Financial Statement Analysis 13th Edition - Solution Manual by Charles H. Gibson

Financial Statement Analysis – 13th
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Edition
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SOLUTION
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MANUAL
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Charles H. Gibson
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Comprehensive Solutions Manual for Instructors
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and Students
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© Charles H. Gibson

All rights reserved. Reproduction or distribution without permission is prohibited.
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©STUDYSTREAM

, Chapter uu1
uu Introduction uuto uuFinancial
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uuReporting
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QUESTIONS

1- 1. a. The uuAICPA uuis uuan uuorganization uuof uuCPAs uuthat uuprior uuto uu1973
uuaccepted uuthe uuprimary uuresponsibility uufor uuthe uudevelopment uuof
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uugenerally uuaccepted uuaccounting uuprinciples. uuTheir uurole uuwas
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uusubstantially uureduced uuin uu1973 uuwhen uuthe uuFinancial uuAccounting

uuStandards uuBoard uuwas uuestablished. u u Their uurole uuwas uufurther

uureduced uuwith uuthe uuestablishment uuof uuthe uuPublic uuCompany

uuAccounting uuOversight uuBoard uuwas uuestablished uuin uu2002.
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b. The uuFinancial uuAccounting uuStandards uuBoard uureplaced uuthe
uuAccounting uuPrinciples uuBoard uuas uuthe uuprimary uurule-making

uubody uufor uuaccounting uustandards. uuIt uuis uuan uuindependent
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uuorganization uuand uuincludes uumembers uuother uuthan uupublic

uuaccountants.
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c. The uuSEC uuhas uuthe uuauthority uuto uudetermine uugenerally uuaccepted
uuaccounting uuprinciples uuand uuto uuregulate uuthe uuaccounting

uuprofession. uuThe uuSEC uuhas uuelected uuto uuleave uumuch uuof uuthe

uudetermination uuof uugenerally uuaccepted uuaccounting uuprinciples uuto
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uuthe uuprivate uusector. u u The uuFinancial uuAccounting uuStandards uuBoard

uuhas uuplayed uuthe uumajor uurole uuin uuestablishing uuaccounting uustandards

uusince uu1973. u u Regulation uuof uuthe uuaccounting uuprofession uuwas
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uusubstantially uuturned uuover uuto uuthe uuPublic uuCompany uuAccounting

uuOversight uuBoard uuin uu2002.




1- uu2. Consistency uuis uuobtained uuthrough uuthe uuapplication uuof uuthe uusame
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uuaccounting uuprinciple uufrom uuperiod uuto uuperiod. u u A uuchange uuin

uuprinciple uurequires uustatement uudisclosure.




1- uu3. The uuconcept uuof uuhistorical uucost uudetermines uuthe uubalance uusheet uuvaluation
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uuof uuland. uuThe uurealization uuconcept uurequires uuthat uua uutransaction uuneeds uuto

uuoccur uufor uuthe uuprofit uuto uube uurecognized.




1- uu4. a. u u Entity e. u u Historical uucost
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b. Realization f. u u Historical uucost

c. Materiality g. u u Disclosure
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d. Conservatism

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Entity uuconcept


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1- uu5.
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, 1- uu6. Generally uuaccepted uuaccounting uuprinciples uudo uunot uuapply uuwhen uua uufirm
uudoes uunot uuappear uuto uube uua uugoing uuconcern. u u If uuthe uudecision uuis uumade

uuthat uuthis uuis uunot uua uugoing uuconcern, uuthen uuthe uuuse uuof uuGAAP uuwould
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uunot uube uuappropriate.




1- uu7. With uuthe uutime uuperiod uuassumption, uuinaccuracies uuof uuaccounting uufor uuthe
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uuentity, uushort uuof uuits uucomplete uulife uuspan, uuare uuaccepted. uuThe uuassumption

uuis uumade uuthat uuthe uuentity uucan uube uuaccounted uufor uureasonably uuaccurately

uufor uua uuparticular uuperiod uuof uutime. u u In uuother uuwords, uuthe uudecision uuis

uumade uuto uuaccept uusome uuinaccuracy uubecause uuof uuincomplete uuinformation
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uuabout uuthe uufuture uuin uuexchange uufor uumore uutimely uureporting. u u The
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uustatements uuare uuconsidered uuto uube uumeaningful uubecause uumaterial

uuinaccuracies uuare uunot uuacceptable.




1- 8. It uuis uutrue uuthat uuthe uuonly uuaccurate uuway uuto uuaccount uufor uuthe
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u u u u

uusuccess uuor uufailure uuof uuan uuentity uuis uuto uuaccumulate uuall uutransactions

uufrom uuthe uuopening uuof uubusiness uuuntil uuthe uubusiness uueventually

uuliquidates. u u But uuit uuis uunot uunecessary uuthat uuthe uustatements uube

uucompletely uuaccurate uuin uuorder uufor uuthem uuto uube uumeaningful.
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1- 9. a. A uuyear uuthat uuends uuwhen uuoperations uuare uuat uua uulow uuebb uufor uuthe uuyear.
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b. The uuaccounting uutime uuperiod uuis uuended uuon uuDecember uu31.

c. A uutwelve-month uuaccounting uuperiod uuthat uuends uuat uuthe uuend uuof uua
uumonth uuother uuthan uuDecember uu31.
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1-10. Money.
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1-11. u u u u When uumoney uudoes uunot uuhold uua uustable uuvalue, uuthe uufinancial
uustatements uucan uulose uumuch uuof uutheir uusignificance. u u To uuthe uuextent uuthat

uumoney uudoes uunot uuremain uustable, uuit uuloses uuusefulness uuas uuthe uustandard

uufor uumeasuring uufinancial uutransactions.
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1-12. No. u u There uuis uua uuproblem uuwith uudetermining uuthe uuindex uuin uuorder uuto
uuadjust uuthe uustatements. u u The uuitems uuthat uuare uuincluded uuin uuthe uuindex

uumust uube uurepresentative. uuIn uuaddition, uuthe uuprices uuof uuitems uuchange

uubecause uuof uuvarious uufactors, uusuch uuas uuquality, uutechnology, uuand
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uuinflation.




Yes. uuA uureasonable uuadjustment uuto uuthe uustatements uucan uube uumade uufor uuinflation.
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1-13. False. u u An uuarbitrary uuwrite-off uuof uuinventory uucannot uube uujustified uuunder
uuthe uuconservatism uuconcept. u u The uuconservatism uuconcept uucan uuonly uube

uuapplied uuwhere uuthere uuare uualternative uumeasurements uuand uueach uuof

uuthese uualternative uumeasurements uuhas uureasonable uusupport.
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