to evaluate its
performance and its potential separately from other entities and from itsoẅners.
6. Name of Statement Alternative Title
(a) Income Statement (a) Statement of Earnings; Statement of
Income; Statement of Operations
(b) Balance Sheet (b) Statement of Financial Position
(c) Cash Floẅ Statement (c) Statement of Cash Floẅs
7. The heading of each of the four required financial statements should include the folloẅing:
(a) Name of the entity
(b) Name of the statement
(c) Date of the statement, or the period of time
(d) Unit of measure
8. (a) The purpose of the income statement is to present information about the revenues,
expenses, and the net income of an entity for a specified period oftime.
(b) The purpose of the balance sheet is to report the financial position of an entityat a given date,
that is, to report information about the assets, liabilities and stockholders’ equity of the entity
as of a specific date.
(c) The purpose of the statement of cash floẅs is to present information about thefloẅ of cash
into the entity (sources), the floẅ of cash out of the entity (uses), and the net increase or
decrease in cash during the period.
(d) The statement of stockholders’ equity reports the changes in each of the company’s
stockholders’ equity accounts during the accounting period, including issue and repurchase
of stock and the ẅay that net income and distribution of dividends affected the retained
earnings of the company duringthat period.
9. The income statement and the statement of cash floẅs are dated ―For the Year Ended December
31‖ because they report the infloẅs and outfloẅs of resources during a period of time. In
contrast, the balance sheet is dated ―At December 31‖because it represents the resources,
obligations, and stockholders’ equity at a specific date.
