Horngren's Accounting (12th Edition)
Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
Question
Book Icon
Chapter 17, Problem 1QC
To determine

Annual Report: the Annual report is a detailed report about a company’s activities during a particular period that is its accounting period. It is prepared for the stockholders of the company and the general public. It is used to analyze the financial position of the company based on the financial statements included in this report.

To Identify: The part of L Company’s annual report that is written by the company and could present a biased view of financial conditions and results.

Expert Solution & Answer
Check Mark

Answer to Problem 1QC

Option ‘b’ is correct.

Explanation of Solution

Management’s discussion and analysis of financial condition and result of operations (MD&A).

Management’s discussion and analysis of financial condition and result of operations (MD&A) is the opinion about the company’s future. It is written by company’s management and informs about their thoughts and understandings of financial statements of the company. The management can be biased in this discussion by focusing even on small achievements and ignoring the future hurdles, which the company might face during operations.

Option a: Balance Sheet.

The balance sheet is the part of financial statements which is audited by auditors. The company prepares the balance sheet and sends it to auditors. Auditors will analyze and approve it only if it is prepared according to the rules. The balance sheet cannot be biased.

So, Option a is incorrect.

Option c: Auditor’s Report.

Auditors report is written by the auditor and not by the management of the company. Auditor audits the financial statements prepared by the company and prepares an auditor’s report. It can’t be biased.

So, Option b is incorrect.

Option d: Income Statement.

The income statement is prepared by the company as a part of financial statements. Financial statements than audited by the auditors. Hence, the Income statement cannot be biased.

So, Option c is incorrect.

Conclusion

So option ‘b’ is correct among the given options.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 17 Solutions

Horngren's Accounting (12th Edition)

Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education