Solution Manual for Financial Accounting, 5th Edition

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Chapter 1-A Framework for Financial AccountingSolutions Manual, Chapter 11-1Chapter1AFramework for Financial AccountingREVIEWQUESTIONSQuestion1-1(LO 1-1)Accounting is the language of business. Whereas a basic math class might involve adding,subtracting, and solving for unknown variables, accounting involves learning tomeasure businesstransactions andcommunicatingthose measurements in a format that is generally understood bydecision makers.Question 1-2(LO 1-1)Those interested in makingdecisionsabout a company includeinvestors,creditors,customers,suppliers,managers,employees,competitors,regulators,tax authorities, andlocal communities.Question 1-3(LO 1-1)Financial accounting seeksto measure business activities of a company and to communicatethose measurements toexternalparties for decision-making purposes.The two primary external, oroutside the firm, users of financial accounting information are investors and creditors.Managerialaccountingdeals with the methodsaccountantsuse to provide information to an organization’sinternalusers, that is, itsownmanagers.Question 1-4(LO 1-1)Thetwo primaryfunctions of financial accounting are to measure business activities of acompany and to communicate information about those activities to investors and creditors fordecision-making purposes.Question 1-5(LO 1-2)The three basic business activities are financing, investing, and operating activities. Financingactivitiesare transactionsthatraise cashneeded to operate the business.Investing activitiestypicallyinclude the purchaseor disposalof long-term resources such as land, buildings, equipment, andmachinery.Operating activitiesinclude the primary operations of the company,providing productsand services to customers and the associated costs of doing so, like utilities, taxes, advertising,wages, rent, and maintenance.Question 1-6(LO 1-2)Typicalfinancing activitieswould include selling stock and paying dividends to investors, aswell as borrowing and repaying debt to creditors.Question 1-7(LO 1-2)Typical investing activities would includethepurchaseordisposalof land,casinobuildings,hotels, gaming tables, chairs, cleaning equipment, and food preparation machines.

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