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 for
a 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 which 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 welfare
organization. A business typically is defined and treated as a separate entity
because the owners, creditors, investors, and other interested parties need to
evaluate its performance and its potential separately from other entities and from its
owners.
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 Flow Statement (c) Statement of Cash Flows
7. The dheading dof deach dof dthe dfour drequired dfinancial dstatements dshould
dinclude dthe d following: d
(a) Name dof dthe dentity d
(b) Name dof dthe dstatement d
(c) Date dof dthe dstatement, dor dthe dperiod dof dtime d
(d) Unit dof dmeasure d
8. (a) The dpurpose dof dthe dincome dstatement dis dto dpresent dinformation dabout
dthe d revenues, dexpenses, dand dthe d net dincome dof dan dentity dfor da
dspecified dperiod dof d time. d
(b) The dpurpose dof dthe dbalance dsheet dis dto dreport dthe dfinancial dposition dof
dan dentity d at da dgiven ddate, dthat dis, dto dreport dinformation dabout dthe
dassets, dliabilities dand d stockholders’ dequity dof dthe dentity das dof da dspecific
ddate. d
(c) The dpurpose dof dthe dstatement dof dcash dflows dis dto dpresent dinformation
dabout dthe d flow dof dcash dinto dthe dentity d(sources), dthe dflow dof dcash dout
dof dthe dentity d(uses), d and dthe dnet dincrease dor ddecrease din dcash dduring
dthe dperiod. d
(d) The dstatement dof dstockholders’ dequity dreports dthe dchanges din deach dof
dthe d company’s dstockholders’ dequity daccounts dduring d the daccounting
dperiod, d including dissue dand drepurchase dof dstock dand dthe dway dthat dnet
dincome dand d distribution dof ddividends daffected dthe dretained dearnings dof
dthe dcompany dduring d that dperiod. d
9. The dincome dstatement dand dthe dstatement dof dcash dflows dare ddated d―For
dthe dYear d Ended dDecember d31‖ dbecause dthey dreport dthe dinflows dand
doutflows dof dresources d during da dperiod dof dtime. dIn dcontrast, dthe dbalance
dsheet dis ddated d―At dDecember d31‖ d because dit drepresents dthe dresources,
dobligations, dand dstockholders’ dequity dat da d specific ddate. d
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 for
a 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 which 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 welfare
organization. A business typically is defined and treated as a separate entity
because the owners, creditors, investors, and other interested parties need to
evaluate its performance and its potential separately from other entities and from its
owners.
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 Flow Statement (c) Statement of Cash Flows
7. The dheading dof deach dof dthe dfour drequired dfinancial dstatements dshould
dinclude dthe d following: d
(a) Name dof dthe dentity d
(b) Name dof dthe dstatement d
(c) Date dof dthe dstatement, dor dthe dperiod dof dtime d
(d) Unit dof dmeasure d
8. (a) The dpurpose dof dthe dincome dstatement dis dto dpresent dinformation dabout
dthe d revenues, dexpenses, dand dthe d net dincome dof dan dentity dfor da
dspecified dperiod dof d time. d
(b) The dpurpose dof dthe dbalance dsheet dis dto dreport dthe dfinancial dposition dof
dan dentity d at da dgiven ddate, dthat dis, dto dreport dinformation dabout dthe
dassets, dliabilities dand d stockholders’ dequity dof dthe dentity das dof da dspecific
ddate. d
(c) The dpurpose dof dthe dstatement dof dcash dflows dis dto dpresent dinformation
dabout dthe d flow dof dcash dinto dthe dentity d(sources), dthe dflow dof dcash dout
dof dthe dentity d(uses), d and dthe dnet dincrease dor ddecrease din dcash dduring
dthe dperiod. d
(d) The dstatement dof dstockholders’ dequity dreports dthe dchanges din deach dof
dthe d company’s dstockholders’ dequity daccounts dduring d the daccounting
dperiod, d including dissue dand drepurchase dof dstock dand dthe dway dthat dnet
dincome dand d distribution dof ddividends daffected dthe dretained dearnings dof
dthe dcompany dduring d that dperiod. d
9. The dincome dstatement dand dthe dstatement dof dcash dflows dare ddated d―For
dthe dYear d Ended dDecember d31‖ dbecause dthey dreport dthe dinflows dand
doutflows dof dresources d during da dperiod dof dtime. dIn dcontrast, dthe dbalance
dsheet dis ddated d―At dDecember d31‖ d because dit drepresents dthe dresources,
dobligations, dand dstockholders’ dequity dat da d specific ddate. d
