Solution Manual For Intermediate Accounting 7th Edition By Spiceland

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Edition: 7th Edition

Format: Downloadable ZIP File

Resource Type: Solution Manual

Duration: Unlimited downloads

Delivery: Instant Download

Solution Manual For Intermediate Accounting 7th Edition By Spiceland

ISBN-10: 1259187853, ISBN-13: 978-1259187858

Question 1–1
Financial accounting is concerned with providing relevant financial information about various
kinds of organizations to different types of external users. The primary focus of financial accounting
is on the financial information provided by profit-oriented companies to their present and potential
investors and creditors.
Question 1–2
Resources are efficiently allocated if they are given to enterprises that will use them to provide
goods and services desired by society and not to enterprises that will waste them. The capital
markets are the mechanism that fosters this efficient allocation of resources.
Question 1–3
Two extremely important variables that must be considered in any investment decision are the
expected rate of return and the uncertainty or risk of that expected return.
Question 1–4
In the long run, a company will be able to provide investors and creditors with a rate of return
only if it can generate a profit. That is, it must be able to use the resources provided to it to generate
cash receipts from selling a product or service that exceed the cash disbursements necessary to
provide that product or service.
Question 1–5
The primary objective of financial accounting is to provide investors and creditors with
information that will help them make investment and credit decisions.
Question 1–6
Net operating cash flows are the difference between cash receipts and cash disbursements
during a period of time from transactions related to providing goods and services to customers. Net
operating cash flows may not be a good indicator of future cash flows because, by ignoring
uncompleted transactions, they may not match the accomplishments and sacrifices of the period.
QUESTIONS FOR REVIEW OF KEY TOPICS
© The McGraw-Hill Companies, Inc., 2013
1-4 Intermediate Accounting 7/e
Answers to Questions (continued)
Question 1–7
GAAP (generally accepted accounting principles) are a dynamic set of both broad and specific
guidelines that a company should follow in measuring and reporting the information in their
financial statements and related notes. It is important that all companies follow GAAP so that
investors can compare financial information across companies to make their resource allocation
decisions.
Question 1–8
In 1934, Congress created the SEC and gave it the job of setting accounting and reporting
standards for companies whose securities are publicly traded. The SEC has retained the power, but
has delegated the task to private sector bodies. The current private sector body responsible for
setting accounting standards is the FASB.
Question 1–9
Auditors are independent, professional accountants who examine financial statements to
express an opinion. The opinion reflects the auditors’ assessment of the statements’ fairness, which
is determined by the extent to which they are prepared in compliance with GAAP. The auditor adds
credibility to the financial statements, which increases the confidence of capital market participants
relying on that information.
Question 1–10
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The most
dramatic change to federal securities laws since the 1930s, the Act radically redesigns federal
regulation of public company corporate governance and reporting obligations. It also significantly
tightens accountability standards for directors and officers, auditors, securities analysts, and legal
counsel. Student opinions as to the relative importance of the key provisions of the act will vary.
Key provisions in the order of presentation in the text are:
 Creation of an Oversight Board
 Corporate executive accountability
 Nonaudit services
 Retention of work papers
 Auditor rotation
 Conflicts of interest
 Hiring of auditor
 Internal control

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