SOLUTION MANUAL FOR
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Financial Accounting 11th Edition
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by Robert Libby, All Chapters 1 - 13
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,TABLE OF CONTENTS n n n
CHAPTER 1: Financial Statements and Business Decisions
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Focus Company: Le-Nature’s Inc.
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CHAPTER 2: Investing and Financing Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 3: Operating Decisions and the Accounting System
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Focus Company: Chipotle Mexican Grill
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CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
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Focus Company: Chipotle Mexican Grill
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CHAPTER 5: Communicating and Analyzing Accounting Information
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Focus Company: Apple Inc.
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CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
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Focus Company: Skechers U.S.A.
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CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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Focus Company: Harley-Davidson, Inc.
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CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
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n Resources
Focus Company: FedEx Corporation
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CHAPTER 9: Reporting and Interpreting Liabilities
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Focus Company: Starbucks
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CHAPTER 10: Reporting and Interpreting Bond Securities
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Focus Company: Amazon
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CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
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Focus Company: Microsoft
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CHAPTER 12: Statement of Cash Flows
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Focus Company: National Beverage Corporation
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CHAPTER 13: Analyzing Financial Statements
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Focus Company: The Home Depot
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,Chapter 1 n
Financial Statements and Business Decisions n n n n
ANSWERS TO QUESTIONS n n
1. Accounting is a system that collects and processes (analyzes, measures, and
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records) financial information about an organization and reports that information to
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decision makers.
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2. Financial accounting involves preparation of the four basic financial statements and
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related disclosures for external decision makers. Managerial accounting involves the
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preparation of detailed plans, budgets, forecasts, and performance reports for internal
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decision makers.
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3. Financial reports are used by both internal and external groups and individuals. The
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internal groups are comprised of the various managers of the entity. The external
n n n n n n n n n n n n n
groups include the owners, investors, creditors, governmental agencies, other
n n n n n n n n n
interested parties, and the public at large.
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4. Investors purchase all or part of a business and hope to gain by receiving part of what
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the company earns and/or selling their ownership interest in the company in the
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future at a higher price than they paid. Creditors lend money to a company fora
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specific length of time and hope to gain by charging interest on the loan.
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, 5. In a society, each organization can be defined as a separate accounting entity. An
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accounting entity is the organization for which financial data are to be collected. Typical
n n n n n n n n n n n n n n
accounting entities are a business, a church, a governmental unit, a university and
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other nonprofit organizations such as a hospital and a welfare organization. A
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business typically is defined and treated as a separate entity because the owners,
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creditors, investors, and other interested parties need to evaluate its performance and
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its potential separately from other entities and from itsowners.
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6. Name of Statement n n Alternative Title n
(a) Income Statement n (a) Statement of Earnings; Statement of
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Income; Statement of Operations n n n
(b) Balance Sheet n (b) Statement of Financial Position
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(c) Cash Flow Statement n n (c) Statement of Cash Flows
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7. The heading of each of the four required financial statements should include the
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following:
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(a) Name of the entity n n n
(b) Name of the statement n n n
(c) Date of the statement, or the period of time n n n n n n n n
(d) Unit of measure n n
8. (a) The purpose of the income statement is to present information about the
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revenues, expenses, and the net income of an entity for a specified period of
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time.
n
(b) The purpose of the balance sheet is to report the financial position of an entityat a
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given date, that is, to report information about the assets, liabilities and
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stockholders’ equity of the entity as of a specific date.
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(c) The purpose of the statement of cash flows is to present information about theflow
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of cash into the entity (sources), the flow of cash out of the entity (uses), and the
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net increase or decrease in cash during the period.
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(d) The statement of stockholders’ equity reports the changes in each of the
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company’s stockholders’ equity accounts during the accounting period,
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including issue and repurchase of stock and the way that net income and
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distribution of dividends affected the retained earnings of the company during
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that period.
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9. The income statement and the statement of cash flows are dated ―For the Year
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Ended December 31‖ because they report the inflows and outflows of resources
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during a period of time. In contrast, the balance sheet is dated ―At December 31‖
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because it represents the resources, obligations, and stockholders’ equity at a
n n n n n n n n n n n
specific date.
n n
n n
Financial Accounting 11th Edition
n n n n
by Robert Libby, All Chapters 1 - 13
n n n n n n n
,TABLE OF CONTENTS n n n
CHAPTER 1: Financial Statements and Business Decisions
n n n n n n
Focus Company: Le-Nature’s Inc.
n n n
CHAPTER 2: Investing and Financing Decisions and the Accounting System
n n n n n n n n n
Focus Company: Chipotle Mexican Grill
n n n n
CHAPTER 3: Operating Decisions and the Accounting System
n n n n n n n
Focus Company: Chipotle Mexican Grill
n n n n
CHAPTER 4: Adjustments, Financial Statements, and the Closing Process
n n n n n n n n
Focus Company: Chipotle Mexican Grill
n n n n
CHAPTER 5: Communicating and Analyzing Accounting Information
n n n n n n
Focus Company: Apple Inc.
n n n
CHAPTER 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash
n n n n n n n n n
Focus Company: Skechers U.S.A.
n n n
CHAPTER 7: Reporting and Interpreting Cost of Goods Sold and Inventory
n n n n n n n n n n
Focus Company: Harley-Davidson, Inc.
n n n
CHAPTER 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural
n n n n n n n n n n n
n Resources
Focus Company: FedEx Corporation
n n n
CHAPTER 9: Reporting and Interpreting Liabilities
n n n n n
Focus Company: Starbucks
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CHAPTER 10: Reporting and Interpreting Bond Securities
n n n n n n
Focus Company: Amazon
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CHAPTER 11: Reporting and Interpreting Stockholders’ Equity
n n n n n n
Focus Company: Microsoft
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CHAPTER 12: Statement of Cash Flows
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Focus Company: National Beverage Corporation
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CHAPTER 13: Analyzing Financial Statements
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Focus Company: The Home Depot
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,Chapter 1 n
Financial Statements and Business Decisions n n n n
ANSWERS TO QUESTIONS n n
1. Accounting is a system that collects and processes (analyzes, measures, and
n n n n n n n n n n
records) financial information about an organization and reports that information to
n n n n n n n n n n n
decision makers.
n n
2. Financial accounting involves preparation of the four basic financial statements and
n n n n n n n n n n
related disclosures for external decision makers. Managerial accounting involves the
n n n n n n n n n n
preparation of detailed plans, budgets, forecasts, and performance reports for internal
n n n n n n n n n n n
decision makers.
n n
3. Financial reports are used by both internal and external groups and individuals. The
n n n n n n n n n n n n
internal groups are comprised of the various managers of the entity. The external
n n n n n n n n n n n n n
groups include the owners, investors, creditors, governmental agencies, other
n n n n n n n n n
interested parties, and the public at large.
n n n n n n n
4. Investors purchase all or part of a business and hope to gain by receiving part of what
n n n n n n n n n n n n n n n n
the company earns and/or selling their ownership interest in the company in the
n n n n n n n n n n n n n
future at a higher price than they paid. Creditors lend money to a company fora
n n n n n n n n n n n n n n n n
specific length of time and hope to gain by charging interest on the loan.
n n n n n n n n n n n n n n
, 5. In a society, each organization can be defined as a separate accounting entity. An
n n n n n n n n n n n n n
accounting entity is the organization for which financial data are to be collected. Typical
n n n n n n n n n n n n n n
accounting entities are a business, a church, a governmental unit, a university and
n n n n n n n n n n n n n
other nonprofit organizations such as a hospital and a welfare organization. A
n n n n n n n n n n n n
business typically is defined and treated as a separate entity because the owners,
n n n n n n n n n n n n n
creditors, investors, and other interested parties need to evaluate its performance and
n n n n n n n n n n n n
its potential separately from other entities and from itsowners.
n n n n n n n n n n
6. Name of Statement n n Alternative Title n
(a) Income Statement n (a) Statement of Earnings; Statement of
n n n n n
Income; Statement of Operations n n n
(b) Balance Sheet n (b) Statement of Financial Position
n n n n
(c) Cash Flow Statement n n (c) Statement of Cash Flows
n n n n
7. The heading of each of the four required financial statements should include the
n n n n n n n n n n n n
following:
n
(a) Name of the entity n n n
(b) Name of the statement n n n
(c) Date of the statement, or the period of time n n n n n n n n
(d) Unit of measure n n
8. (a) The purpose of the income statement is to present information about the
n n n n n n n n n n n
revenues, expenses, and the net income of an entity for a specified period of
n n n n n n n n n n n n n n
time.
n
(b) The purpose of the balance sheet is to report the financial position of an entityat a
n n n n n n n n n n n n n n n n
given date, that is, to report information about the assets, liabilities and
n n n n n n n n n n n n
stockholders’ equity of the entity as of a specific date.
n n n n n n n n n n
(c) The purpose of the statement of cash flows is to present information about theflow
n n n n n n n n n n n n n n
of cash into the entity (sources), the flow of cash out of the entity (uses), and the
n n n n n n n n n n n n n n n n n
net increase or decrease in cash during the period.
n n n n n n n n n
(d) The statement of stockholders’ equity reports the changes in each of the
n n n n n n n n n n n
company’s stockholders’ equity accounts during the accounting period,
n n n n n n n n
including issue and repurchase of stock and the way that net income and
n n n n n n n n n n n n n
distribution of dividends affected the retained earnings of the company during
n n n n n n n n n n n
that period.
n n
9. The income statement and the statement of cash flows are dated ―For the Year
n n n n n n n n n n n n n
Ended December 31‖ because they report the inflows and outflows of resources
n n n n n n n n n n n n
during a period of time. In contrast, the balance sheet is dated ―At December 31‖
n n n n n n n n n n n n n n n
because it represents the resources, obligations, and stockholders’ equity at a
n n n n n n n n n n n
specific date.
n n
