Ch 1 Answers to Questions and Assigned Exercises

Ch 1 Answers to Questions and Assigned Exercises -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
SOLUTIONS TO CONCEPTS FOR ANALYSIS CA 1-3 Accounting numbers affect investing decisions. Investors, for example, use the financial statements of different companies to enhance their understanding of each company’s financial strength and operating results. Because these statements follow generally accepted accounting principles, investors can make meaningful comparisons of different financial statements to assist their investment decisions. Accounting numbers also influence creditors’ decisions. A commercial bank usually looks into a company’s financial statements and past credit history before deciding whether to grant a loan and in what amount. The financial statements provide a fair picture of the company’s financial strength (for example, short-term liquidity and long-term solvency) and operating performance for the current period and over a period of time. The information is essential for the bank to ensure that the loan is safe and sound. CA 1-15 (a) The ethical issue in this case relates to making questionable entries to meet expected earnings forecasts. As indicated in this chapter, businesses’ concentration on “maximizing the bottom line,” “facing the challenges of competition,” and “stressing short-term results” places accountants in an environment of conflict and pressure. (b) Given that Normand has pleaded guilty, he certainly acted improperly. Doing the right thing, making the right decision, is not always easy. Right is not always obvious, and the pressures to “bend the rules,” “to play the game,” “to just ignore it” can be considerable. (c) No doubt, Normand was in a difficult position. I am sure that he was concerned that if he failed to go along, it would affect his job performance negatively or that he might be terminated. These job pressures, time pressures, peer pressures often lead individuals astray. Can it happen to you? One individual noted that at a seminar on ethics sponsored by the CMA Society of Southern California, attendees were asked if they had ever been pressured to make questionable entries. This individual noted that to the best of his recollection, everybody raised a hand, and more than one had eventually chosen to resign. (d) Major stakeholders are: (1) Troy Normand, (2) present and potential stockholders and creditors of WorldCom, (3) employees, and (4) family. Recognize that WorldCom is the largest bankruptcy in United States history, so many individuals are affected. SOLUTIONS TO CODIFICATION EXERCISES CE1-2 (a) The Codification Overview module illustrates three items (1) the topic structure (2) different methods of accessing and viewing content, and (3) a summary of the unique features of the Codification Research System. (b)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/15/2012 for the course ACCT 381 taught by Professor Marleybrown during the Spring '11 term at Portland State.

Page1 / 6

Ch 1 Answers to Questions and Assigned Exercises -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online