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Chap001 Solution Manual

An organization cannot have more or less assets than

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activities (assets). An organization cannot have more or less assets than its liabilities and equity combined and, similarly, it cannot have more or less liabilities and equity than its total assets. This means: assets = liabilities + equity. This relation is called the accounting equation (also called the balance sheet equation ), and it applies to organizations at all times. 32. The dollar amounts in Research In Motion’s financial statements are rounded to the nearest thousand ($1,000). Research In Motion’s consolidated statement of earnings (or income statement) covers the fiscal year (consisting of 52 weeks) ended February 27, 2010. Research In Motion also reports comparative income statements for the previous two years (consisting of 52 weeks). 33 . At September 26, 2009, Apple had ($ in millions) assets of $47,501, liabilities of $15,861, and equity of $31,640. 34. Confirmation of Nokia’s accounting equation follows (numbers in EUR millions): Assets = Liabilities + Equity 35,738 = 20,989 + 14,749 35. The independent auditor for Palm, Inc., is Deloitte and Touché LLP. The auditor expressly states that “our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.” The auditor also states that “these consolidated financial statements and financial statement schedule are the responsibility of the Company’s management.” 1-4
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Chapter 01 - Accounting in Business QUICK STUDIES Quick Study 1-1 (a) and (b) GAAP: Generally Accepted Accounting Principles Importance: GAAP are the rules that specify acceptable accounting practices. SEC: Securities and Exchange Commission Importance: The SEC is charged by Congress to set reporting rules for organizations that sell ownership shares to the public. The SEC delegates part of this responsibility to the FASB. FASB: Financial Accounting Standards Board Importance: FASB is an independent group of full-time members who are responsible for setting accounting rules. IASB: International Accounting Standards Board. Importance: Its purpose is to issue standards that identify preferred practices in the desire of harmonizing accounting practices across different countries. The vast majority of countries and financial exchanges support its activities and objectives. IFRS: International Financial Reporting Standards. Importance: A global set of accounting standards issued by the IASB. Many countries require or permit companies to comply with IFRS in preparing their financial statements. The FASB is undergoing a process with the IASB to converge GAAP and IFRS and to create a single set of accounting standards for global use. 1-5
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Chapter 01 - Accounting in Business Quick Study 1-2 Internal controls serve several purposes: They involve monitoring an organization’s activities to promote efficiency and to prevent wrongful use of its resources.
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