SolutionpoManualpoForpoFinancialpoStatementpoAnalysis,
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapter 1 Introduct
Ion To Financial Reporting
QUESTIONS
1- 1.
A The AICPA Is An Organization Of Cpas That Prior To 1973
. Ac Cepted The Primary Responsibility For The Development Of
Generall Y Accepted Accounting Principles. Their Role Was
Substantially Re Duced In 1973 When The Financial Accounting
Standards Board Was Established. Their Role Was Further
Reduced With The Esta Blishment Of The Public Company
Accounting Oversight Board W As Established In 2002.
b. The Financial Accounting Standards Board Replaced The Acc
Ounting Principles Board As The Primary Rule-
Making Body For Accounting Standards. It Is An Independent
Organization And Includes Members Other Than Public Acco
Untants.
c. The SEC Has The Authority To Determine Generally Accepted
A Ccounting Principles And To Regulate The Accounting
Profession. The SEC Has Elected To Leave Much Of The
Determination Of Generally Accepted Accounting Principles To
The Private Sector.
The Financial Accounting Standards Board Has Played The
Major Role In Establishing Accounting Standards Since 1973. R
Egulation Of The Accounting Profession Was Substantially
Turned Over To The Public Company Accounting Oversight
Board In 2 002.
1- 2.
Consistency Is Obtained Through The Application Of The Same A
Ccounting Principle From Period To Period. A Change In
Principl E Requires Statement Disclosure.
1- 3.
The Concept Of Historical Cost Determines The Balance Sheet
Valuatio N Of Land. The Realization Concept Requires That A
Transaction Needs To Occur For The Profit To Be Recognized.
1- 4. A. Entity E. Historical Cost
b. Realization F. Historical Cost
c. Materiality G. Disclosure
, d. Conservatism
1- 5. Entity Concept
, 1- 6.
Generally Accepted Accounting Principles Do Not Apply When A
Firm Does Not Appear To Be A Going Concern. If The Decision
Is Mad E That This Is Not A Going Concern, Then The Use Of
GAAP Would
Not Be Appropriate.
1- 7.
With The Time Period Assumption, Inaccuracies Of Accounting For
The Entity, Short Of Its Complete Life Span, Are Accepted. The
Assumptio N Is Made That The Entity Can Be Accounted For
Reasonably Accurat Ely For A Particular Period Of Time. In Other
Words, The Decision Is
Made To Accept Some Inaccuracy Because Of Incomplete
Informatio N About The Future In Exchange For More Timely Reporting.
The Stat Ements Are Considered To Be Meaningful Because Material
Inaccuraci Es Are Not Acceptable.
1- 8. It Is True That The Only Accurate Way To Account For The
Succes S Or Failure Of An Entity Is To Accumulate All
Transactions From The Opening Of Business Until The Business
Eventually Liquidates. But I
T Is Not Necessary That The Statements Be Completely Accurate In
O Rder For Them To Be Meaningful.
1- 9. A. A Year That Ends When Operations Are At A Low Ebb For The Year.
b. The Accounting Time Period Is Ended On December 31.
c. A Twelve-
Month Accounting Period That Ends At The End Of A Month
Oth Er Than December 31.
1-10. Money.
1-
11. When Money Does Not Hold A Stable Value, The Financial
Statements Can Lose Much Of Their Significance. To The Extent
That
Money Does Not Remain Stable, It Loses Usefulness As The
Standa Rd For Measuring Financial Transactions.
1-12.
No. There Is A Problem With Determining The Index In Order To
A Djust The Statements. The Items That Are Included In The
Index Mu St Be Representative. In Addition, The Prices Of Items
Change Becau Se Of Various Factors, Such As Quality,
Technology, And Inflation.
Yes. A Reasonable Adjustment To The Statements Can Be Made For Inflation.
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapter 1 Introduct
Ion To Financial Reporting
QUESTIONS
1- 1.
A The AICPA Is An Organization Of Cpas That Prior To 1973
. Ac Cepted The Primary Responsibility For The Development Of
Generall Y Accepted Accounting Principles. Their Role Was
Substantially Re Duced In 1973 When The Financial Accounting
Standards Board Was Established. Their Role Was Further
Reduced With The Esta Blishment Of The Public Company
Accounting Oversight Board W As Established In 2002.
b. The Financial Accounting Standards Board Replaced The Acc
Ounting Principles Board As The Primary Rule-
Making Body For Accounting Standards. It Is An Independent
Organization And Includes Members Other Than Public Acco
Untants.
c. The SEC Has The Authority To Determine Generally Accepted
A Ccounting Principles And To Regulate The Accounting
Profession. The SEC Has Elected To Leave Much Of The
Determination Of Generally Accepted Accounting Principles To
The Private Sector.
The Financial Accounting Standards Board Has Played The
Major Role In Establishing Accounting Standards Since 1973. R
Egulation Of The Accounting Profession Was Substantially
Turned Over To The Public Company Accounting Oversight
Board In 2 002.
1- 2.
Consistency Is Obtained Through The Application Of The Same A
Ccounting Principle From Period To Period. A Change In
Principl E Requires Statement Disclosure.
1- 3.
The Concept Of Historical Cost Determines The Balance Sheet
Valuatio N Of Land. The Realization Concept Requires That A
Transaction Needs To Occur For The Profit To Be Recognized.
1- 4. A. Entity E. Historical Cost
b. Realization F. Historical Cost
c. Materiality G. Disclosure
, d. Conservatism
1- 5. Entity Concept
, 1- 6.
Generally Accepted Accounting Principles Do Not Apply When A
Firm Does Not Appear To Be A Going Concern. If The Decision
Is Mad E That This Is Not A Going Concern, Then The Use Of
GAAP Would
Not Be Appropriate.
1- 7.
With The Time Period Assumption, Inaccuracies Of Accounting For
The Entity, Short Of Its Complete Life Span, Are Accepted. The
Assumptio N Is Made That The Entity Can Be Accounted For
Reasonably Accurat Ely For A Particular Period Of Time. In Other
Words, The Decision Is
Made To Accept Some Inaccuracy Because Of Incomplete
Informatio N About The Future In Exchange For More Timely Reporting.
The Stat Ements Are Considered To Be Meaningful Because Material
Inaccuraci Es Are Not Acceptable.
1- 8. It Is True That The Only Accurate Way To Account For The
Succes S Or Failure Of An Entity Is To Accumulate All
Transactions From The Opening Of Business Until The Business
Eventually Liquidates. But I
T Is Not Necessary That The Statements Be Completely Accurate In
O Rder For Them To Be Meaningful.
1- 9. A. A Year That Ends When Operations Are At A Low Ebb For The Year.
b. The Accounting Time Period Is Ended On December 31.
c. A Twelve-
Month Accounting Period That Ends At The End Of A Month
Oth Er Than December 31.
1-10. Money.
1-
11. When Money Does Not Hold A Stable Value, The Financial
Statements Can Lose Much Of Their Significance. To The Extent
That
Money Does Not Remain Stable, It Loses Usefulness As The
Standa Rd For Measuring Financial Transactions.
1-12.
No. There Is A Problem With Determining The Index In Order To
A Djust The Statements. The Items That Are Included In The
Index Mu St Be Representative. In Addition, The Prices Of Items
Change Becau Se Of Various Factors, Such As Quality,
Technology, And Inflation.
Yes. A Reasonable Adjustment To The Statements Can Be Made For Inflation.
