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
PROBLEM 8-11 59
Chapter 9 62
PROBLEM 9-1 62
EXERCISE 9-7 64
EXERCISE 9-9 66
PROBLEM 9-4 67
PROBLEM 9-6 68
Chapter 17 70
EXERCISE 17-6 70
Chapter 18 71
PROBLEM 18-1 71
PROBLEM 18-4 74
PROBLEM 18-6 76
PROBLEM 18-7 79
PROBLEM 18-8 81
EXERCISE 18-20 82
EXERCISE 18-21 82
Chapter 22 84
EXERCISE 22-2 84
EXERCISE 22-8 84
EXERCISE 22-11 84
Chapter 23 86
EXERCISE 23-11 86
EXERCISE 23-13 88
EXERCISE 23-15 90

Chapter 1

CA 1-4

It is not appropriate to abandon mandatory accounting rules and allow each company to voluntarily disclose the type of information it considered important. Without a coherent body of accounting theory and standards, each accountant or enterprise would have to develop its own theory structure and set of practices, and readers of financial statements would have to familiarize themselves with every company’s peculiar accounting and reporting practices. As a result, it would be almost impossible to prepare state-ments that could be compared.

In addition, voluntary disclosure may not be an efficient way of disseminating information. A company is likely to disclose less information if it has the discretion to do so. Thus, the