Exam (elaborations)

Solution Manual for Intermediate Accounting 18th Edition, by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield .Chapter 1- 23 | Complete Guide A+

Name: Solution Manual for Intermediate Accounting 18th Edition, by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield .Chapter 1- 23 | Complete Guide A+
SKU: doc_4130343
Rating: 4.67 (3 reviews)
Author: TestsBanks

3 reviews

262 views 6 purchases

Course
West VirginaUniversity

Institution
West VirginaUniversity

Book
Intermediate Accounting

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-1 Complete Solution Manual and Instructor Resource for Intermediate Accounting, 18th Edition 18th Edition, by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield. ISBN- Chapter 1 ...

[Show more]

Preview 10 out of 1977 pages

View example

Uploaded on January 3, 2024
Number of pages 1977
Written in 2023/2024
Type Exam (elaborations)
Contains Questions & answers

warfield isbn
solution manual and instructor resource for
intermediate accounting 18th edition 18th edition
donald e kieso jerry j weygandt and terry d

Book Title:Intermediate Accounting

Author(s):Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Edition:2022
ISBN:9781119790976
Edition:Unknown

Exam (elaborations)
Test Bank for Intermediate Accounting 18th Edition by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield|9781119778899| All Chapters 1-23|LATEST
Exam (elaborations)
Test Bank for Intermediate Accounting 18th Edition by Kieso, Weygandt and Warfield, ISBN: 9781119790976, All 23 Chapters Fully Covered, Verified Latest Edition Newest Version
Exam (elaborations)
Test Bank for Intermediate Accounting 18th Edition by Kieso, Weygandt and Warfield, ISBN: 9781119790976, All 23 Chapters Covered, Verified Latest Edition

3 reviews

By: nguyentukyduyen0803 • 1 month ago

By: TestsBanks • 1 month ago

Thank you for the positive review. If you're Looking for Any Study Materials (exams, test bank, ATI, Hesi etc.) Contact me , we’re looking forward to hear from you soon! & HAVE A GREAT DAY!!!!!!!

By: paintera3 • 5 months ago

By: TestsBanks • 5 months ago

Thank you So Much for the positive review. If you're Looking for Any Study Materials (exams, test bank, ATI, Hesi etc.) Contact me , we’re looking forward to hear from you soon! & HAVE A GREAT DAY!!!!!!!

By: maxmolinari26 • 6 months ago

By: TestsBanks • 6 months ago

Thank you for the positive review. If you're Looking for Any Study Materials (exams, test bank, ATI, Hesi etc.) Contact me , we’re looking forward to hear from you soon! & HAVE A GREAT DAY!!!!!!!

TestsBanks

Member since 3 year 336 documents sold

CA$21.57

Added

Add to cart

Add to wishlist

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

Complete
Solution Manual and Instructor Resource for
Intermediate Accounting, 18th Edition 18th Edition, by
Donald E. Kieso, Jerry J. Weygandt and Terry D.
Warfield. ISBN-13 978-1119790976

Chapter 1
Financial Accounting and Accounting Standards

Assignment Classification Table (By Topic)

Topics Questions Brief Exercises Critical
Exercises Thinking

1. Environment of 1,2, 3,4 1 1 1
accounting, principles,
objectives, standards,
accounting theory.

2. Authoritative 5,6, 7,8 2 2 2
pronouncements and
rule-making bodies.
3. Conceptual framework- 9, 10 3 3,4
general, objective of
financial reporting.
4. Qualitative characteristics of 11,12, 13, 14, 3,4, 5, 6, 7 4,5,6 5, 10
accounting. 15, 16,17
5. Elements of 18, 19 8, 9 7
financial
statements.
6. Basic assumptions and 20, 21, 22, 23, 10, 11, 12, 4, 8, 9, 10, 6, 7, 8, 9, 11
principles. 24, 25, 26, 27, 13, 14 11, 12
28, 29, 30,31
7. Cost constraint. 32,33,34
8. Role of pressure groups. 35, 36 12, 14, 15, 16,
17
9. Ethical issues. 37, 38,39,40 13

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-1

, Assignment Classification Table (By Learning Objective)

Learning Objectives Questions Brief Exercises Critical
Exercises Thinking

1. Describe the financial reporting 1, 2, 3, 4, 1, 2 1, 2 1
environment, major standard- 5, 6, 7, 8
setting bodies, and the meaning
of generally accepted accounting
principles (GAAP).
2. Describe the components and 9, 10, 11, 12, 3, 5, 6, 3, 4, 5, 6, 7 2,3,4, 5,
usefulness of the conceptual 13, 14, 15, 16, 7, 8,9 10
framework. 17, 18, 19

3. Discuss the basic assumptions 20, 21, 22, 23, 4, 10, 11, 8, 9, 10, 11, 6, 7, 8, 9,
and principles of accounting. 24, 25, 26, 27, 12, 13, 14 12 11, 12
28, 29, 31,
32, 33, 34
4. Identify the major challenges in 30, 35, 36, 37, 2 11, 13, 14,
the financial reporting 38, 39,40 15, 16
environment.

Assignment Characteristics Table (Time on Task)

Item Description Level of Time
Difficulty (minutes)
E1.1 Need for GAAP. Simple 15-20
E1.2 Financial reporting and accounting standards. Simple 15-20
E1.3 Usefulness, objective of financial reporting. Simple 15-20
E1.4 Usefulness, objective of financial reporting, Simple 15-20
qualitative characteristics.
E1.5 Qualitative characteristics. Moderate 20-30
E1.6 Qualitative characteristics. Simple 15-20
E1.7 Elements of financial statements. Simple 15-20
E1.8 Assumptions, principles, and constraint. Simple 15-20
E1.9 Assumptions, principles, and constraint. Moderate 20-25
E1.10 Full disclosure principle. Complex 20-25
E1.11 Accounting principles and assumptions- Moderate 20-25
E1.12 comprehensive.
Accounting principles-comprehensive. Moderate 20-25

CT1.1 Securities and Exchange Commission. Moderate 30-40
CT1.2 Conceptual framework-general. Simple 20-25
CT1.3 Conceptual framework-general. Simple 25-35
CT1.4 Objective of financial reporting. Moderate 25-35
CT1.5 Qualitative characteristics. Moderate 30-35

5-1-2 Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)

, CT1.6 Revenue recognition principle. Complex 25-30
CT1.7 Expense recognition principle. Complex 20-25
CT1.8 Expense recognition principle. Moderate 20-25
CT1.9 Expense recognition principle. Moderate 20-30
CT1.10 Qualitative characteristics. Moderate 20-30
CT1.11 Expense recognition principle. Moderate 20-25
CT1.12 Cost Constraint. Moderate 30-35
CT1.13 Rule-making Issues. Complex 20-25
CT1.14 Models for setting GAAP. Simple 15-20
CT1.15 Economic consequences. Moderate 25-35
CT1.16 GAAP and economic consequences. Moderate 25-35

Answers to Questions

1. If a company‘s financial performance is measured accurately, fairly, and on a timely basis, the right
managers and companies can attract investment capital. Unreliable and irrelevant information leads
to poor capital allocation, which adversely affects the efficiency of the securities market.
LO: 1, Bloom: K, Difficulty: Simple, Time: 1-3, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

2. The objective of general purpose financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders, and other creditors
in making decisions about providing resources to the entity through equity investments and loans or
other forms of credit. Information that is decision-useful to capital providers (investors) may also be
useful to other users of financial reporting who are not investors.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Decision Making

3. Investors are interested in financial reporting because it provides information that is useful for
making decisions (referred to as the decision-usefulness approach). When making these
decisions, investors are interested in assessing the company‘s (1) ability to generate net cash
inflows and (2) management‘s ability to protect and enhance the capital providers‘ investments.
Financial reporting should therefore help investors assess the amounts, timing, and uncertainty of
prospective cash inflows from dividends or interest, and the proceeds from the sale, redemption,
or maturity of securities or loans. For investors to make these assessments, the economic
resources of an enterprise, the claims to those resources, and the changes in them must be
understood.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Decision Making

4. A common set of financial accounting and reporting standards applied by all businesses and
entities should produce financial statements which are reasonably comparable. Without a common
set of standards, each enterprise could, and would, develop a theory structure and set of
practices, resulting in noncomparability among the financial statements of enterprises.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

5. The SEC has the power to prescribe, in whatever detail it desires, the accounting practices and
principles to be employed by companies that fall within its jurisdiction. Because the SEC receives
audited financial statements from nearly all companies that issue securities to the public or are listed
on stock exchanges, it is greatly interested in the content, accuracy, and credibility of the statements.
For many years, the SEC relied on the AICPA to regulate the profession and develop and enforce
accounting principles. Lately, the SEC has assumed a more active role in the development of

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-3

, accounting standards, especially in the area of disclosure requirements. In December 1973, in ASR
No. 150, the SEC said the FASB‘s statements would be presumed to carry substantial authoritative
support and anything contrary to them to lack such support. It thereby supports the development of
accounting principles in the private sector.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

6. The explanation should note that generally accepted accounting principles or standards have
―substantial authoritative support.‖ They consist of accounting practices, procedures, concepts,
and methods that are recognized by a large majority of practicing accountants as well as other
members of the business and financial community. Statements issued by the Financial Accounting
Standards Board constitute ―substantial authoritative support.‖
LO: 1, Bloom: K, Difficulty: Simple, 5-10, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

Questions Chapter 1 (Continued)
7. The FASB Accounting Standards Codification (Codification) is a compilation of all GAAP in one
place. Its purpose is to integrate and synthesize existing GAAP, not to create new GAAP. It creates
one level of GAAP which is considered authoritative. The FASB Codification Research Systems
(CRS) is an online real-time database that provides easy access to the Codification. The Codification
and the related CRS provide a topically organized structure that is subdivided into topics, subtopics,
sections, and paragraphs.
LO: 1, Bloom: K, Difficulty: Moderate, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

8. It is hoped that the Codification will help users to better understand what GAAP is. If this occurs,
companies will be more likely to comply with GAAP and the time to research accounting issues will
be substantially reduced. In addition, through the electronic web-based format, GAAP can be easily
updated which will help users stay current.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

9. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can
lead to consistent standards and that prescribes the nature, function, and limits of financial account-
ing and financial statements. A conceptual framework is necessary for financial accounting for the
following reasons:
(1) It enables the FASB to issue more useful and consistent standards in the future.
(2) New issues will be more quickly solvable by reference to an existing framework of basic theory.
(3) It increases financial statement users‘ understanding of and confidence in financial reporting.
(4) It enhances comparability among companies‘ financial statements.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

10. The objective of financial reporting is to provide financial information about the reporting entity that
is useful to present and potential equity investors, lenders, and other creditors in making decisions
about providing resources to the entity.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

11. ―Qualitative characteristics of accounting information‖ are those characteristics that contribute to
the quality or value of the information. The overriding qualitative characteristic of accounting infor-
mation is usefulness for decision-making.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

12. Relevance and faithful representation are the two fundamental qualities of useful accounting
information. For information to be relevant, it should be capable of making a difference in a decision
by helping users to form predictions about the outcomes of past, present, and future events or to

5-1-4 Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)

, confirm or correct expectations. Faithful representation rests on whether the numbers and
descriptions match what really existed or happened.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

Questions Chapter 1 (Continued)

13. The concept of materiality refers to the relative significance of an amount, activity, or item to
informative disclosure, proper presentation of financial position, and the results of operations.
Materiality has qualitative and quantitative aspects; both the nature of the item and its relative size
enter into its evaluation.

An accounting misstatement is said to be material if knowledge of the misstatement could affect
the decisions of the average informed reader of the financial statements. Financial statements are
misleading if they omit a material fact or include so many immaterial matters as to be confusing. In
the examination, the auditor concentrates efforts in proportion to degrees of materiality and relative
risk and disregards immaterial items.

The relevant criteria for assessing materiality will depend upon the circumstances and the nature
of the item and will vary greatly among companies. For example, an error in current assets or
current liabilities will be more important for a company with a flow of funds problem than for one
with adequate working capital.

The effect upon net income (or earnings per share) is the most commonly used measure of
materiality. This reflects the prime importance attached to net income by investors and other users
of the statements. The effects upon assets and equities are also important, as are misstatements
of individual accounts and subtotals included in the financial statements. The FASB defines
materiality to be consistent with the legal concept of materiality, as established in the securities
laws. Specifically, information is material ―if there is a substantial likelihood that the omitted or
misstated item would have been viewed by a reasonable resource provider as having significantly
altered the total mix of information.‖
There are no rigid standards or guidelines for assessing materiality. The lower bound of materiality
has been variously estimated at 5% of net income, but the determination will vary based upon the
individual case and might not fall within these limits. Certain items, such as a questionable loan to a
company officer, may be considered material even when minor amounts are involved. In contrast, a
large misclassification among expense accounts may not be deemed material if there is no
misstatement of net income.
LO: 2, Bloom: C, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Decision Making

14. The enhancing characteristics are comparability, verifiability, timeliness, and understandability.
Enhancing qualities are qualitative characteristics that are complementary to the fundamental
qualitative characteristics. These characteristics distinguish more useful information from less
useful information.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

15. In providing information to users of financial statements, the FASB relies on general-purpose
financial statements. The intent of such statements is to provide the most useful information
possible at minimal cost to various user groups. Underlying these objectives is the notion that a
user needs a reasonable knowledge of business and financial accounting matters to understand
the information contained in financial statements. This point is important. It means that in the
preparation of financial statements, a level of reasonable competence for the user can be
assumed; this has an impact on the way and the extent to which information is reported.
LO: 2, Bloom: C, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: AICPA AC: Reporting, AICPA PC: Communication

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-5

,16. Comparability facilitates comparisons between information about two different enterprises at a
particular point in time. Consistency, a type of comparability, facilitates comparisons between
information about the same enterprise at two different points in time.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

Questions Chapter 1 (Continued)

17. The accounting literature contains many terms that have specific meanings. Some of these terms
have been in use for a long time, and their meanings have changed over time. Since the elements of
financial statements are the building blocks with which the statements are constructed, it is
necessary to develop a basic definitional framework for them.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

18. Distributions to owners differ from expenses and losses in that they represent transfers to owners,
and they do not arise from activities intended to produce income. Expenses differ from losses in
that they arise from the entity‘s ongoing major or central operations. Losses arise from peripheral
or incidental transactions.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

19. Investments by owners differ from revenues and gains in that they represent transfers by owners
to the entity, and they do not arise from activities intended to produce income. Revenues differ
from gains in that they arise from the entity‘s ongoing major or central operations. Gains arise from
peripheral or incidental transactions.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None

20. The four basic assumptions that underlie the financial accounting structure are:
(1) The economic entity assumption.
(2) The going concern assumption.
(3) The monetary unit assumption.
(4) The periodicity assumption.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

21. (a) In accounting, it is generally agreed that any measures of the success of an enterprise for
periods less than its total life are at best provisional and subject to correction. Measurement
of progress and status for arbitrary time periods is a practical necessity to serve those who
must make decisions. It is not the result of postulating specific time periods as measurable
segments of total life.
(b) The practice of periodic measurement has led to many of the most difficult accounting prob-
lems, such as inventory pricing, depreciation of long-term assets, and the necessity for
revenue recognition tests. The accrual system calls for associating related revenues and
expenses. This becomes difficult for an arbitrary time period with incomplete transactions in
process at both the beginning and the end of the period. Many accounting practices such as
adjusting entries or the reporting of corrections of prior periods result directly from efforts to
make each period‘s calculations as accurate as possible and yet recognizing that they are
only provisional.
LO: 3, Bloom: C, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

22. The monetary unit assumption assumes that the unit of measure (the dollar) remains reasonably
stable so that dollars of different years can be added without any adjustment. When the value of
the dollar fluctuates greatly over time, the monetary unit assumption loses its validity.

The FASB in Concept No. 5 indicated that it expects the dollar unadjusted for inflation or deflation
to be used to measure items recognized in financial statements. Only if circumstances change
dramatically will the FASB consider a more stable measurement unit.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None

5-1-6 Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)

,Questions Chapter 1 (Continued)

23. Fair value is defined as ―the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.‖ Fair value
is, therefore, a market-based measure.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: AICPA PC: None

24. The fair value hierarchy provides insight into the priority of valuation techniques that are used to
determine fair value. The fair value hierarchy is divided into three broad levels.

Fair Value Hierarchy

Level 1: Observable inputs that reflect quoted prices for Least Subjective
identical assets or liabilities in active markets.

Level 2: Inputs other than quoted prices included in Level 1 that
are observable for the asset or liability either directly or
through corroboration with observable data.

Level 3: Unobservable inputs (for example, a company‘s own Most Subjective
data or assumptions).

As indicated, Level 1 is the most reliable because it is based on quoted prices, such as a closing
stock price in the Wall Street Journal. Level 2 is the next most reliable and would rely on
evaluating similar assets or liabilities in active markets. At the least-reliable level, Level 3, much
judgment is needed based on the best information available to arrive at a relevant and
representationally faithful fair value measurement.
LO: 3, Bloom: K, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

25. The revenue recognition principle requires that companies recognize revenue in the accounting
period in which the performance obligation is satisfied. In the case of services, revenue is
recognized when the services are performed. In the case of selling a product, the performance
obligation is met when the product is delivered. Companies follow a five-step process to analyze
revenue arrangements to determine when revenue should be recognized: (1) Identify the
contract(s) with the customer; (2) Identify the separate performance obligations in the contract; (3)
Determine the transaction price; (4) Allocate the transaction price to separate performance
obligations, and; (5) Recognize revenue when each performance obligation is satisfied.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

26. A performance obligation is a promise to deliver a product or provide a service to a customer. The
revenue recognition principle requires that companies recognize revenue in the accounting period
in which the performance obligation is satisfied. In the case of services, revenue is recognized
when the services are performed. In the case of selling a product, the performance obligation is
met when the product is delivered.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-7

,Questions Chapter 1 (Continued)

27. The five steps in the revenue recognition process are:

Step 1 Identify the contract(s) with the customer. A contract is an agreement between two
parties that creates enforceable rights or obligations.

Step 2 Identify the separate performance obligations in the contract. A performance
obligation is either a promise to provide a service or deliver a product, or both.

Step 3. Determine the transaction price. The transaction price is the amount of consideration
that a company expects to receive from a customer in exchange for transferring a good
or service.

Step 4. Allocate the transaction price to separate performance obligations. This is usually
done by estimating the value of consideration attributable to each product or service.
Step 5. Recognize revenue when each performance obligation is satisfied. This occurs
when the service is provided or the product is delivered.

Note that many revenue transactions pose few problems because the transaction is initiated and
completed at the same time.
LO: 3, Bloom: C, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

28. Revenues are recognized when a performance obligation is satisfied–in the case of services,
revenue is recognized when the services are performed. Therefore, revenue for Selane Eatery
should be recognized at the time the luncheon is served.
LO: 3, Bloom: AN, Difficulty: Simple, Time: 3-5, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

29. The cause and effect relationship can seldom be conclusively demonstrated, but many costs
appear to be related to particular revenues, and recognizing them as expenses accompany
recognition of the revenue. Examples of expenses that are recognized by associating cause and
effect are sales commissions and the cost of products sold or services provided.
Systematic and rational allocation means that in the absence of a direct means of associating
cause and effect, and where the asset provides benefits for several periods, its cost should be
allocated to the periods in a systematic and rational manner. Examples of expenses that are
recognized in a systematic and rational manner are depreciation of plant assets, amortization of
intangible assets, and allocation of rent and insurance.

Some costs are immediately expensed because the costs have no discernible future benefits or
the allocation among several accounting periods is not considered to serve any useful purpose.
Examples include officers‘ salaries, most selling costs, amounts paid to settle lawsuits, and costs
of resources used in unsuccessful efforts.
LO: 3, Bloom: AN, Difficulty: Simple, Time: 5-7, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

30. (a) To be recognized in the main body of financial statements, an item must meet the definition of
an element. In addition, the item must have been measured, recorded in the books, and passed
through the double-entry system of accounting.
(b) Information provided in the notes to the financial statements amplifies or explains the items
presented in the main body of the statements and is essential to an understanding of the per-
formance and position of the enterprise. Information in the notes does not have to be quanti-
fiable, nor does it need to qualify as an element.
(c) Supplementary information includes information that presents a different perspective from that
adopted in the financial statements. It also includes management‘s explanation of the financial
information and a discussion of the significance of that information.
LO: 4, Bloom: C, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

5-1-8 Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)

,Questions Chapter 1 (Continued)
31. The general guide followed with regard to the full disclosure principle is to disclose in the financial
statements any facts of sufficient importance to influence the judgment of an informed reader.
The fact that the amount of outstanding common stock doubled in January of the subsequent
reporting period probably should be disclosed because such a situation is of importance to present
stockholders. Even though the event occurred after December 31, 2025 (referred to as a
subsequent event), it should be disclosed on the balance sheet as of December 31, 2025, in order
to make adequate disclosure. (The major point that should be emphasized throughout the entire
discussion on full disclosure is that there is normally no ―black‖ or ―white‖ but varying shades of
grey and it takes experience and good judgment to arrive at an appropriate answer).
LO: 3, Bloom: AN, Difficulty: Simple, Time: 3-5, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

32. Accounting information is subject to the cost constraint. Information should not be provided unless
the benefits exceed the costs of preparing it.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

33. The costs of providing accounting information include costs of collecting and processing,
disseminating, auditing, potential litigation, disclosure to competitors, and analysis and
interpretation. Benefits to preparers may include greater management control and access to
capital at a lower cost. Users may receive better information for allocation of resources, tax
assessment, and rate regulation. Occasionally new accounting standards require the presentation
of information that is not readily assembled by the accounting systems of most companies. A
determination should be made as to whether the incremental or additional costs of providing the
proposed information exceed the incremental benefits to be obtained. This determination requires
careful judgment since the benefits of the proposed information may not be readily apparent.
LO: 3, Bloom: AN, Difficulty: Simple, Time: 3-5, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

34. In general, conservatism should not be the basis for determining the accounting for transactions
because it conflicts with the conceptual framework quality of neutrality.

(a) Acceptable if reasonably accurate estimation is possible. To the extent that warranty costs can
be estimated accurately, they should be recorded when an obligation exists, usually in the
period of the sale.

(b) Not acceptable. Most accounts are collectible, or the company will be out of business very
soon. Hence, sales can be recorded when made. Also, other companies record sales when
made rather than when collected, so if accounts for Landowska Co. are to be compared with
other companies, they must be kept on a comparable basis. However, estimates for
uncollectible accounts should be recorded if there is a reasonably accurate basis for estimating
bad debts.

(c) Not acceptable. A provision for the possible loss can be made through an appropriation of
retained earnings, but until judgment has been rendered on the suit or it is otherwise settled,
entry of the loss usually represents anticipation. Recording it earlier is probably an unwise legal
strategy as well. For the loss to be recognized at this point, the loss would have to be probable
and reasonably estimable. (See FASB ASC 450-10-05 for additional discussion if desired.)
Note disclosure is required if the loss is not recorded.
LO: 3, Bloom: AN, Difficulty: Simple, Time: 3-5, Analytic, AICPA BC: None, AICPA AC: Measurement, Reporting, AICPA PC: None

35. The sources of pressure are innumerable, but the most intense and continuous pressure to
change or influence accounting principles or standards come from individual companies, industry
associations, governmental agencies, practicing accountants, academicians, professional account-
ing organizations, and public opinion.
LO: 4, Bloom: K, Difficulty: Simple, 5-10, AACSB: Communication, AICPA BC: Governance Perspective, AICPA AC: Reporting, AICPA PC: Communication

Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 5-1-9

, Questions Chapter 1 (Continued)
36. Economic consequences mean the impact of accounting reports on the wealth positions of issuers
and users of financial information and the decision-making behavior resulting from that impact. In
other words, accounting information impacts various users in many different ways, which leads to
wealth transfers among these various groups.

If politics plays an important role in the development of accounting rules, the rules will be subject
to manipulation to further whatever policy prevails at the moment. No matter how well-intentioned
the rule maker may be, if the information is designed to indicate that investing in a particular
enterprise involves less risk than it actually does, or is designed to encourage investment in a
particular segment of the economy, financial reporting will suffer an irreplaceable loss of credibility.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: Governance Perspective, AICPA AC: Reporting, AICPA PC: Communication

37 Concern exists about fraudulent financial reporting because it can undermine the entire financial
reporting process. Failure to provide accurate information to users can lead to inappropriate
allocations of resources in our economy. In addition, failure to detect massive fraud can lead to
additional governmental oversight of the accounting profession.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: Governance Perspective, AICPA AC: Reporting, AICPA PC: Communication

38. The expectations gap is the difference between what people think accountants should be doing and
what accountants think they can do. It is a difficult gap to close. The accounting profession recognizes
it must play an important role in narrowing this gap. To meet the needs of society, the profession is
continuing its efforts in developing accounting standards, such as numerous pronouncements issued
by the FASB, to serve as guidelines for recording and processing business transactions in the
changing economic environment.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

39. Some major challenges facing the accounting profession relate to the following items:
Nonfinancial measurement—how to report significant key performance measurements such as
customer satisfaction indexes, backlog information and reject rates on goods purchased.

Forward-looking information—how to report more future-oriented information.

Soft assets—how to report on intangible assets, such as market know-how, market dominance,
and well-trained employees.

Timeliness—how to report more real-time information.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Communication

40. Accountants must perceive the ethical dimensions of some situations because GAAP does not
define or cover all specific features that are to be reported in financial statements. In these
instances, accountants must choose among alternatives. These accounting choices influence
whether particular stakeholders may be harmed or benefited. Ethical decision-making involves
awareness of potential harm or benefit and taking responsibility for the choices.
LO: 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Ethics, Communication, AICPA BC: None, AICPA AC: Reporting, AICPA PC: Ethical Conduct

5-1-10 Copyright © 2022 WILEY Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller TestsBanks. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$21.57. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

75759 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling

Exam (elaborations)

Solution Manual for Intermediate Accounting 18th Edition, by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield .Chapter 1- 23 | Complete Guide A+

Document information

Subjects

Connected book

More summaries for

Written for

3 reviews

Seller

Reviews received

Content preview

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Quick and easy check-out

Focus on what matters

Frequently asked questions

What do I get when I buy this document?

Satisfaction guarantee: how does it work?

Who am I buying these notes from?

Will I be stuck with a subscription?

Can Stuvia be trusted?