SOLUTION MANUAL For Intermediate Accounting, 11th Edition by David Spiceland, Mark Nelson, | Verified Chapters 1 - 21 | Complete Newest Version

Solution Manual For Intermediate Accounting, 11th Edition
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by David Spiceland, Mark Nelson, Wayne Thomas, Jennifer
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,Chapter 1 hs hs Environment and Theoretical Structure hs hs hs



Financial Accounting hs




Question 1–1 hs


Financial accounting is concerned with providing relevant financial
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hsinformation about various kinds of organizations to different types of external
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hsusers. The primary focus of financial accounting is on the financial information
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hsprovided by profit- oriented companies to their present and potential investors
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hsand creditors.
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Question 1–2 hs


Resources are efficiently allocated if they are given to enterprises that will
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hsuse them to provide goods and services desired by society and not to enterprises
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hsthat will waste them. The capital markets are the mechanism that fosters this
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h sefficient allocation of resources.
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Question 1–3 hs


Two extremely important variables that must be considered in any
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hsinvestment decision are the expected rate of return and the uncertainty or risk of
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hsthat expected return.
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Question 1–4 hs


In the long run, a company will be able to provide investors and creditors
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hswith a rate of return only if it can generate a profit. That is, it must be able to
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hsuse the resources provided to it to generate cash receipts from selling a product
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hsor service that exceed the cash disbursements necessary to provide that product
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hsor service.
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Question 1–5 hs


The primary objective of financial accounting is to provide investors and
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hscreditors with information that will help them make investment and credit
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hsdecisions.

Question 1–6 hs


Net operating cash flows are the difference between cash receipts and cash
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hsdisbursements during a period of time from transactions related to providing
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hsgoods and services to customers. Net operating cash flows may not be a good
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hsindicator of future cash flows because, by ignoring uncompleted transactions,
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hsthey may not match the accomplishments and sacrifices of the period.
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,Question 1–7 hs


GAAP (generally accepted accounting principles) are a dynamic set of both
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broad and specific guidelines that a company should follow in measuring and
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reporting the information in their financial statements and related notes. It is
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important that all companies follow GAAP so that investors can compare
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financial information across companies to make their resource allocation
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decisions.
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Question 1–8 hs


In 1934, Congress created the SEC and gave it the job of setting accounting
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and reporting standards for companies whose securities are publicly traded. The
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SEC has retained the power, but has relied on private sector bodies to create the
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standards. The current private sector body responsible for setting accounting
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standards is the FASB.
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Question 1–9 hs


Auditors are independent, professional accountants who examine financial
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statements to express an opinion. The opinion reflects the auditors‗ assessment of
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the statements' fairness, which is determined by the extent to which they are
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prepared in compliance with GAAP. The auditor adds credibility to the financial
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statements, which increases the confidence of capital market participants relying
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on that information.
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, Question 1–10 hs


Key provisions included in the text are:
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 Creation of the Public Company Accounting Oversight Board
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 Regulate types of non-audit audit services hs hs hs hs hs


 Require lead audit partner rotation every 5 year
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 Corporate executive accountability hs hs


 Addresses conflicts of interest for security analysts
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 Internal control reporting and auditor opinion about controls
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Question 1–11 hs


New accounting standards, or changes in standards, can have significant
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differential effects on companies, investors and creditors, and other interest
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groups by causing redistribution of wealth. There also is the possibility that
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standards could harm the economy as a whole by causing companies to change
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their behavior.
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Question 1–12 hs


The FASB undertakes a series of elaborate information gathering steps before
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issuing an accounting standard to determine consensus as to the preferred method
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of accounting, as well as to anticipate adverse economic consequences.
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Question 1–13 hs


The purpose of the conceptual framework is to guide the Board in
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developing accounting standards by providing an underlying foundation and basic
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reasoning on which to consider merits of alternatives. The framework does not
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prescribe GAAP.
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