Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
6th Edition
ISBN: 9780134486840
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 1QC
What part of the Liberty’s annual report is written by the company and could present a biased view of financial conditions and results?
- a.
Balance Sheet - b. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
- c. Auditor’s Report
- d. Income Statement
Expert Solution & Answer
To determine
Annual Report: As per Securities and Exchange Commission requirements, all the public companies are mandated to prepare the annual report. Annual report of a company contains the following information:
- Company’s financial status
- Summary about company, its industry, its brands, and its growth policies
- States the risks of the company and its competitors
Thus, annual report provides complete information about the financial position of a company. This helps the investors to make proper decisions.
To determine: The part of annual report that provides biased view of financial conditions.
Given info: Details of annual report.
Answer to Problem 1QC
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD & A) is a part of annual report written by the company and presents a biased view of the financial conditions and the results. Hence, correct answer is option a.
Explanation of Solution
Explanation for incorrect answer:
a.
Balance sheet is a one of the financial statement. It reports the assets and liabilities of the company as on a specific date. Thus, it does not provide any information about the biased views of the financial condition of the company. Hence, it is not the correct answer.
c.
Audit report is the report issued by the public accountant. It expresses his opinion about the financial statements and their conformity with generally accepted accounting principles. Audit report does not explain about the financial condition of the company. Hence, it is not the correct answer.
d.
Income statement is a financial statement. It reports information regarding income earned and the expenses incurred by the company. It does not provide any information about the biased views of the financial condition of the company. Hence, it is not correct answer.
Explanation for correct answer:
b.
Management’s discussion and analysis of a company reported in the annual report explains the business operations and the current and expected financial performance of the company. It is provided in the interest of the investors and it is biased. Hence, it is correct answer.
Conclusion
Hence, the correct answer is option b.
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Students have asked these similar questions
reading the footnote to a company financial statement and management discussion & analysis is least likely to help an analyst determine
a)how well the financial statement reflect the companies true performanc
b)The various accruals, adjustment and assumption that went into the financial statement
c)The detailed information that underlines the companies accounting system
Management accounting and financial accounting differ in that management accounting information is prepared
a.following prescribed rules
b.using whatever methods the company finds beneficial
c.for shareholders and investors
d.for the Inland Revenue Department
e.none of these
Which of the following statements about GAAP is not true?
O a. GAAP impacts how companies report and what they report.
O b. GAAP allows a company's management to record and report data as it sees fit.
O c. GAAP is the principles and assumptions that the management of a company uses to record and report its financial information.
O d. GAAP is a standard set of principles and assumptions that allows for the comparison of financial performance.
Chapter 15 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Ch. 15 - What part of the Libertys annual report is written...Ch. 15 - Prob. 2QCCh. 15 - Prob. 3QCCh. 15 - Prob. 4QCCh. 15 - Prob. 5QCCh. 15 - Prob. 6QCCh. 15 - Prob. 7QCCh. 15 - Prob. 8QCCh. 15 - Prob. 9QCCh. 15 - Prob. 10QC
Ch. 15 - What ate the three main ways to analyze financial...Ch. 15 - What is an annual report? Briefly describe the key...Ch. 15 - Prob. 3RQCh. 15 - What is trend analysis, and how does it differ...Ch. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 9RQCh. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Prob. 15.1SECh. 15 - Prob. 15.2SECh. 15 - Prob. 15.3SECh. 15 - Prob. 15.4SECh. 15 - Prob. 15.5SECh. 15 - Prob. 15.6SECh. 15 - Prob. 15.7SECh. 15 - Prob. 15.8SECh. 15 - Prob. 15.9SECh. 15 - Prob. 15.10SECh. 15 - Prob. 15.11SECh. 15 - Prob. 15.12SECh. 15 - E15-13 Performing horizontal analysis—income...Ch. 15 - Prob. 15.14ECh. 15 - Prob. 15.15ECh. 15 - Prob. 15.16ECh. 15 - Prob. 15.17ECh. 15 - Prob. 15.18ECh. 15 - Prob. 15.19ECh. 15 - E15-20 Analyzing profitability
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The Klein...Ch. 15 - Prob. 15.25APCh. 15 - Prob. 15.26APCh. 15 - Prob. 15.27APCh. 15 - Prob. 15.28APCh. 15 - Prob. 15.30BPCh. 15 - Prob. 15.31BPCh. 15 - Prob. 15.32BPCh. 15 - Prob. 15.33BPCh. 15 - Prob. 15.34BPCh. 15 - Prob. 15.35BPCh. 15 - P15-36B Completing a comprehensive financial...Ch. 15 - Prob. 38CPCh. 15 - Lance Berkman is the controller of Saturn, a dance...Ch. 15 - Prob. 15.1EI
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