SOLUTION MANUAL FORzx zx
Financial Accounting 11th Edition
zx zx zx zx
Robert Libby, Patricia Libby, Frank Hodge
zx zx zx zx zx
,SOLUTION MANUAL FOR zx zx
Financial zxAccounting zx11th zxEdition zxRobert
zxLibby, zxPatricia zxLibby, zxFrank zxHodge
Chapter 1 zx
Financial Statements and Business Decisions
zx zx zx zx
ANSWERS zxTO zxQUESTIONS
1. Accounting zxis zxa zxsystem zxthat zxcollects zxand zxprocesses zx(analyzes,
zxmeasures, zxand zxrecords) zxfinancial zxinformation zxabout zxan zxorganization
zxand zxreports zxthat zxinformation zxto zxdecision zxmakers.
2. Financial zxaccounting zxinvolves zxpreparation zxof zxthe zxfour zxbasic zxfinancial
zxstatements zxand zxrelated zxdisclosures zxfor zxexternal zxdecision zxmakers.
zxManagerial zxaccounting zxinvolves zxthe zxpreparation zxof zxdetailed zxplans,
zxbudgets, zxforecasts, zxand zxperformance zxreports zxfor zxinternal zxdecision
zxmakers.
3. Financial zxreports zxare zxused zxby zxboth zxinternal zxand zxexternal zxgroups zxand
zxindividuals. zxThe zxinternal zxgroups zxare zxcomprised zxof zxthe zxvarious
zxmanagers zxof zxthe zxentity. zxThe zxexternal zxgroups zxinclude zxthe zxowners,
zxinvestors, zxcreditors, zxgovernmental zxagencies, zxother zxinterested zxparties,
zxand zxthe zxpublic zxat zxlarge.
4. Investors zxpurchase zxall zxor zxpart zxof zxa zxbusiness zxand zxhope zxto zxgain zxby
zxreceiving zxpart zxof zxwhat zxthe zxcompany zxearns zxand/or zxselling zxtheir
zxownership zxinterest zxin zxthe zxcompany zxin zxthe zxfuture zxat zxa zxhigher zxprice
zxthan zxthey zxpaid. zxCreditors zxlend zxmoney zxto zxa zxcompany zxfor zxa zxspecific
zxlength zxof zxtime zxand zxhope zxto zxgain zxby zxcharging zxinterest zxon zxthe zxloan.
,5. In zxa zxsociety, zxeach zxorganization zxcan zxbe zxdefined zxas zxa zxseparate
zxaccounting zxentity. zxAn zxaccounting zxentity zxis zxthe zxorganization zxfor zxwhich
zxfinancial zxdata zxare zxto zxbe zxcollected. zxTypical zxaccounting zxentities zxare zxa
zxbusiness, zxa zxchurch, zxa zxgovernmental zxunit, zxa zxuniversity zxand zxother
zxnonprofit zxorganizations zxsuch zxas zxa zxhospital zxand zxa zxwelfare zxorganization.
zxA zxbusiness zxtypically zxis zxdefined zxand zxtreated zxas zxa zxseparate zxentity
zxbecause zxthe zxowners, zxcreditors, zxinvestors, zxand zxother zxinterested zxparties
zxneed zxto zxevaluate zxits zxperformance zxand zxits zxpotential zxseparately zxfrom
zxother zxentities zxand zxfrom zxits zxowners.
6. Name zxof zxStatement Alternative zxTitle
(a) Income zxStatement (a) zxStatement zxof zxEarnings; zxStatement zxof
Income; zxStatement zxof zxOperations
(b) Balance zxSheet (b) zxStatement zxof zxFinancial zxPosition
(c) Cash zxFlow zxStatement (c) z x Statement zxof zxCash zxFlows
7. The zxheading zxof zxeach zxof zxthe zxfour zxrequired zxfinancial zxstatements
zxshould zxinclude zxthe zxfollowing:
(a) Name zxof zxthe zxentity
(b) Name zxof zxthe zxstatement
(c) Date zxof zxthe zxstatement, zxor zxthe zxperiod zxof zxtime
(d) Unit zxof zxmeasure
8. (a) The zxpurpose zxof zxthe zxincome zxstatement zxis zxto zxpresent zxinformation
zxabout zxthe zxrevenues, zxexpenses, zxand zxthe zxnet zxincome zxof zxan zxentity
zxfor zxa zxspecified zxperiod zxof zxtime.
(b) The zxpurpose zxof zxthe zxbalance zxsheet zxis zxto zxreport zxthe zxfinancial
zxposition zxof zxan zxentity zxat zxa zxgiven zxdate, zxthat zxis, zxto zxreport
zxinformation zxabout zxthe zxassets, zxliabilities zxand zxstockholders’ zxequity
zxof zxthe zxentity zxas zxof zxa zxspecific zxdate.
(c) The zxpurpose zxof zxthe zxstatement zxof zxcash zxflows zxis zxto zxpresent
zxinformation zxabout zxthe zxflow zxof zxcash zxinto zxthe zxentity zx(sources), zxthe
zxflow zxof zxcash zxout zxof zxthe zxentity zx(uses), zxand zxthe zxnet zxincrease zxor
zxdecrease zxin zxcash zxduring zxthe zxperiod.
(d) The zxstatement zxof zxstockholders’ zxequity zxreports zxthe zxchanges zxin
zxeach zxof zxthe zxcompany’s zxstockholders’ zxequity zxaccounts zxduring zxthe
zxaccounting zxperiod, zxincluding zxissue zxand zxrepurchase zxof zxstock zxand
zxthe zxway zxthat zxnet zxincome zxand zxdistribution zxof zxdividends zxaffected
zxthe zxretained zxearnings zxof zxthe zxcompany zxduring zxthat zxperiod.
9. The zxincome zxstatement zxand zxthe zxstatement zxof zxcash zxflows zxare zxdated
zx―For zxthe zxYear zxEnded zxDecember zx31‖ zxbecause zxthey zxreport zxthe
zxinflows zxand zxoutflows zxof zxresources zxduring zxa zxperiod zxof zxtime. zxIn
zxcontrast, zxthe zxbalance zxsheet zxis zxdated zx―At zxDecember zx31‖ zxbecause zxit
zxrepresents zxthe zxresources, zxobligations, zxand zxstockholders’ zxequity zxat zxa
zxspecific zxdate.
, 10. Assets zxare zximportant zxto zxcreditors zxand zxinvestors zxbecause zxassets
zxprovide zxa zxbasis zxfor zxjudging zxwhether zxsufficient zxresources zxare zxavailable
zxto zxoperate zxthe zxcompany. zxAssets zxare zxalso zximportant zxbecause zxthey
zxcould zxbe zxsold zxfor zxcash zxin zxthe zxevent zxthe zxcompany zxgoes zxout zxof
zxbusiness. zxLiabilities zxare zximportant zxto zxcreditors zxand zxinvestors zxbecause
zxthe zxcompany zxmust zxbe zxable zxto zxgenerate zxsufficient zxcash zxfrom
zxoperations zxor zxfurther zxborrowing zxto zxmeet zxthe zxpayments zxrequired zxby
zxdebt zxagreements. zxIf zxa zxbusiness zxdoes zxnot zxpay zxits zxcreditors, zxthe zxlaw
zxmay zxgive zxthe zxcreditors zxthe zxright zxto zxforce zxthe zxsale zxof zxassets
zxsufficient zxto zxmeet zxtheir zxclaims.
11. Net zxincome zxis zxthe zxexcess zxof zxtotal zxrevenues zxover zxtotal zxexpenses.
zxNet zxloss zxis zxthe zxexcess zxof zxtotal zxexpenses zxover zxtotal zxrevenues.
12. The zxequation zxfor zxthe zxincome zxstatement zxis zxRevenues zx- zxExpenses zx=
zxNet zxIncome zx(or zxNet zxLoss zxif zxthe zxamount zxis zxnegative). zxThus, zxthe
zxthree zxmajor zxitems zxreported zxon zxthe zxincome zxstatement zxare zx(1)
zxrevenues, zx(2) zxexpenses, zxand zx(3) zxnet zxincome.
13. The zxequation zxfor zxthe zxbalance zxsheet zx(also zxknown zxas zxthe zxbasic
zxaccounting zxequation) zxis: zxAssets zx= zxLiabilities zx+ zxStockholders’ zxEquity.
zxAssets zxare zxthe zxprobable zx(expected) zxfuture zxeconomic zxbenefits zxowned
zxby zxthe zxentity zxas zxa zxresult zxof zxpast zxtransactions. z x They zxare zxthe
zxresources zxowned zxby zxthe zxbusiness zxat zxa zxgiven zxpoint zxin zxtime zxsuch zxas
zxcash, zxreceivables, zxinventory, zxmachinery, zxbuildings, zxland, zxand zxpatents.
zxLiabilities zxare zxprobable zx(expected) zxdebts zxor zxobligations zxof zxthe zxentity
zxas zxa zxresult zxof zxpast zxtransactions zxthat zxwill zxbe zxpaid zxwith zxassets zxor
zxservices zxin zxthe zxfuture. zxThey zxare zxthe zxobligations zxof zxthe zxentity zxsuch
zxas zxaccounts zxpayable, zxnotes zxpayable, zxand zxbonds zxpayable.
zxStockholders’ zxequity zxis zxfinancing zxprovided zxby zxowners zxof zxthe zxbusiness
zxand zxoperations. zxIt zxis zxthe zxclaim zxof zxthe zxowners zxto zxthe zxassets zxof zxthe
zxbusiness zxafter zxthe zxcreditors’ zxclaims zxhave zxbeen zxsatisfied. zxIt zxmay zxbe
zxthought zxof zxas zxthe zxresidual zxinterest zxbecause zxit zxrepresents zxassets
zxminus zxliabilities.
14. The zxequation zxfor zxthe zxstatement zxof zxcash zxflows zxis: zxCash zxflows zxfrom zxoperating
zxactivities
+ zxCash zxflows zxfrom zxinvesting zxactivities zx+ zxCash zxflows zxfrom zxfinancing
zxactivities zx= zxChange zxin zxcash zxfor zxthe zxperiod. zxThe zxnet zxcash zxflows zxfor
zxthe zxperiod zxrepresent zxthe zxincrease zxor zxdecrease zxin zxcash zxthat zxoccurred
zxduring zxthe zxperiod. zxCash zxflows zxfrom zxoperating zxactivities zxare zxcash zxflows
zxdirectly zxrelated zxto zxearning zxincome zx(normal zxbusiness zxactivity zxincluding
zxinterest zxpaid zxand zxincome zxtaxes zxpaid). zxCash zxflows zxfrom zxinvesting
zxactivities zxinclude zxcash zxflows zxthat zxare zxrelated zxto zxthe zxacquisition zxor zxsale
zxof zxproductive zxassets zxused zxby zxthe zxcompany. zxCash zxflows zxfrom zxfinancing
zxactivities zxare zxdirectly zxrelated zxto zxthe zxfinancing zxof zxthe zxenterprise zxitself.
15. The zxretained zxearnings zxequation zxis: zxBeginning zxRetained zxEarnings zx+
zxNet zxIncome zx- zxDividends zx= zxEnding zxRetained zxEarnings. zxIt zxbegins
zxwith zxbeginning-of-the-year zxRetained zxEarnings zxwhich zxis zxthe zxprior
zxyear’s zxending zxretained zxearnings zxreported zxon zxthe zxbalance zxsheet.
z x The zxcurrent zxyear's zxNet zxIncome zxreported zxon zxthe zxincome zxstatement
zxis zxadded zxand zxthe zxcurrent zxyear's zxDividends zxare zxsubtracted zxfrom zxthis
