Chapter 1

Environment and Theoretical Structure of

Financial Accounting

EXERCISES
Exercise 1-1Requirement 1
Haskins and Price
Operating Cash Flow
Cash collected
Cash disbursements:
Payment of rent
Salaries
Travel
Utilities
Net operating cash flow

Year 1
$330,000

Year 2
$450,000

(60,000)
(200,000)
(50,000)
(30,000)
$(10,000)

-0(210,000)
(60,000)
(50,000
$130,000

Requirement 2
Haskins and Price
Income Statements
Revenues
Expenses:
Salaries
Utilities
Travel
Rent
Net Income

Alternate Exercise and Problem Solutions

Year 1
$380,000

Year 2
$440,000

(200,000)
(40,000)
(50,000)
(30,000)
$ 60,000

(210,000)
(40,000)
(60,000)
(30,000)
$100,000

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Requirement 3
Year 1: Amounts billed to customers
Less: Cash collected
Ending accounts receivable

$380,000
(330,000)
$ 50,000

Year 2: Beginning accounts receivable

Plus: Amounts billed to customers
Less: Cash collected
Ending accounts receivable

Exercise 1-2
g

List A

1. predictive value

h _2. relevance
e

3. Faithful representation

j
c

4. comprehensive income
5. materiality

a _6. consistency
i

7. verifiability

b
f

8. matching
9. historical cost

d 10. realization

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$ 50,000
440,000
$490,000
(450,000)
$ 40,000

List B

a. applying the same accounting practices

over time
b. record expenses in the period the related
revenue is recognized
c. concerns the relative size of an item and its
effect on decisions
d. concerns the recognition of revenue
e. along with relevance, a primary decisionspecific quality
f. the original transaction value upon
acquisition
g. information is useful in predicting the
future
h. pertinent to the decision at hand
i. implies consensus among different
measurers
j. the change in equity from nonowner
transactions

Intermediate Accounting, 7/e

Exercise 1-3
2.
3.
4.
5.
6.

1. Periodicity

Matching
Historical cost (original transaction value)
Full disclosure
Realization (revenue recognition)
The economic entity assumption
1. Periodicity

Exercise 1-4
2.
3.
4.
5.
6.

Historical cost (original transaction value)

Matching
Full disclosure
The economic entity assumption
Realization (revenue recognition)

Alternate Exercise and Problem Solutions

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1-3