Solution Manual For Intermediate Accounting, 11th Edition by
x x x x x x xx x
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
x x x x x x
,Chapter 1 Environment and Theoretical Structure of x x x x x x
Financial Accounting x
Question 1–1 x
Financial accounting is concerned with providing relevant financial information abo
x x x x x x x x x
ut various kinds of organizations to different types of external users. The primary focus of
x x x x x x x x x x x x x x x
financial accounting is on the financial information provided by profit-
x x x x x x x x x
oriented companies to their present and potential investors and creditors.
x x x x x x x x x x
Question 1–2 x
Resources are efficiently allocated if they are given to enterprises that will use them t
x x x x x x x x x x x x x x
o provide goods and services desired by society and not to enterprises that will waste them
x x x x x x x x x x x x x x x
. The capital markets are the mechanism that fosters this efficient allocation of resources.
x x x x x x x x x x x x x
Question 1–3 x
Two extremely important variables that must be considered in any investment decisi
x x x x x x x x x x x
on are the expected rate of return and the uncertainty or risk of that expected return.
x x x x x x x x x x x x x x x
Question 1–4 x
In the long run, a company will be able to provide investors and creditors with a rate o
x x x x x x x x x x x x x x x x x
f return only if it can generate a profit. That is, it must be able to use the resources provided
x x x x x x x x x x x x x x x x x x x
to it to generate cash receipts from selling a product or service that exceed the cash disbur
x x x x x x x x x x x x x x x x x
sements necessary to provide that product or service.
x x x x x x x
Question 1–5 x
The primary objective of financial accounting is to provide investors and creditors w
x x x x x x x x x x x x
ith information that will help them make investment and credit decisions.
x x x x x x x x x x
Question 1–6 x
Net operating cash flows are the difference between cash receipts and cash disburse
x x x x x x x x x x x x
ments during a period of time from transactions related to providing goods and services to
x x x x x x x x x x x x x x
customers. Net operating cash flows may not be a good indicator of future cash flows bec
x x x x x x x x x x x x x x x x
ause, by ignoring uncompleted transactions, they may not match the accomplishments an
x x x x x x x x x x x
d sacrifices of the period.
x x x x
,Question 1–7 x
GAAP (generally accepted accounting principles) are a dynamic set of both broad a
x x x x x x x x x x x x
nd specific guidelines that a company should follow in measuring and reporting the infor
x x x x x x x x x x x x x
mation in their financial statements and related notes. It is important that all companies fo
x x x x x x x x x x x x x x
llow GAAP so that investors can compare financial information across companies to mak
x x x x x x x x x x x x
e their resource allocation decisions.
x x x x
Question 1–8 x
In 1934, Congress created the SEC and gave it the job of setting accounting and repor
x x x x x x x x x x x x x x x
ting standards for companies whose securities are publicly traded. The SEC has retained t
x x x x x x x x x x x x x
he power, but has relied on private sector bodies to create the standards. The current privat
x x x x x x x x x x x x x x x
e sector body responsible for setting accounting standards is the FASB.
x x x x x x x x x x
Question 1–9 x
Auditors are independent, professional accountants who examine financial statemen
x x x x x x x x
ts to express an opinion. The opinion reflects the auditors‗ assessment of the statements' fa
x x x x x x x x x x x x x x
irness, which is determined by the extent to which they are prepared in compliance with G
x x x x x x x x x x x x x x x
AAP. The auditor adds credibility to the financial statements, which increases the confide
x x x x x x x x x x x x
nce of capital market participants relying on that information.
x x x x x x x x
, Question 1–10 x
Key provisions included in the text are:
x x x x x x
Creation of the Public Company Accounting Oversight Board
x x x x x x x
Regulate types of non-audit audit services x x x x x
Require lead audit partner rotation every 5 year
x x x x x x x
Corporate executive accountability x x
Addresses conflicts of interest for security analysts x x x x x x
Internal control reporting and auditor opinion about controls
x x x x x x x
Question 1–11 x
New accounting standards, or changes in standards, can have significant differential
x x x x x x x x x x x
effects on companies, investors and creditors, and other interest groups by causing redistr
x x x x x x x x x x x x
ibution of wealth. There also is the possibility that standards could harm the economy as a
x x x x x x x x x x x x x x x x
whole by causing companies to change their behavior.
x x x x x x x
Question 1–12 x
The FASB undertakes a series of elaborate information gathering steps before issuin
x x x x x x x x x x x
g an accounting standard to determine consensus as to the preferred method of accounting
x x x x x x x x x x x x x
, as well as to anticipate adverse economic consequences.
x x x x x x x x
Question 1–13 x
The purpose of the conceptual framework is to guide the Board in developing accoun
x x x x x x x x x x x x x
ting standards by providing an underlying foundation and basic reasoning on which to co
x x x x x x x x x x x x x
nsider merits of alternatives. The framework does not prescribe GAAP.
x x x x x x x x x
x x x x x x xx x
David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
x x x x x x
,Chapter 1 Environment and Theoretical Structure of x x x x x x
Financial Accounting x
Question 1–1 x
Financial accounting is concerned with providing relevant financial information abo
x x x x x x x x x
ut various kinds of organizations to different types of external users. The primary focus of
x x x x x x x x x x x x x x x
financial accounting is on the financial information provided by profit-
x x x x x x x x x
oriented companies to their present and potential investors and creditors.
x x x x x x x x x x
Question 1–2 x
Resources are efficiently allocated if they are given to enterprises that will use them t
x x x x x x x x x x x x x x
o provide goods and services desired by society and not to enterprises that will waste them
x x x x x x x x x x x x x x x
. The capital markets are the mechanism that fosters this efficient allocation of resources.
x x x x x x x x x x x x x
Question 1–3 x
Two extremely important variables that must be considered in any investment decisi
x x x x x x x x x x x
on are the expected rate of return and the uncertainty or risk of that expected return.
x x x x x x x x x x x x x x x
Question 1–4 x
In the long run, a company will be able to provide investors and creditors with a rate o
x x x x x x x x x x x x x x x x x
f return only if it can generate a profit. That is, it must be able to use the resources provided
x x x x x x x x x x x x x x x x x x x
to it to generate cash receipts from selling a product or service that exceed the cash disbur
x x x x x x x x x x x x x x x x x
sements necessary to provide that product or service.
x x x x x x x
Question 1–5 x
The primary objective of financial accounting is to provide investors and creditors w
x x x x x x x x x x x x
ith information that will help them make investment and credit decisions.
x x x x x x x x x x
Question 1–6 x
Net operating cash flows are the difference between cash receipts and cash disburse
x x x x x x x x x x x x
ments during a period of time from transactions related to providing goods and services to
x x x x x x x x x x x x x x
customers. Net operating cash flows may not be a good indicator of future cash flows bec
x x x x x x x x x x x x x x x x
ause, by ignoring uncompleted transactions, they may not match the accomplishments an
x x x x x x x x x x x
d sacrifices of the period.
x x x x
,Question 1–7 x
GAAP (generally accepted accounting principles) are a dynamic set of both broad a
x x x x x x x x x x x x
nd specific guidelines that a company should follow in measuring and reporting the infor
x x x x x x x x x x x x x
mation in their financial statements and related notes. It is important that all companies fo
x x x x x x x x x x x x x x
llow GAAP so that investors can compare financial information across companies to mak
x x x x x x x x x x x x
e their resource allocation decisions.
x x x x
Question 1–8 x
In 1934, Congress created the SEC and gave it the job of setting accounting and repor
x x x x x x x x x x x x x x x
ting standards for companies whose securities are publicly traded. The SEC has retained t
x x x x x x x x x x x x x
he power, but has relied on private sector bodies to create the standards. The current privat
x x x x x x x x x x x x x x x
e sector body responsible for setting accounting standards is the FASB.
x x x x x x x x x x
Question 1–9 x
Auditors are independent, professional accountants who examine financial statemen
x x x x x x x x
ts to express an opinion. The opinion reflects the auditors‗ assessment of the statements' fa
x x x x x x x x x x x x x x
irness, which is determined by the extent to which they are prepared in compliance with G
x x x x x x x x x x x x x x x
AAP. The auditor adds credibility to the financial statements, which increases the confide
x x x x x x x x x x x x
nce of capital market participants relying on that information.
x x x x x x x x
, Question 1–10 x
Key provisions included in the text are:
x x x x x x
Creation of the Public Company Accounting Oversight Board
x x x x x x x
Regulate types of non-audit audit services x x x x x
Require lead audit partner rotation every 5 year
x x x x x x x
Corporate executive accountability x x
Addresses conflicts of interest for security analysts x x x x x x
Internal control reporting and auditor opinion about controls
x x x x x x x
Question 1–11 x
New accounting standards, or changes in standards, can have significant differential
x x x x x x x x x x x
effects on companies, investors and creditors, and other interest groups by causing redistr
x x x x x x x x x x x x
ibution of wealth. There also is the possibility that standards could harm the economy as a
x x x x x x x x x x x x x x x x
whole by causing companies to change their behavior.
x x x x x x x
Question 1–12 x
The FASB undertakes a series of elaborate information gathering steps before issuin
x x x x x x x x x x x
g an accounting standard to determine consensus as to the preferred method of accounting
x x x x x x x x x x x x x
, as well as to anticipate adverse economic consequences.
x x x x x x x x
Question 1–13 x
The purpose of the conceptual framework is to guide the Board in developing accoun
x x x x x x x x x x x x x
ting standards by providing an underlying foundation and basic reasoning on which to co
x x x x x x x x x x x x x
nsider merits of alternatives. The framework does not prescribe GAAP.
x x x x x x x x x
