Solution Manual
Financial Accounting, 7th Canadian Edition
by Libby, Hodge, Kanaan, Sterling
All Chapters 1-13, Complete
1-
1
,TABLE OF CONTENTS
T T T
CHAPTERTONE
FinancialTStatementsTandTBusinessTDecisions
CHAPTERTTWO
InvestingTandTFinancingTDecisionsTandTtheTAccountingTSystem
CHAPTERTTHREE
OperatingTDecisionsTandTtheTAccountingTSystem
CHAPTERTFOUR
Adjustments,TFinancialTStatements,TandTtheTClosingTProcess
CHAPTERTFIVE
ReportingTandTInterpretingTSalesTRevenue,TReceivables,TandTCash
CHAPTERTSIX
ReportingTandTInterpretingTCostTofTSalesTandTInventory
CHAPTERTSEVEN
ReportingTandTInterpretingTLong-LivedTAssets
CHAPTERTEIGHT
ReportingTandTInterpretingTCurrentTLiabilities
CHAPTERTNINE
ReportingTandTInterpretingTNon-currentTLiabilities
CHAPTERTTEN
ReportingTandTInterpretingTShareholders'TEquity
CHAPTERTELEVEN
StatementTofTCashTFlows
CHAPTERTTWELVE
CommunicatingTAccountingTInformationTandTAnalyzingTFinancialTStatements
CHAPTERTTHIRTEEN
ReportingTandTInterpretingTInvestmentsTinTOtherTCorporations
1-
2
,CHAPTER ONE T
Financial Statements and Business Decisions
T T T T
ANSWERSTTOTQUESTIONS
1. AccountingTisTaTsystemTthatTcollectsTandTprocessesT(analyzes,Tmeasures,TandTrecords)Tfin
ancialTinformationTaboutTanTorganizationTandTreportsTthatTinformationTtoTdecisionTmakers.
2. FinancialTaccountingTinvolvesTpreparationTofTtheTfourTbasicTfinancialTstatementsTandTrelated
TdisclosuresTforTexternalTdecisionTmakers.TManagerialTaccountingTinvolvesTtheTpreparationT
ofTdetailedTplans,Tbudgets,Tforecasts,TandTperformanceTreportsTforTinternalTdecisionTmaker
s.
3. FinancialTreportsTareTusedTbyTbothTinternalTandTexternalTgroupsTandTindividuals.TTheTinternalT
groupsTareTcomprisedTofTtheTvariousTmanagersTofTtheTentity.TTheTexternalTgroupsTincludeTth
eTowners,Tinvestors,Tcreditors,TgovernmentalTagencies,TotherTinterestedTparties,TandTtheTpu
blicTatTlarge.
4. InvestorsTpurchaseTallTorTpartTofTaTbusinessTandThopeTtoTgainTbyTreceivingTpartTofTwhatTtheTc
ompanyTearnsTand/orTsellingTtheTcompanyTinTtheTfutureTatTaThigherTpriceTthanTtheyTpaid.TCre
ditorsTlendTmoneyTtoTaTcompanyTforTaTspecificTlengthTofTtimeTandThopeTtoTgainTbyTchargingTin
terestTonTtheTloan.
5. InTaTsocietyTeachTorganizationTcanTbeTdefinedTasTaTseparateTaccountingTentity.TAnTaccountin
gTentityTisTtheTorganizationTforTwhichTfinancialTdataTareTtoTbeTcollected.TTypicalTaccountingTe
ntitiesTareTaTbusiness,TaTchurch,TaTgovernmentalTunit,TaTuniversityTandTotherTnonprofitTorgan
izationsTsuchTasTaThospitalTandTaTwelfareTorganization.TATbusinessTtypicallyTisTdefinedTandTt
reatedTasTaTseparateT entityTbecauseTtheTowners,Tcreditors,Tinvestors,TandTotherTinterestedT
partiesTneedTtoTevaluateTitsTperformanceTandTitsTpotentialTseparatelyTfromTotherTentitiesTan
dTfromTitsTowners.
6. NameTofTStatement AlternativeTTitle
(a) IncomeTStatement (a)T StatementTofTEarnings;TStatementTof
Income;TStatementTofTOperations
(b) BalanceTSheet (b)T StatementTofTFinancialTPosition
(c) AuditTReport (c)T ReportTofTIndependentTAccountants
1-
3
, 7. TheTheadingTofTeachTofTtheTfourTrequiredTfinancialTstatementsTshouldTincludeTtheTfollowi
ng:
(a) NameTofTtheTentity
(b) NameTofTtheTstatement
(c) DateTofTtheTstatement,TorTtheTperiodTofTtime
(d) UnitTofTmeasure
8. (a)
TheTpurposeTofTtheTincomeTstatementTisTtoTpresentTinformationTaboutTtheTrevenue
s,Texpenses,TandTtheTnetTincomeTofTtheTentityTforTaTspecifiedTperiodTofTtime.
(b) TheTpurposeTofTtheTbalanceTsheetTisTtoTreportTtheTfinancialTpositionTofTanTentityTatTaTgi
venTdate,TthatTis,TtoTreportTinformationTaboutTtheTassets,TobligationsTandTstockholder
s’TequityTofTtheTentityTasTofTaTspecificTdate.
(c) TheTpurposeTofTtheTstatementTofTcashTflowsTisTtoTpresentTinformationTaboutTtheTflowTo
fTcashTintoTtheTentityT(sources),TtheTflowTofTcashToutTofTtheTentityT(uses),TandTtheTnetTi
ncreaseTorTdecreaseTinTcashTduringTtheTperiod.
(d) TheTstatementTofTretainedTearningsTreportsTtheTwayTthatTnetTincomeTandTdistribution
TofTdividendsTaffectedTtheTretainedTearningsTofTtheTcompanyTduringTtheTaccountingTpe
riod.
9. TheTincomeTstatementTandTtheTstatementTofTcashTflowsTareTdatedT“ForTtheTYearTEnded
DecemberT31,T2010,”TbecauseTtheyTreportTtheTinflowsTandToutflowsTofTresourcesTduri
T
ngTaTperiodTofTtime.TInTcontrast,TtheTbalanceTsheetTisTdatedT“AtTDecemberT31,T2010,”T
becauseTitTrepresentsTtheTresources,TobligationsTandTstockholders’TequityTatTaTspecifi
cTdate.
10. AssetsTareTimportantTtoTcreditorsTandTinvestorsTbecauseTassetsTprovideTaTbasisTforTjudging
TwhetherTsufficientTresourcesTareTavailableTtoToperateTtheTcompany.TAssetsTareTalsoTimpor
tantTbecauseTtheyTcouldTbeTsoldTforTcashTinTtheTeventTtheTcompanyTgoesToutTofTbusiness.T
LiabilitiesTareTimportantTtoTcreditorsTandTinvestorsTbecauseTtheTcompanyTmustTbeTableTtoT
generateTsufficientTcashTfromToperationsTorTfurtherTborrowingTtoTmeetTtheTpaymentsTrequir
edTbyTdebtTagreements.TIfTaTbusinessTdoesTnotTpayTitsTcreditors,TtheTlawTmayTgiveTtheTcredi
torsTtheTrightTtoTforceTtheTsaleTofTassetsTsufficientTtoTmeetTtheirTclaims.
11. NetTincomeTisTtheTexcessTofTtotalTrevenuesToverTtotalTexpenses.TNetTlossTisTtheTexces
sTofTtotalTexpensesToverTtotalTrevenues.
12. TheTequationTforTtheTincomeTstatementTisTRevenuesT-
ExpensesT=TNetTIncomeT(orTNetTLossTifTtheTamountTisTnegative).TThus,TtheTthreeTmajorTite
T
msTreportedTonTtheTincomeTstatementTareT(1)Trevenues,T(2)Texpenses,TandT(3)T netTincom
e.
1-
4
