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Solutions To Problems And Exercises Intermediate Accounting

4514 words - 19 pages

Solutions to Problems and Exercises

Table of Contents

Chapter 1 5
CA 1-4 5
CA 1-6 5
CA 1-8 6
CA 1-10 7
CA 1-12 8
CA 1-17 9
Chapter 2 10
CE2-2 10
CE2-3 10
EXERCISE 2-2 11
EXERCISE 2-3 12
EXERCISE 2-4 13
CA 2-4 13
Chapter 3 15
EXERCISE 3-6 15
EXERCISE 3-10 16
EXERCISE 3-13 19
EXERCISE 3-15 19
EXERCISE 3-20 20
Chapter 4 22
PROBLEM 4-1 22
PROBLEM 4-3 25
PROBLEM 4-5 27
PROBLEM 4-7 29
Chapter 5 31
PROBLEM 5-2 31
PROBLEM 5-4 34
Chapter 6 37
EXERCISE 6-3 37
EXERCISE 6-6 38
Chapter 7 39
PROBLEM 7-2 39
PROBLEM 7-4 41
PROBLEM 7-9 43
PROBLEM 7-11 46
EXERCISE 7-25 48
EXERCISE 7-26 50
Chapter 8 52
EXERCISE 8-23 52
EXERCISE 8-25 53
PROBLEM 8-5 55
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However, an investor wishing additional information has to pay to receive additional information desired. Different investors may be interested in different types of information. Since the company may not be equipped to provide the requested information, it would have to spend additional resources to fulfill such needs; or the company may refuse to furnish such information if it’s too costly to do so. As a result, investors may not get the desired information or they may have to pay a significant amount of money for it. Furthermore, redundancy in gathering and distributing information occurs when different investors ask for the same information at different points in time. To the society as a whole, this would not be an efficient way of utilizing resources.

CA 1-6

(a) The Financial Accounting Foundation (FAF) is the sponsoring organization of the FASB. The FAF selects the members of the FASB and its Advisory Council, funds their activities, and generally oversees the FASB’s activities.

The FASB follows a due process in establishing a typical FASB Statement of Financial Accounting Standards. The following steps are usually taken: (1) A topic or project is identified and placed on the Board’s agenda. (2) A task force of experts from various sectors is assembled to define problems, issues, and alternatives related to the topic. (3) Research and analysis are conducted by the FASB technical staff. (4) A preliminary views document is drafted and released. (5) A public hearing is often held, usually 60 days after the release of the preliminary views. (6) The Board analyzes and evaluates the public response. (7) The Board deliberates on the issues and prepares an exposure draft for release. (8) After a 30-day (minimum) exposure period for public comment, the Board evaluates all of the responses received. (9) A committee studies the exposure draft in relation to the public responses, reevaluates its position, and revises the draft if necessary. (10) The full Board gives the revised draft final consideration and votes on issuance of a Standards Statement. The passage of a new accounting standard in the form of an FASB Statement requires the support of five of the seven Board members.

(b) The FASB issues three major types of pronouncements: Standards and Interpretations, Financial Accounting Concepts, and Technical Bulletins. Financial accounting standards issued by the FASB are considered GAAP. In addition, the FASB also issues interpretations that represent modifications or extensions of existing standards and APB Opinions. These interpretations have the same authority as standards and APB Opinions in guiding current accounting practices.

The Statements of Financial Accounting Concepts (SFAC) help the FASB to avoid the “problem-by-problem approach.” These statements set forth fundamental objectives and concepts that the Board will use in developing future standards of financial accounting and...

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