SolutionpoManualpoForpoFinancialpoStatementpoAnalysis,
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chaptery 1
Introducty
iony toy Financialy Reporting
QUESTIONS
1-y1. a.
They AICPAy isy any organizationy ofy CPAsy thaty priory toy 1973y acyceptedy
they primaryy responsibilityy fory they developmenty ofy generallyyyaccept
edyaccountingyprinciples.y Theiry roley wasy substantiallyy reyducedy iny 197
3y wheny they Financialy Accountingy StandardsyyyBoardywasy established.
Theiryroleywasyfurtheryreducedywithytheyestayblishmen
ty ofy they Publicy Companyy Accountingy Oversighty Boardy wyasy establis
hedy iny 2002.
b. They Financialy Accountingy Standardsy Boardy replacedy they Accyounti
ngy Principlesy Boardy asy they primaryy rule-
makingy bodyy fory accountingy standards.y Ity isy any independentyorganizati
ony andy includesy membersy othery thany publicy acco
untants.
c. They SECy hasy they authorityy toy determiney generallyy acceptedy ayccounti
ngy principlesy andy toy regulatey they accountingy profession.yThey SECy
hasy electedy toy leavey muchy ofy they determinationy ofygenerallyy accepte
dy accountingy principlesy toy they privatey sector.
They Financialy Accountingy Standardsy Boardy hasy playedyyytheymajor
y roley iny establishingy accountingy standardsy sincey 1973.
Ry
egulationy ofy they accountingy professiony wasy substantiallyy turnedyover
y toy they Publicy Companyy Accountingy Oversighty Boardy iny 2y002.
1-y 2.
Consistencyyisyobtainedythroughytheyapplicationyofytheysameyayccounting
y principley fromy periody toy period.y Ay changey iny principlyey requiresy
statementy disclosure.
1-y 3.
They concepty ofy historicaly costy determinesy they balancey sheety valuatioyny
ofy land.y They realizationy concepty requiresy thaty ay transactiony needsytoy oc
cury fory they profity toy bey recognized.
1-y 4. a. Entity e. Historicaly cost
b. Realization f. Historicaly cost
c. Materiality g. Disclosure
, d. Conservatismy
1-y 5. Entityy concept
, 1-y 6.
Generallyy acceptedy accountingy principlesy doy noty applyy wheny ay firmydoes
y noty appeary toy bey ay goingy concern.
Ifyyytheyyydecisionyyyisyyymadyey
thaty thisy isy noty ay goingy concern,y theny they usey ofy GAAPy would
noty bey appropriate.
1-y 7.
Withy they timey periody assumption,y inaccuraciesy ofy accountingy fory theyentity,
y shorty ofy itsy completey lifey span,y arey accepted.y They assumptioyny isy m
adey thaty they entityy cany bey accountedy fory reasonablyy accuratyelyy fory a
y particulary periody ofy time. Iny othery words,y they decisiony is
madey toy accepty somey inaccuracyy becausey ofy incompletey informatioyn
yaboutytheyfuturey iny exchangey fory morey timelyy reporting.y They statyementsy a
rey consideredy toy bey meaningfuly becausey materialy inaccuraciyesy arey noty a
cceptable.
1-y8.
Ity isy truey thaty they onlyy accuratey wayy toy accounty fory they succesysy
ory failurey ofy any entityy isy toy accumulatey ally transactionsy fromy theyopeningy o
fy businessy untily they businessy eventuallyy liquidates. Buty i
ty isy noty necessaryy thaty they statementsy bey completelyy accuratey iny oyrdery
fory themy toy bey meaningful.
1- 9. a. Ay yeary thaty endsy wheny operationsy arey aty ay lowy ebby fory they year.
b. They accountingy timey periody isy endedy ony Decembery 31.
c. Ay twelve-
monthy accountingy periody thaty endsy aty they endy ofy ay monthy othyer
y thany Decembery 31.
1-10. Money.
1-
11.
Whenymoneyydoesynotyholdyaystableyvalue,ythey financialystatement
sy cany losey muchy ofy theiry significance. Toy they extenty that
moneyy doesy noty remainy stable,y ity losesy usefulnessy asy they standayrdy
fory measuringy financialy transactions.
1-12.
No.
Therey isy ay problemy withy determiningy they indexy iny ordery toy aydjust
y they statements.
They itemsy thaty arey includedy iny they indexy muysty bey representative.
y Iny addition,y they pricesy ofy itemsy changey becauysey ofy variousy factors,y s
uchy asy quality,y technology,y andy inflation.
Yes.y Ay reasonabley adjustmenty toy they statementsy cany bey madey fory inflation.
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chaptery 1
Introducty
iony toy Financialy Reporting
QUESTIONS
1-y1. a.
They AICPAy isy any organizationy ofy CPAsy thaty priory toy 1973y acyceptedy
they primaryy responsibilityy fory they developmenty ofy generallyyyaccept
edyaccountingyprinciples.y Theiry roley wasy substantiallyy reyducedy iny 197
3y wheny they Financialy Accountingy StandardsyyyBoardywasy established.
Theiryroleywasyfurtheryreducedywithytheyestayblishmen
ty ofy they Publicy Companyy Accountingy Oversighty Boardy wyasy establis
hedy iny 2002.
b. They Financialy Accountingy Standardsy Boardy replacedy they Accyounti
ngy Principlesy Boardy asy they primaryy rule-
makingy bodyy fory accountingy standards.y Ity isy any independentyorganizati
ony andy includesy membersy othery thany publicy acco
untants.
c. They SECy hasy they authorityy toy determiney generallyy acceptedy ayccounti
ngy principlesy andy toy regulatey they accountingy profession.yThey SECy
hasy electedy toy leavey muchy ofy they determinationy ofygenerallyy accepte
dy accountingy principlesy toy they privatey sector.
They Financialy Accountingy Standardsy Boardy hasy playedyyytheymajor
y roley iny establishingy accountingy standardsy sincey 1973.
Ry
egulationy ofy they accountingy professiony wasy substantiallyy turnedyover
y toy they Publicy Companyy Accountingy Oversighty Boardy iny 2y002.
1-y 2.
Consistencyyisyobtainedythroughytheyapplicationyofytheysameyayccounting
y principley fromy periody toy period.y Ay changey iny principlyey requiresy
statementy disclosure.
1-y 3.
They concepty ofy historicaly costy determinesy they balancey sheety valuatioyny
ofy land.y They realizationy concepty requiresy thaty ay transactiony needsytoy oc
cury fory they profity toy bey recognized.
1-y 4. a. Entity e. Historicaly cost
b. Realization f. Historicaly cost
c. Materiality g. Disclosure
, d. Conservatismy
1-y 5. Entityy concept
, 1-y 6.
Generallyy acceptedy accountingy principlesy doy noty applyy wheny ay firmydoes
y noty appeary toy bey ay goingy concern.
Ifyyytheyyydecisionyyyisyyymadyey
thaty thisy isy noty ay goingy concern,y theny they usey ofy GAAPy would
noty bey appropriate.
1-y 7.
Withy they timey periody assumption,y inaccuraciesy ofy accountingy fory theyentity,
y shorty ofy itsy completey lifey span,y arey accepted.y They assumptioyny isy m
adey thaty they entityy cany bey accountedy fory reasonablyy accuratyelyy fory a
y particulary periody ofy time. Iny othery words,y they decisiony is
madey toy accepty somey inaccuracyy becausey ofy incompletey informatioyn
yaboutytheyfuturey iny exchangey fory morey timelyy reporting.y They statyementsy a
rey consideredy toy bey meaningfuly becausey materialy inaccuraciyesy arey noty a
cceptable.
1-y8.
Ity isy truey thaty they onlyy accuratey wayy toy accounty fory they succesysy
ory failurey ofy any entityy isy toy accumulatey ally transactionsy fromy theyopeningy o
fy businessy untily they businessy eventuallyy liquidates. Buty i
ty isy noty necessaryy thaty they statementsy bey completelyy accuratey iny oyrdery
fory themy toy bey meaningful.
1- 9. a. Ay yeary thaty endsy wheny operationsy arey aty ay lowy ebby fory they year.
b. They accountingy timey periody isy endedy ony Decembery 31.
c. Ay twelve-
monthy accountingy periody thaty endsy aty they endy ofy ay monthy othyer
y thany Decembery 31.
1-10. Money.
1-
11.
Whenymoneyydoesynotyholdyaystableyvalue,ythey financialystatement
sy cany losey muchy ofy theiry significance. Toy they extenty that
moneyy doesy noty remainy stable,y ity losesy usefulnessy asy they standayrdy
fory measuringy financialy transactions.
1-12.
No.
Therey isy ay problemy withy determiningy they indexy iny ordery toy aydjust
y they statements.
They itemsy thaty arey includedy iny they indexy muysty bey representative.
y Iny addition,y they pricesy ofy itemsy changey becauysey ofy variousy factors,y s
uchy asy quality,y technology,y andy inflation.
Yes.y Ay reasonabley adjustmenty toy they statementsy cany bey madey fory inflation.
