SOLUTIONS MANUAL
** All Chapters included
** Answers to Questions
** Solutions to Exercises & Problems
** Data Analysis Technology Bootcamps
** Excel Templates Solutions
,Table of Contents are given below
1. The Environment and Conceptual Framework of Financial Reporting
2. Accounting Information System
3. Income Statement and Revenue Recognition
4. Balance Sheet and Statement of Cash Flows
5. Time Value of Money
6. Cash and Accounts Receivable
7. Valuation of Inventories: A Cost-Basis Approach
8. Inventories: Additional Valuation Issues
9. Acquisition and Disposition of Property, Plant, and Equipment
10. Depreciation, Impairments, and Depletion
11. Intangible Assets
12. Current Liabilities and Contingencies
13. Long-Term Liabilities
14. Stockholders' Equity
15. Dilutive Securities and Earnings per Share
16. Investments
17. Revenue Recognition
18. Accounting for Income Taxes
19. Pensions
20. Leases
21. Accounting Changes and Error Analysis
22. Statement of Cash Flows
23. Full Disclosure
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch23-1)
CHAPTER 23
Full Disclosure in Financial Reporting
Assignment Classification Table (By Topic)
Brief Critical
Topics Questions Exercises Exercises Problems Thinking
* 1. The disclosure principle; type 2, 3 1, 2, 3
of disclosure.
* 2. Role of notes that accompany 1, 4, 5 1, 2 1, 2, 3, 4
financial statements.
* 3. Subsequent events. 6 3 1, 2 1 4, 12
* 4. Segment reporting; diversified 7, 8, 9, 4, 5, 6, 7 3 2 5, 6, 7
firms. 10, 11
* 5. Discussion and analysis. 12, 13
* 6. Interim reporting. 14, 15, 8, 9
16, 17
* 7. Audit opinions and fraudulent 18, 19 11
reporting.
* 8. Earnings forecasts. 20, 21 10
*9. Interpretation of ratios. 22, 23, 24 4, 5, 6 5
*10. Impact of transactions on ratios. 8 4, 5, 6 3 13
*11. Liquidity ratios. 8 4, 5, 6 3, 5
*12. Profitability ratios. 28 4, 5, 6 3, 5
*13. Coverage ratios. 4, 5, 6
*14. Activity ratios. 25, 26 8, 9 4, 5, 6 3
*15. Comprehensive ratio problems. 4, 5, 6 3, 5
*16. Percentage analysis. 24, 27 3, 4
*This material is dealt with in an Appendix to the chapter.
23-1
, Answers to Questions
1. As indicated in the text, the major advantages are: (1) additional information pertinent to specific
financial statements can be explained in qualitative terms, or supplementary data of a quantitative
nature can be provided to expand on the information in the financial statements, and (2) restrictions on
basic contractual agreements can be explained. The types of items normally found in footnotes are: (1)
disclosure of accounting methods used, (2) disclosure of contingent assets and liabilities,
(3) examination of creditor claims, (4) claims of equity holders, and (5) executory commitments.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
2. The full disclosure principle in accounting calls for reporting in financial statements any financial
facts significant enough to influence the judgment of an informed reader. Disclosure has increased
because of the complexity of the business environment, the necessity for timely information, and
the desire for more information on the enterprise for control and monitoring purposes.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. The benefit of disclosing the reconciliation of the effective tax rate and the federal statutory rate is
that an investor can determine the actual taxes paid by the enterprise. Such a determination is
particularly important if the enterprise has substantial fluctuations in its effective tax rate caused by
unusual or infrequent transactions. In some cases, companies only have income in a given period
because of a favorable tax treatment that is not sustainable. Such information should be extremely
useful to a financial statement reader.
LO: 1, Bloom: K, Difficulty: Moderate Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
4. (a) The increased likelihood that the company will suffer a costly strike requires no disclosure in
the financial statements. The possibility of a strike is an inherent risk of many businesses. It,
along with the risks of war, recession, etc., is in the category of general news.
(b) A note should provide a description of the unusual and infrequent loss in order that the
financial statement user has some understanding of the nature of this item.
(c) Contingent assets which may materially affect a company’s financial position must be disclosed
when the surrounding circumstances indicate that, in all likelihood, a valid asset will materialize.
In most situations, an asset would not be recognized until the court settlement had occurred.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. Transactions between related parties are disclosed to ensure that the users of the financial state-
ments understand the basic nature of some of the transactions. Because it is often difficult to
separate the economic substance from the legal form in related party transactions, disclosure is
used extensively in this area. Purchase of a substantial block of the company’s common stock by
Holland, coupled with the use of a Holland affiliate to act as food broker, suggests that disclosure is
needed.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
6. “Subsequent events” are of two types:
(1) Those which affect the financial statements directly and should be recognized therein through
appropriate adjustments.
(2) Those which do not affect the financial statements directly and require no adjustment of the
account balances but whose effects may be significant enough to be disclosed with appropriate
figures or estimates shown.
(a) Probably adjust the financial statements directly.
(b) Disclosure.
(c) Disclosure.
(d) Disclosure.
23-4
** All Chapters included
** Answers to Questions
** Solutions to Exercises & Problems
** Data Analysis Technology Bootcamps
** Excel Templates Solutions
,Table of Contents are given below
1. The Environment and Conceptual Framework of Financial Reporting
2. Accounting Information System
3. Income Statement and Revenue Recognition
4. Balance Sheet and Statement of Cash Flows
5. Time Value of Money
6. Cash and Accounts Receivable
7. Valuation of Inventories: A Cost-Basis Approach
8. Inventories: Additional Valuation Issues
9. Acquisition and Disposition of Property, Plant, and Equipment
10. Depreciation, Impairments, and Depletion
11. Intangible Assets
12. Current Liabilities and Contingencies
13. Long-Term Liabilities
14. Stockholders' Equity
15. Dilutive Securities and Earnings per Share
16. Investments
17. Revenue Recognition
18. Accounting for Income Taxes
19. Pensions
20. Leases
21. Accounting Changes and Error Analysis
22. Statement of Cash Flows
23. Full Disclosure
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch23-1)
CHAPTER 23
Full Disclosure in Financial Reporting
Assignment Classification Table (By Topic)
Brief Critical
Topics Questions Exercises Exercises Problems Thinking
* 1. The disclosure principle; type 2, 3 1, 2, 3
of disclosure.
* 2. Role of notes that accompany 1, 4, 5 1, 2 1, 2, 3, 4
financial statements.
* 3. Subsequent events. 6 3 1, 2 1 4, 12
* 4. Segment reporting; diversified 7, 8, 9, 4, 5, 6, 7 3 2 5, 6, 7
firms. 10, 11
* 5. Discussion and analysis. 12, 13
* 6. Interim reporting. 14, 15, 8, 9
16, 17
* 7. Audit opinions and fraudulent 18, 19 11
reporting.
* 8. Earnings forecasts. 20, 21 10
*9. Interpretation of ratios. 22, 23, 24 4, 5, 6 5
*10. Impact of transactions on ratios. 8 4, 5, 6 3 13
*11. Liquidity ratios. 8 4, 5, 6 3, 5
*12. Profitability ratios. 28 4, 5, 6 3, 5
*13. Coverage ratios. 4, 5, 6
*14. Activity ratios. 25, 26 8, 9 4, 5, 6 3
*15. Comprehensive ratio problems. 4, 5, 6 3, 5
*16. Percentage analysis. 24, 27 3, 4
*This material is dealt with in an Appendix to the chapter.
23-1
, Answers to Questions
1. As indicated in the text, the major advantages are: (1) additional information pertinent to specific
financial statements can be explained in qualitative terms, or supplementary data of a quantitative
nature can be provided to expand on the information in the financial statements, and (2) restrictions on
basic contractual agreements can be explained. The types of items normally found in footnotes are: (1)
disclosure of accounting methods used, (2) disclosure of contingent assets and liabilities,
(3) examination of creditor claims, (4) claims of equity holders, and (5) executory commitments.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
2. The full disclosure principle in accounting calls for reporting in financial statements any financial
facts significant enough to influence the judgment of an informed reader. Disclosure has increased
because of the complexity of the business environment, the necessity for timely information, and
the desire for more information on the enterprise for control and monitoring purposes.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. The benefit of disclosing the reconciliation of the effective tax rate and the federal statutory rate is
that an investor can determine the actual taxes paid by the enterprise. Such a determination is
particularly important if the enterprise has substantial fluctuations in its effective tax rate caused by
unusual or infrequent transactions. In some cases, companies only have income in a given period
because of a favorable tax treatment that is not sustainable. Such information should be extremely
useful to a financial statement reader.
LO: 1, Bloom: K, Difficulty: Moderate Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
4. (a) The increased likelihood that the company will suffer a costly strike requires no disclosure in
the financial statements. The possibility of a strike is an inherent risk of many businesses. It,
along with the risks of war, recession, etc., is in the category of general news.
(b) A note should provide a description of the unusual and infrequent loss in order that the
financial statement user has some understanding of the nature of this item.
(c) Contingent assets which may materially affect a company’s financial position must be disclosed
when the surrounding circumstances indicate that, in all likelihood, a valid asset will materialize.
In most situations, an asset would not be recognized until the court settlement had occurred.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. Transactions between related parties are disclosed to ensure that the users of the financial state-
ments understand the basic nature of some of the transactions. Because it is often difficult to
separate the economic substance from the legal form in related party transactions, disclosure is
used extensively in this area. Purchase of a substantial block of the company’s common stock by
Holland, coupled with the use of a Holland affiliate to act as food broker, suggests that disclosure is
needed.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
6. “Subsequent events” are of two types:
(1) Those which affect the financial statements directly and should be recognized therein through
appropriate adjustments.
(2) Those which do not affect the financial statements directly and require no adjustment of the
account balances but whose effects may be significant enough to be disclosed with appropriate
figures or estimates shown.
(a) Probably adjust the financial statements directly.
(b) Disclosure.
(c) Disclosure.
(d) Disclosure.
23-4
