Fundamental accounting principles 20th ed j wild, shaw chaippetta Part 3

wiL10874_ch18_730-773.indd Page 765 8/9/10 7:40:44 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chapter 18 Managerial Accounting Concepts and Principles 765 Required Prepare a one-page memorandum to your supervisor outlining your presentation to the marketing staff Refer to Decision Maker, Purchase Manager, in this chapter Assume that you are the motorcycle manufacturer’s managerial accountant The purchasing manager asks you about preparing an estimate of the related costs for buying motorcycle seats from supplier (B) She tells you this estimate is needed because unless dollar estimates are attached to nonfinancial factors, such as lost production time, her supervisor will not give it full attention The manager also shows you the following information ● ● ● ● ● ● ● Problem 18-4A Opportunity cost estimation and application C1 C2 Production output is 3,000 motorcycles per year based on 250 production days a year Production time per day is hours at a cost of $2,000 per hour to run the production line Lost production time due to poor quality is 1% Satisfied customers purchase, on average, three motorcycles during a lifetime Satisfied customers recommend the product, on average, to 10 other people Marketing predicts that using seat (B) will result in 10 lost customers per year from repeat business and referrals Average gross profit per motorcycle is $3,000 Required Estimate the costs (including opportunity costs) of buying motorcycle seats from supplier (B) This problem requires that you think creatively and make reasonable estimates; thus there could be more than one correct answer (Hint: Reread the answer to Decision Maker and compare the cost savings for buying from supplier [B] to the sum of lost customer revenue from repeat business and referrals and the cost of lost production time.) Shepler Boot Company makes specialty boots for the rodeo circuit On December 31, 2010, the company had (a) 500 pairs of boots in finished goods inventory and (b) 1,500 heels at a cost of $5 each in raw materials inventory During 2011, the company purchased 50,000 additional heels at $5 each and manufactured 20,000 pairs of boots Check Estimated cost of lost production time, $40,000 Problem 18-5A Ending inventory computation and evaluation C4 Required Determine the unit and dollar amounts of raw materials inventory in heels at December 31, 2011 Check (1) Ending (heel) inventory, 11,500 units; $57,500 Analysis Component Write a one-half page memorandum to the production manager explaining why a just-in-time inventory system for heels should be considered Include the amount of working capital that can be reduced at December 31, 2011, if the ending heel raw material inventory is cut by half Shown here are annual financial data at December 31, 2011, taken from two different companies Pinnacle Retail Beginning inventory Merchandise Finished goods Cost of purchases Cost of goods manufactured Ending inventory Merchandise Finished goods Slope Board Manufacturing Problem 18-6A Inventory computation and reporting C4 P1 x e cel $150,000 $300,000 mhhe.com/wildFAP20e 250,000 586,000 100,000 200,000 Required Compute the cost of goods sold section of the income statement at December 31, 2011, for each com- pany Include the proper title and format in the solution Write a half-page memorandum to your instructor (a) identifying the inventory accounts and (b) describing where each is reported on the income statement and balance sheet for both companies Check (1) Slope Board’s cost of goods sold, $686,000 wiL10874_ch18_730-773.indd Page 766 8/9/10 7:40:44 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles 766 Chapter 18 Managerial Accounting Concepts and Principles Problem 18-7A Many fast-food restaurants compete on lean business concepts Match each of the following activities at a fast-food restaurant with the lean business concept it strives to achieve Some activities might relate to more than one lean business concept _ Clean tables and floors a Just-in-time (JIT) _ Orders filled within three minutes b Continuous improvement (CI) _ Standardized food making processes c Total quality management (TQM) _ Courteous employees _ Food produced to order _ New product development _ Customer satisfaction surveys _ Continually changing menus _ Drive-through windows _ 10 Standardized menus from location to location Lean business concepts C6 Problem 18-8A Manufacturing and income statements; inventory analysis The following calendar year-end information is taken from the December 31, 2011, adjusted trial balance and other records of Plaza Company P2 Advertising expense Depreciation expense — Office equipment Depreciation expense — Selling equipment Depreciation expense — Factory equipment Factory supervision Factory supplies used Factory utilities Inventories Raw materials, December 31, 2010 Raw materials, December 31, 2011 Goods in process, December 31, 2010 Goods in process, December 31, 2011 Finished goods, December 31, 2010 Finished goods, December 31, 2011 $ 30,750 9,250 10,600 35,550 104,600 9,350 35,000 168,850 184,000 17,700 21,380 169,350 138,490 Direct labor Income taxes expense Indirect labor Miscellaneous production costs Office salaries expense Raw materials purchases Rent expense — Office space Rent expense — Selling space Rent expense — Factory building Maintenance expense — Factory equipment Sales Sales discounts Sales salaries expense $ 677,480 235,725 58,875 10,425 65,000 927,000 24,000 28,100 78,800 37,400 4,527,000 64,500 394,560 Required Check (1) Cost of goods manufactured, $1,955,650 Prepare the company’s 2011 manufacturing statement Prepare the company’s 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses Analysis Component Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days’ sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory (To compute turnover and days’ sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories Round answers to one decimal place Problem 18-9A Manufacturing cycle time and efficiency A1 White Maple Company produces maple bookcases to customer order It received an order from a customer to produce 15,000 bookcases The following information is available for the production of the bookcases Process time Inspection time Move time Wait time 16.0 0.5 5.5 18.0 days days days days wiL10874_ch18_730-773.indd Page 767 8/9/10 7:40:44 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chapter 18 Managerial Accounting Concepts and Principles 767 Required Compute the company’s manufacturing cycle time Compute the company’s manufacturing cycle efficiency Interpret your answer Check (2) Manufacturing cycle efficiency, 0.40 Analysis Component Assume that White Maple wishes to increase its manufacturing cycle efficiency to 0.75 What are some ways that it can accomplish this? This chapter described the purpose of managerial accounting in the context of the current business environment Review the home electronics section of your local newspaper; the Sunday paper is often best Review advertisements of home electronics and identify the manufacturers that offer these products and the factors on which they compete PROBLEM SET B Required C1 Problem 18-1B Managerial accounting role Discuss the potential contributions and responsibilities of the managerial accounting professional in helping a home electronics manufacturer succeed (Hint: Think about information and estimates that a managerial accountant might provide new entrants into the home electronics market.) Listed here are the total costs associated with the 2011 production of 10,000 Blu-ray Discs (BDs) manufactured by Hip-Hop The BDs sell for $15 each Costs Cost by Behavior Cost by Function Variable Product Plastic for BDs — $1,000 Wages of assembly workers — $20,000 Cost of factory rent — $4,500 Systems staff salaries — $10,000 Labeling (outsourced)—$2,500 Cost of office equipment rent—$700 Upper management salaries—$100,000 Annual fixed fee for cleaning service—$3,000 Sales commissions—$0.50 per BD 10 Machinery depreciation—$15,000 Fixed $1,000 Problem 18-2B Cost computation, classification, and analysis C2 C3 Period $1,000 Required Classify each cost and its amount as (a) either fixed or variable and (b) either product or period (The first cost is completed as an example.) Compute the manufacturing cost per BD Check (2) Total variable manufacturing cost, $23,500 Analysis Component Assume that 15,000 BDs are produced in the next year What you predict will be the total cost of plastic for the BDs and the per unit cost of the plastic for the BDs? Explain Assume that 15,000 BDs are produced in the next year What you predict will be the total cost of factory rent and the per unit cost of the factory rent? Explain Assume that you must make a presentation to a client explaining the difference between prime and conversion costs The client makes and sells 50,000 cookies per week The client tells you that her sales staff also would like a clarification regarding product and period costs She tells you that most of the staff lack training in managerial accounting Required Prepare a one-page memorandum to your client outlining your planned presentation to her sales staff Problem 18-3B Cost classification and explanation C2 C3 wiL10874_ch18_730-773.indd Page 768 8/9/10 7:40:45 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles 768 Chapter 18 Managerial Accounting Concepts and Principles Problem 18-4B Refer to Decision Maker, Purchase Manager, in this chapter Assume that you are the motorcycle manufacturer’s managerial accountant The purchasing manager asks you about preparing an estimate of the related costs for buying motorcycle seats from supplier (B) She tells you this estimate is needed because unless dollar estimates are attached to nonfinancial factors such as lost production time, her supervisor will not give it full attention The manager also shows you the following information Opportunity cost estimation and application C1 C2 ● ● ● ● ● ● ● Production output is 2,000 motorcycles per year based on 250 production days a year Production time per day is hours at a cost of $500 per hour to run the production line Lost production time due to poor quality is 1% Satisfied customers purchase, on average, three motorcycles during a lifetime Satisfied customers recommend the product, on average, to 10 other people Marketing predicts that using seat (B) will result in lost customers per year from repeat business and referrals Average gross profit per motorcycle is $4,000 Required Check Cost of lost gross profit, $32,000 Estimate the costs (including opportunity costs) of buying motorcycle seats from supplier (B) This problem requires that you think creatively and make reasonable estimates; thus there could be more than one correct answer (Hint: Reread the answer to Decision Maker, and compare the cost savings for buying from supplier [B] to the sum of lost customer revenue from repeat business and referrals and the cost of lost production time.) Problem 18-5B The Edge Company makes specialty skates for the ice skating circuit On December 31, 2010, the company had (a) 500 skates in finished goods inventory and (b) 2,000 blades at a cost of $15 each in raw materials inventory During 2011, Edge Company purchased 45,000 additional blades at $15 each and manufactured 20,000 pairs of skates Ending inventory computation and evaluation C4 Required Check (1) Ending (blade) inventory, 7,000 units; $105,000 Determine the unit and dollar amounts of raw materials inventory in blades at December 31, 2011 Analysis Component Write a one-half page memorandum to the production manager explaining why a just-in-time inven- tory system for blades should be considered Include the amount of working capital that can be reduced at December 31, 2011, if the ending blade raw material inventory is cut in half Problem 18-6B Shown here are annual financial data at December 31, 2011, taken from two different companies Inventory computation and reporting C4 P1 Beginning inventory Merchandise Finished goods Cost of purchases Cost of goods manufactured Ending inventory Merchandise Finished goods Cardinal Drug Nandina (Retail) (Manufacturing) $ 50,000 $200,000 350,000 686,000 25,000 300,000 Required Check (1) Cardinal Drug cost of goods sold, $375,000 Compute the cost of goods sold section of the income statement at December 31, 2011, for each com- pany Include the proper title and format in the solution Write a half-page memorandum to your instructor (a) identifying the inventory accounts and (b) iden- tifying where each is reported on the income statement and balance sheet for both companies wiL10874_ch18_730-773.indd Page 769 8/9/10 7:40:45 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chapter 18 Managerial Accounting Concepts and Principles 769 Eastman-Kodak manufactures digital cameras and must compete on lean manufacturing concepts Match each of the following activities that it engages in with the lean manufacturing concept it strives to achieve (Some activities might relate to more than one lean manufacturing concept.) _ Kodak monitors the market to determine what a Just-in-time (JIT) features its competitors are offering on digital b Continuous improvement (CI) cameras c Total quality management (TQM) _ Kodak asks production workers for ideas to improve production _ Lenses are received daily based on customer orders _ Customers receive a satisfaction survey with each camera purchased _ The manufacturing process is standardized and documented _ Cameras are produced in small lots, and only to customer order _ Manufacturing facilities are arranged to reduce move time and wait time _ Kodak conducts focus groups to determine new features that customers want in digital cameras _ Orders received are filled within two business days _ 10 Kodak works with suppliers to reduce inspection time of incoming materials Problem 18-7B The following calendar year-end information is taken from the December 31, 2011, adjusted trial balance and other records of Firethorn Furniture Problem 18-8B Advertising expense Depreciation expense—Office equipment Depreciation expense—Selling equipment Depreciation expense—Factory equipment Factory supervision Factory supplies used Factory utilities Inventories Raw materials, December 31, 2010 Raw materials, December 31, 2011 Goods in process, December 31, 2010 Goods in process, December 31, 2011 Finished goods, December 31, 2010 Finished goods, December 31, 2011 $ 22,250 10,440 12,125 37,400 123,500 8,060 39,500 42,375 72,430 14,500 16,100 179,200 143,750 Lean business concepts C6 Manufacturing and income statements; analysis of inventories P2 Direct labor Income taxes expense Indirect labor Miscellaneous production costs Office salaries expense Raw materials purchases Rent expense — Office space Rent expense — Selling space Rent expense — Factory building Maintenance expense — Factory equipment Sales Sales discounts Sales salaries expense $ 564,500 138,700 61,000 10,440 72,875 896,375 25,625 29,000 95,500 32,375 5,002,000 59,375 297,300 Required Prepare the company’s 2011 manufacturing statement Prepare the company’s 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses Analysis Component Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days’ sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory (To compute turnover and days’ sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories Round answers to one decimal place Check (1) Cost of goods manufactured, $1,836,995 wiL10874_ch18_730-773.indd Page 770 8/10/10 8:58:41 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 770 Chapter 18 Managerial Accounting Concepts and Principles Problem 18-9B Quick Dry Ink produces ink-jet printers for personal computers It received an order for 600 printers from a customer The following information is available for this order Manufacturing cycle time and efficiency A1 Process time Inspection time Move time Wait time 16.0 3.4 9.0 21.6 hours hours hours hours Required Compute the company’s manufacturing cycle time Compute the company’s manufacturing cycle efficiency Interpret your answer Analysis Component Assume that Quick Dry Ink wishes to increase its manufacturing cycle efficiency to 0.80 What are some ways that it can accomplish this? SERIAL PROBLEM Business Solutions C2 C4 P2 (This serial problem begins in Chapter and continues through most of the book If previous chapter segments were not completed, the serial problem can begin at this point It is helpful, but not necessary, to use the Working Papers that accompany the book.) SP 18 Santana Rey, owner of Business Solutions, decides to diversify her business by also manufactur- ing computer workstation furniture Required Classify the following manufacturing costs of Business Solutions by behavior and traceability Cost by Behavior Cost by Traceability Product Costs Variable Fixed Direct Indirect Monthly flat fee to clean workshop Laminate coverings for desktops Taxes on assembly workshop Glue to assemble workstation component parts Wages of desk assembler Electricity for workshop Depreciation on tools Prepare a manufacturing statement for Business Solutions for the month ended January 31, 2012 As- Check (3) COGS, $2,700 sume the following manufacturing costs: Direct materials: $2,200 Factory overhead: $490 Direct labor: $900 Beginning goods in process: none (December 31, 2011) Ending goods in process: $540 (January 31, 2012) Beginning finished goods inventory: none (December 31, 2011) Ending finished goods inventory: $350 (January 31, 2012) Prepare the cost of goods sold section of a partial income statement for Business Solutions for the month ended January 31, 2012 wiL10874_ch18_730-773.indd Page 771 8/9/10 7:40:45 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chapter 18 Managerial Accounting Concepts and Principles 771 Beyond the Numbers Managerial accounting is more than recording, maintaining, and reporting financial results Managerial accountants must provide managers with both financial and nonfinancial information including estimates, projections, and forecasts There are many accounting estimates that management accountants must make, and Research In Motion must notify shareholders of these estimates REPORTING IN ACTION C1 Required RIM BTN 18-1 Access and read Research In Motion’s “Use of Estimates” section of the “Summary of Significant Accounting Policies” footnote to its financial statements, from Appendix A What are some of the accounting estimates that Research In Motion made in preparing its financial statements? What are some of the effects if the company’s actual results differ from its estimates? What is the management accountant’s role in determining those estimates? Fast Forward Access Research In Motion’s annual report for a fiscal year ending after February 27, 2010, from either its Website [RIM.com] or the SEC’s EDGAR database [www.sec.gov] Answer the questions in parts (1) and (2) after reading the current “Summary of Significant Accounting Policies” Identify any major changes BTN 18-2 Manufacturing companies must decide whether to operate their own manufacturing facilities or instead outsource the manufacturing function to a third-party (outside) company This decision impacts both company managers and also financial statement items Access the annual report or 10-K for both Research In Motion (RIM) and Apple The RIM report is for the year ended February 27, 2010 and the Apple report is for the year ended September 26, 2009 Required Determine whether RIM operates its own manufacturing facilities or outsources the manufacturing COMPARATIVE ANALYSIS C1 RIM Apple function (Hint: Search for “Manufacturing Capacity.”) Determine whether Apple operates its own manufacturing facilities or outsources the manufacturing function (Hint: Search for “product manufacturing.”) For both companies, determine the amounts they report for (a) raw materials inventory, (b) work-in- process inventory, and (c) finished goods inventory Explain how the decision on outsourcing (or not) of manufacturing operations is related to the components of inventory BTN 18-3 Assume that you are the managerial accountant at Infostore, a manufacturer of hard drives, CDs, and DVDs Its reporting year-end is December 31 The chief financial officer is concerned about having enough cash to pay the expected income tax bill because of poor cash flow management On November 15, the purchasing department purchased excess inventory of CD raw materials in anticipation of rapid growth of this product beginning in January To decrease the company’s tax liability, the chief financial officer tells you to record the purchase of this inventory as part of supplies and expense it in the current year; this would decrease the company’s tax liability by increasing expenses ETHICS CHALLENGE C1 C3 Required In which account should the purchase of CD raw materials be recorded? How should you respond to this request by the chief financial officer? BTN 18-4 Write a one-page memorandum to a prospective college student about salary expectations for graduates in business Compare and contrast the expected salaries for accounting (including different subfields such as public, corporate, tax, audit, and so forth), marketing, management, and finance majors Prepare a graph showing average starting salaries (and those for experienced professionals in those fields if available) To get this information, stop by your school’s career services office; libraries also have this information The Website JobStar.org (click on Salary Info) also can get you started COMMUNICATING IN PRACTICE C6 wiL10874_ch18_730-773.indd Page 772 8/9/10 7:40:45 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles 772 Chapter 18 Managerial Accounting Concepts and Principles TAKING IT TO THE NET C1 BTN 18-5 Managerial accounting professionals follow a code of ethics As a member of the Institute of Management Accountants, the managerial accountant must comply with Standards of Ethical Conduct Required Identify, print, and read the Statement of Ethical Professional Practice posted at www.IMAnet.org (Search using “ethical professional practice.”) What four overarching ethical principles underlie the IMA’s statement? Describe the courses of action the IMA recommends in resolving ethical conflicts TEAMWORK IN ACTION C5 P2 The following calendar-year information is taken from the December 31, 2011, adjusted trial balance and other records of Azalea Company BTN 18-6 Advertising expense Depreciation expense—Office equipment Depreciation expense—Selling equipment Depreciation expense — Factory equipment Factory supervision Factory supplies used Factory utilities Inventories Raw materials, December 31, 2010 Raw materials, December 31, 2011 Goods in process, December 31, 2010 Goods in process, December 31, 2011 Finished goods, December 31, 2010 Finished goods, December 31, 2011 $ 19,125 8,750 10,000 32,500 122,500 15,750 36,250 177,500 168,125 15,875 14,000 164,375 129,000 Direct labor Indirect labor Miscellaneous production costs Office salaries expense Raw materials purchases Rent expense—Office space Rent expense—Selling space Rent expense—Factory building Maintenance expense—Factory equipment Sales Sales discounts Sales salaries expense $ 650,750 60,000 8,500 100,875 872,500 21,125 25,750 79,750 27,875 3,275,000 57,500 286,250 Required Each team member is to be responsible for computing one of the following amounts You are not to Point: Provide teams with transparencies and markers for presentation purposes ENTREPRENEURIAL DECISION C1 C2 C6 duplicate your teammates’ work Get any necessary amounts from teammates Each member is to explain the computation to the team in preparation for reporting to class a Materials used d Total cost of goods in process b Factory overhead e Cost of goods manufactured c Total manufacturing costs Check your cost of goods manufactured with the instructor If it is correct, proceed to part (3) Each team member is to be responsible for computing one of the following amounts You are not to duplicate your teammates’ work Get any necessary amounts from teammates Each member is to explain the computation to the team in preparation for reporting to class a Net sales d Total operating expenses b Cost of goods sold e Net income or loss before taxes c Gross profit Corey Rimmel, Adam Hendin, and David Melnick of Hot Box Cookies must understand manufacturing costs to effectively operate and succeed as a profitable and efficient business BTN 18-7 Required What are the three main categories of manufacturing costs the owners must monitor and control? Pro- vide examples of each wiL10874_ch18_730-773.indd Page 773 8/17/10 2:44:15 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Chapter 18 Managerial Accounting Concepts and Principles 773 How can the owners make Hot Box Cookies’ manufacturing process more cost-effective? Provide examples of two useful managerial measures of time and efficiency What are four goals of a total quality management process? How can Hot Box Cookies use TQM to improve its business activities? BTN 18-8 Visit your favorite fast-food restaurant Observe its business operations Required HITTING THE ROAD C1 C2 Describe all business activities from the time a customer arrives to the time that customer departs List all costs you can identify with the separate activities described in part Classify each cost from part as fixed or variable, and explain your classification Access Nokia’s Website (www.nokia.com/about-nokia) and select “Corporate Governance” and then select “Overview.” Read the section dealing with the responsibilities of its board of directors BTN 18-9 GLOBAL DECISION C1 Required Identify the responsibilities of Nokia’s board of directors How would management accountants be involved in assisting the board of directors in carrying out their responsibilities? Explain ANSWERS TO MULTIPLE CHOICE QUIZ c b b a Beginning finished goods Cost of goods manufactured (COGM) Ending finished goods Cost of goods sold $6,000 COGM $3,200 $7,500 COGM $4,700 wiL10874_ch19_774-811.indd Page 774 8/11/10 5:25:53 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 19 Job Order Cost Accounting A Look Back A Look at This Chapter A Look Ahead Chapter 18 introduced managerial accounting and explained basic cost concepts We also described the lean business model and the reporting of manufacturing activities, including the manufacturing statement We begin this chapter by describing a cost accounting system We then explain the procedures used to determine costs using a job order costing system We conclude with a discussion of over- and underapplied overhead Chapter 20 focuses on measuring costs in process production companies We explain process production, describe how to assign costs to processes, and compute and analyze cost per equivalent unit Learning Objectives CAP CONCEPTUAL C1 C2 Describe important features of job order production (p 776) ANALYTICAL A1 PROCEDURAL Apply job order costing in pricing services (p 789) Explain job cost sheets and how they are used in job order cost accounting (p 778) LP19 P1 Describe and record the flow of materials costs in job order cost accounting (p 780) P2 Describe and record the flow of labor costs in job order cost accounting (p 782) P3 Describe and record the flow of overhead costs in job order cost accounting (p 783) P4 Determine adjustments for overapplied and underapplied factory overhead (p 788) wiL10874_ind_IND-IND28.indd Page IND-21 8/20/10 9:50:10 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index Remote events, 448 Rent, 51, 98, 411, 866, 869 Replacement cost, 240 Report cards, budget reports as, 990 Report form of balance sheet, 68 Reporting auditor’s reports, 319, A-3, A-4 balanced scorecard, 749, 874–875 in budget administration, 948, 949 depreciation, 403–404, 415 equity reporting, 148, 149 flexible budgets, 990–991 under GAAP See Generally accepted accounting principles global issues, 150, 438 under IFRS See International Financial Reporting Standards manufacturing activities, 740–748 balance sheet, 740–741, 755 demonstration of, 751–753 effects of trends in managerial accounting, 747–748 flow of activities and costs, 744–745 global view of, 749 income statement, 741–744, 755 manufacturing statement, 738, 745–747, 753–754, 755 merchandising activities, 180–181, 191, 206 payroll reporting, 453–455; See also specific reports FICA taxes and income taxes, 453, 454 FUTA and SUTA taxes, 444, 453 wages and salaries, 455 performance reporting for manufacturers, 743–744 reports summarized, 876–877 variance analysis of, 1005, 1014–1015 variances identified in, 997 tax reporting MACRS used for, 402 payroll, 444, 453, 454 timing of, 94–96, 115 accounting periods, 94–95 accrual v cash basis, 95 revenue and expense recognition, 96 Reporting currency, 610 Reporting periods See Accounting period(s) Report to the Nation (ACFE, 2008), 735 Required return (hurdle rate), 1041, 1043, 1045 Research and development (R&D), A-12 Research In Motion (RIM), 4, 14, 15, 53n, 67, 68, 238, 524 analysis of financial statements, 687–692 horizontal analysis, 688–691 ratio analysis, 697–712 trend analysis, 691–692 vertical analysis, 693–696 financial report (example), A-2–A-18 auditor’s report of internal control over financial reporting, A-4 balance sheets, consolidated, A-5 management’s discussion and analysis (MD&A), A-3 selected notes to financial statements, A-9–A-18 statements of cash flows, consolidated, A-8 statements of operations, consolidated, A-7 statements of shareholders’ equity, consolidated, A-6 reportable segments, 695 Residual equity See Equity Residual interest in business assets, 53 Residual value of asset, 397 Responsibility accounting, 875n, 875–877 controllable v direct costs, 875–876, 885 responsibility accounting system, 876–877 summary of cost allocation, 877 Responsibility accounting budgets, 876 Responsibility accounting performance report, 876 Responsibility accounting system, 864 Responsibility centers, 877 Restricted retained earnings, 524–525 Retail amount of inventory, 251 Retailer, 180 Retail inventory method, 251, 253 Retained earnings, 512, 532 appropriated, 525 capitalizing, 516 restricted, 524–525 stock dividends and, 517, 518 Retained earnings deficit, 515 Retirement of debt bonds, 561–562, 578–579 gain on, 644, 660–661 stock, 524, 533 Retirement of stock, 524, 533 Retrospective application, 711–712 Return, 26, 27 Return and risk analysis, 26 Return on assets (ROA), 22–23, 25, 26, 28, 873, 879 Return on average investment, 1039–1040 Return on common stockholders’ equity, 703, 705, 710 Return on equity, 552 Return on investment See Return on assets Return on sales (profit margin) ratio, 109, 115, 605–606, 613, 702, 705, 710 Return on total assets ratio, 605–606, 613, 702–703, 705, 710, 875, 886 Revenue(s), 14, 16 accrued See Accrued revenues increase in equity and, 53 incremental, 1051–1052 interest revenue, 331, 333, 372, 378, 597–598 miscellaneous, 323 other revenues and gains, 193, 206 unearned See Unearned revenue(s) for unfinished jobs, 779, 793 Revenue accounts, 114–115 Revenue centers, 865 Revenue expenditures, 404, 405, 418 Revenue recognition, 11, 96, A-11–A-12 Revenue recognition principle, 10–11, 61, 96 accrued services revenue, 103 unearned revenues and, 53, 101 Reverse stock split, 518 Reversing entries, 147, 154, 156 accounting with, 154–155 accounting without, 154 Rex Stores, 22 Rights infringement, 409 IND-21 Rights of stockholders, 510 RIM See Research In Motion RIM.com, 15, 687 Rimmel, Corey, 731 Ripken, Cal, Jr., 446 Risk, 26, 27, 69–70, 450 Risk-free investments, 526 Ritz Carlton Hotel, 748 ROA See Return on assets Robert Morris Associates, 23 ROI (return on investment) See Return on assets Rolling budgets, 949–950 Romo, Tony, 228 Rounding, 68, 703 Royal Phillips Electronics, 960 Rules-based accounting (GAAP), 22 Safety stock, 953 Safety stock inventory systems, 953 Salaries, 7, 102, 442, 455, 866 Sale of plant assets, 406–407, 418 Sales on account See Credit sales cash sales, 51, 74, 282 computing for target income, 919–920, 923, 928 cost of See Cost of goods sold credit cards See Credit card(s) degree of operating leverage and, 927 expenses allocated on portion of total sales, 867 in foreign currency, 611 gift card sales, 101, 439 joint relation with expenses, 693 of merchandise, accounting for, 187–189 global view of, 195 journal entry demonstration, 200 sales discounts, 183, 188, 202 sales returns and allowances, 188–189, 202, 280 sales transactions, 187, 206 summary of entries, 192 under periodic inventory system, 202 technological controls, 317 unearned revenues from, 53 Sales activity, 744, 745 Sales budget, 951, 952–953, 963 Sales commissions, 736, 954, 958 Sales discount(s), 183, 188, 202 Sales invoices, 51, 280, 339 Sales journal, 278–280 additional issues, 279–280 demonstrations, 200, 290 journalizing, 278–279, 282 periodic inventory system, 278n, 292, 294 posting, 279, 280 proving ledgers, 279 Sales line, in CVP chart, 916 Sales mix, 921, 1052, 1053 Sales mix selection, 1052–1053 Sales on account See Credit sales Sales on credit See Credit sales Sales policies, 322 Sales promotions, 104, 116, 565, 579 wiL10874_ind_IND-IND28.indd Page IND-22 8/20/10 9:50:10 PM user-f500 IND-22 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index Sales returns and allowances allowances, 189 recording in sales journal, 280 returns, 188–189, 202 Sales taxes computing from sales receipts, 439, 439n payable, as known liabilities, 438–439, 439n recording in sales journal, 280 Sales variances, 1005, 1014 Sales volume, 917 Salvage value of asset, 397, 399, 403, 407, 1043 Sam’s, 182 SAP, 287 Sarbanes-Oxley Act (SOX) of 2002, 8, 12–13, 316, 736 accounting controls and, 69 e-communications requirements, 273 financial statement requirements, 106 goals of, 706 on inventory safeguards, 235 requirements of, 316–317 Satyam Computers, Savings accounts, 321 SBA.gov, 482 Scatter diagrams, 911–912, 918, 926–927 Schedule (list), 279 aging schedule, 368 depreciation schedules, 399, 400, 401 Schedule of accounts payable, 284, 292, 296 Schedule of accounts receivable, 279, 292, 296, 361 Schedule of manufacturing activities, 745–747 S corporations, 12, 482 Scrap or rework decision, 1050–1051, 1057, 1059 Sea Ray, 603 Sears, Roebuck & Co., 362, 864 Seasonal businesses, 953, 968 SEC See Securities and Exchange Commission sec.gov/investor/pubs/cyberfraud.htm, 319 Secured bonds, 566 Securities and Exchange Commission (SEC), bond registration requirements, 554n EDGAR database, 15, A-1 financial statements filed with, 106 U.S v non-U.S registrants, www.SEC.gov, 403, A-1 Security for loans, 373–374 Security tags, 409 Segment elimination decision, 1053–1054 Segment return on assets ratio, 288–289, 296, 297 Segments See Business segments Self-employed persons, 443 Selling expense(s), 193 Selling expense budget, 954, 963 Selling price, 182 Sell or process decision, 1051–1052 Semiannual compounding, 570, 572 Sensitivity analysis, 921 Separate legal entity, 508 Separation of duties, 318, 319, 321, 322, 323–324, 332 Sequential processing, 815 Serial bonds, 566 Service charges, 331 Service companies, 147, 698 cost concepts for, 739 job order cost accounting for, 779, 789, 793 manufacturing activities different from, 740, 755 process cost accounting for, 815 Service departments, 858–859 allocating costs of, 867, 868, 868n, 870–871, 881 two-stage cost allocation for, 859–860 Service economy, 747 Service life of asset See Useful life of asset Services, 15 make or buy decisions, 1050 prepaid, 51, 62 provided for cash, 16, 60 provided on credit, 17, 61 Services, capital, and stated ratio method, 484–485 Services revenue, 103–104 SewWhat? Inc., 989 Share(s) See Stock “Share capital,” 526 Shareholder(s) See Stockholder(s) Shareholders’ equity See Stockholders’ equity Sharing agreement loss (deficit), 484 Shea, Katie, 49 Shoplifting, 190 Short selling, 704, 707 Short-term investments, 596, 606–607, 634 Short-term liabilities See Current liabilities Short-term notes payable, 439–441, 460 to borrow from bank, 440–441, 452 to extend credit period, 440 Short-term receivables, 699 Shredders, 273 Shrinkage, 190, 202–203 Siemens AG, 1055 Signature card, 328 Significant influence, 597, 602–603, 612, 613 Signing bonus, 98, 115–116 Simple capital structure, 527n Single-step income statement, 193–194, 199, 206 Sinking fund bonds, 566 Skechers, 70 Skullcandy, 857 Small Business Administration, 482 Small stock dividends, 516, 517, 533 Smathers and Branson, 945 Snorg Tees, 435 SnorgTees.com, 435 Snowmaking costs, 955 Social responsibility, Social Security benefits, 442 Social Security taxes, 442, 453 Software; See also Accounting software; specific programs CRM software, 287 customer interaction software, 822 as intangible asset, 412 Sole proprietorship See Proprietorship(s) Solvency, 687 Solvency ratios, 22, 701–702, 710 debt ratio, 69–70, 74, 701, 705, 710 debt-to-equity ratio, 566–567, 578, 579, 701, 705, 710 equity ratio, 701, 705 summary of, 705 times interest earned ratio, 450, 453, 460, 701–702, 710 Source documents, 50, 74, 96, 274; See also individual documents invoices, 51, 182, 183 in job order costing, 780 preprinted forms, 317 recording transactions from, 50–51 in voucher system See Voucher system Southwest Airlines, 739, 740 SOX See Sarbanes-Oxley Act S&P (Standard & Poor’s), 557, 603, 686, 687, 688 SP (standard price), 998 Special journals, 275–285, 296 basics of, 276 cash disbursements journal, 284 demonstrations, 290, 294 journalizing, 284, 285 periodic inventory system, 284, 285, 285n, 293, 294 posting, 284 cash receipts journal demonstrations, 290, 294 footing, crossfooting, and posting, 282 journalizing and posting, 281–282 periodic inventory system, 293, 294 defined, 276 demonstrations, 289–292 cash disbursements journal, 290, 294 cash receipts journal, 290, 294 periodic inventory system, 293–296 general journal transactions, 285 global view of, 288 periodic inventory system, 292–296 cash disbursements journal, 284, 285, 285n, 293, 294 cash receipts journal, 293, 294 demonstration, 293–296 purchases journal, 283n, 293, 294 sales journal, 278n, 292, 294 purchases journal demonstrations, 290, 294 journalizing, 283 periodic inventory system, 283n, 293, 294 posting, 283–284 proving ledger, 284 sales journal, 278–280 additional issues, 279–280 demonstrations, 200, 290 journalizing, 278–279, 282 periodic inventory system, 278n, 292, 294 posting, 279, 280 proving ledgers, 279 subsidiary ledgers, 276–277 accounts payable ledger, 276, 277, 284, 291, 295, 297 accounts receivable ledger, 276–277, 291, 295, 361 inventory ledger, 229 notes payable, 440 other ledgers, 277 posting from sales ledger, 279 Specific accounting principles, 10 wiL10874_ind_IND-IND28.indd Page IND-23 8/20/10 9:50:10 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index Specific identification, 231, 252, 253 cost flow assumptions in, 230, 231 financial statement effects of, 236 periodic system, 246–247 perpetual system, 231–232, 242, 245 Specific invoice inventory pricing See Specific identification Speedee Oil Change and Tune-Up, 1002 Spending variance, 1009, 1010 Sports Illustrated, 444 “Spread,” 554 Spreadsheet(s); See also Work sheets in financial statement analysis, 689 in preparation of statement of cash flows, 654–656 in preparing budgeted balance sheet, 959n SQ (standard quantity), 998 Stair-step costs, 910 Standard cost(s), 995–1004, 1014 cost variances, 997n, 997–1000 analysis of, 997 computation of, 997–998 labor cost variances, 999–1000, 1008 materials cost variances, 998–999, 1008 demonstration, 1006–1010 direct labor costs, 1012–1013 direct materials costs, 1012 expanded overhead variances, 1010–1012 computing overhead cost variances, 1010–1011 fixed overhead cost variances, 1012 variable overhead cost variances, 1011–1012 global view of, 1004 identifying, 996 materials and labor standards, 996–997 identifying standard costs, 996 setting standard costs, 996, 997 overhead standards and variances, 1001–1004 overhead cost variance See Overhead cost variance setting overhead standards, 1001–1002 sales variances, 1005 setting, 996, 997 Standard cost accounting system, 1012–1013 Standard cost card, 996, 997 Standard & Poor’s (S&P), 557, 603, 686, 687, 688 Standard & Poor’s (S&P) 500, Standard price (SP), 998 Standard quantity (SQ), 998 Staples, 191 Starbucks, 395–396, 525, 596, 644 Stated rate on bonds, 555 Stated ratio method, 484 Stated value stock, 512, 514 State ethics codes, Statement of cash flows, 19, 20, 21, 630–662 basics of, 632–638 classification of, 633–634 format, 635–636 importance of, 632–633 measurement of, 633 noncash investing and financing, 635, 662 preparation of, 636–638 purpose, 632 cash flow ratios, 650–651 cash sources and uses, 650 consolidated, A-8, A-23, A-28, A-32 defined, 632 demonstration, 25, 651–654 direct method, 654 indirect method, 652–653 direct method of reporting, 657–661, 662 illustration of, 637 indirect method compared, 638–639 operating activities section format, 661 operating cash payments, 658–661 operating cash receipts, 657–658 summary of adjustments for, 661 financing cash flows, 20, 21, 647–649, 650, 656, 662 equity analysis, 648 global view of, 648 noncurrent liability analysis, 647 proving cash balances, 648 three-stage analysis, 647 global issues, 649 global view of, 648 indirect method of reporting, 638–639, 662 changes in current liabilities, 642–643 changes in noncash current assets, 640–642 demonstration, 652–653 direct method compared, 638–639 nonoperating items, 643 operating items not providing or using cash, 643 spreadsheet used in, 654–656 summary of adjustments, 644 investing cash flows, 20, 21, 645–646, 650, 656, 662 global view of, 648 noncurrent asset analysis, 645–646 other asset analysis, 646 three-stage analysis, 645 operating cash flows, 638–644 application of indirect method, 639–644 global view of, 648 indirect and direct reporting methods, 638–639 spreadsheet preparation of, 654–655 summary of adjustments for indirect method, 644 preparation of, 20, 21, 636–638, 662 analyzing cash account, 636–637 analyzing noncash credits, 637–638 information needed, 638 proving cash balances, 649 spreadsheet preparation of, 654–656 analysis of changes, 656 indirect method, 654–655 use in evaluating company, 649, 662 Statement of changes in owner’s equity See Statement of owner’s equity Statement of earnings, 456, 457 Statement of Financial Accounting Standards No 153, “Exchanges of Nonmonetary Assets–an amendment of APB Opinion No 29,” 416 Statement of financial position See Balance sheet(s) IND-23 Statement of operations See Income statement Statement of owner’s equity, 19, 20 demonstration, 25, 73, 112, 153 preparation of, 19, 20, 191 from adjusted trial balance, 106–107, 112 using trial balance, 67–68 from worksheet, 139–142 Statement of partners’ equity, 485–486 Statement of retained earnings, 525 Statement of stockholders’ equity, 525 equity reporting, 525, 526 examples of, A-6, A-22, A-27, A-33 Statements of operations, A-7, A-21, A-25 State Unemployment Taxes (SUTA), 444, 453 Static budget, 991 Statutory restriction on retained earnings, 524 Step-wise cost(s), 910 “Step-wise” cost allocation, 868 Stock, 12 capital stock, 12, 511–512, A-15–A-16 common stock See Common stock direct or indirect sale of, 511 dividends on See Dividend(s) interpretation of stock quotes, 512 journal entries for transactions, 530, 531 no-par value stock, 511, 513 par value stock, 511, 512, 513 preferred stock See Preferred stock redemption value of, 521 retirement of debt, 524, 533 treasury stock See Treasury stock Stock-based compensation, A-12, A-15–A-16 Stock buyback, 523 Stock certificates, 510 Stock dividends, 516–518, 635 accounting for, 516–518 reasons for, 516 value of stock and, 518, 533 Stockholder(s), 5, 12, 508, 510–511 annual meetings, 509 registrar and transfer agents, 510–511 rights of, 510, 532 stock certificates and transfer, 510 Stockholders’ equity, 512 common stock, 12, 510 book value per common share, 528–529, 533, 705 demonstration, 529–531 dividends on See Dividend(s) equity analysis of transactions, 648 global view of, 526 issuance, 511, 512–514, 533 return on common stockholders’ equity, 703, 705, 710 demonstration, 529–531 dividends, 53, 515–518, 532 cash dividends, 515n, 515–516, 532 declaration of, 648 demonstration, 531–532 global view of, 526 stock dividends, 516–518, 532 stock splits, 518, 533 wiL10874_ind_IND-IND28.indd Page IND-24 8/20/10 9:50:10 PM user-f500 IND-24 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index Stockholders’ equity—Cont preferred stock, 518–521 book value per preferred share, 528–529, 533 callable, 521 convertible, 520–521 dividend preference of, 519–520, 520n, 532 global view of, 526 issuance of, 519, 521, 533 reporting prior period adjustments, 525 restrictions and appropriations, 524–525 statement of retained earnings, 524–525 statement of stockholders’ equity, 525, A-6, A-22, A-27, A-33 stock options, 525–526 Stock options, 525–526 Stock quotes, 512 Stock split, 518, 533 Store supplies, 52 Straight-line bond amortization, 556 demonstration, 568–569 discount on bonds payable, 556–557, 578 premium on bonds payable, 559, 578 Straight-line depreciation, 99, 398–399, 418 changes in estimates for, 403 other methods compared, 401–402 popularity of method, 402 Straight-line depreciation rate, 399 Straight-line depreciation schedule, 399 Strategic budgeting, 946 Strategic management, 27 Sub-chapter C corporations, 482 Sub-chapter S corporations, 482 Subordinated debentures, 566 Subscriptions, 53, 100, 444 Subsidiaries, 603 Subsidiary ledgers, 276–277, 296 accounts payable ledger See Accounts payable ledger accounts receivable ledger, 276–277, 291, 295, 361 inventory ledger, 229 notes payable, 440 other ledgers, 277 posting from sales ledger, 279 Sub Surface Waste Management, 364 Subunits, 864 Summary of significant accounting policies, A-9–A-12 Summed costs, in CVP analysis, 917 Sunk costs, 738, 1047, 1050–1051 Sunoco, 449 SuperValu, 180, 360 Supplemental information, A-17–A-18 Supplementary records, 186, 198 Suppliers, 188 Supplies, 52 as prepaid expense, 98 purchase of, 15, 16, 59, 60 Sustainable income, 710–712 changes in accounting principles and, 711–712 continuing operations, 710 discontinued segments, 710 earnings per share, 711 extraordinary items, 710–711 SUTA (State Unemployment Taxes), 444, 453 SYSCO, 180, 360 T-accounts, 55, 56, 64, 641 for adjusting entries, 111 in analyzing cash flows, 657–658 factory overhead account, 787 Take-home pay, 442 “Taking inventory,” 201, 202, 229 Talbots, 439 Target, 95, 180, 951 Target cost, 777 Target costing, 778 Target income, 919–920, 923, 928 Taxation Annual Federal Unemployment Tax Return (Form 940), 453 corporate income tax See Income taxes double taxation of corporations, 509 Employer’s Quarterly Federal Tax Return (Form 941), 453, 454 inventory costing methods and, 236–237, 252–253 IRS See Internal Revenue Service MACRS used for tax reporting, 402 partnerships, 480 payroll taxes failure to pay, 443 FICA, 442–444, 453, 454 FUTA, 444, 453 income tax, 442–443, 453, 454 Medicare taxes, 442, 453 Social Security taxes, 442, 453 SUTA, 444, 453 potential tax assessments, 449 sales taxes computing from sales receipts, 439, 439n payable, as known liabilities, 438–439, 439n recording in sales journal, 280 tax accounting, 6–7, 459 tax deductible interest on bonds, 552 tax reporting, 402 Wage and Tax Statement (Form W-2), 453 Tax reporting, 1043 Technology in accounting, automation, 829 cyberfashion, 274 data for planning and control, 877 in internal control, 318, 319–320 cash registers as, 318, 322, 324 computerized point-of-sale systems, 317 in inventory identification, 229 perpetual inventory system and, 182, 235 recordkeeping time and, 286 virtual retinal display, 275 Technology-based accounting systems automatic posting in, 279 check processing, 328–329 computer networks, 286–287 computer technology, 286 data processing, 286 ERP software, 287 similarities to manual systems, 57, 58, 59 Temporary accounts, 142, 143, 156, 191, 206 Temporary differences, 459–460 Temporary (short-term) investments, 596, 606–607, 634 Term bonds, 566 Theft, 316 credit card number theft, 319, 320 identity theft, 319–320, 325 preventing collusion, 318 360-Day year, 103 3M, 610 Three-stage analysis, 645, 647 Throughput time, 748 TIBCO Software, 564 Ticker prices, 704 TicketMaster, Ticket sales, 11, 53, 100 Time deposits, 321 Time dimension of managerial accounting, 734–735 Timeliness of information, 734 Time period assumption, 11, 94, 115 Times interest earned ratio, 701–702, 705, 710 Times interest earned ratio, 450, 453, 460 Time tickets, 782–783, 784, 785 Time value of money, B–B-7 in capital budgeting discounting, 1036 methods not using, 1037–1040 methods using, 1040–1046 concepts, B-1, B-7 future values See Future value(s) present values See Present value(s) Time Warner, 286 Timing in budget administration, 949–950 of cash disbursements, 957–958 in reporting, 94–96, 115 Tootsie Roll, 397, 398 Top line items, 195 Total asset turnover ratio, 413, 418, 419, 605–606, 613, 700, 702, 710 Total costs line, in CVP chart, 916 Total quality management (TQM), 748 Toyota Motor Corporation, 747, 748, 921 Toys “R” Us, 241–242 TQM (total quality management), 748 Traceability, classification by, 737, 739 Trade discount(s), 182 Trade-in allowances, 416 Trademarks, 411 Trade names, 411 Trade payables, 52 Trading on the equity, 521, 552 Trading securities, 597, 599–600, 613 accounting summary for, 604 global view of, 605 selling, 599–600 valuing and reporting, 599 Transaction(s), impact of, 74 Transaction analysis, 15–18, 27, 48–74 accounting equation and, 14 accounts payable, 16, 17–18 accounts receivable, 17 cash payments, 16–17 cash purchases, 15, 16, 59, 60 cash receipts, 17, 61 cash revenues, 16 cash withdrawals, 18 credit purchases, 15, 16, 60 demonstration, 24, 70–74 GAAP v IFRS on, 22 wiL10874_ind_IND-IND28.indd Page IND-25 8/20/10 9:50:10 PM user-f500 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index global view of, 22, 68–69 illustration of, 59–63 investment by owner, 15, 59 processing and See Transaction processing recording See Recording transactions summary of accounts, 24 summary of transactions, 18–19 trial balance See Trial balance Transaction processing, 54–64 accounting equation analysis, 63, 64 debits and credits, 55, 55n double-entry accounting, 55–56 illustration of, 59–63 journalizing and posting, 56–59 ledger and chart of accounts, 54 steps in, 74 Transfer agent, 510–511 Transfer price, 882–883, 885 Transfer pricing system, 867 Transportation costs, 185–186 Transportation-in, 186, 201–202 Transportation-out, 186 Transposition errors, 66n Treasurer, 322 Treasury stock, 522–524, 533 global view of, 526 purchasing, 522–523 reissuing, 523–524 retiring, 524, 533 Trek, 735 Trend analysis, 691–693 Trial balance, 65–69, 74 adjusted See Adjusted trial balance demonstration, 73 periodic inventory system, 296 perpetual inventory system, 292 finding and correcting errors, 65–66, 66n post-closing, 144–146, 156 preparation of, 65–66 preparing financial statements from, 66–68 balance sheet, 67, 68 income statement, 67 presentation issues, 68 statement of owner’s equity, 67–68 unadjusted, 106, 139, 140 Triple-threat of fraud, 320 Trump Entertainment Resorts LP, 486 Truth-in-Lending Act, 564 Turnover rate of assets, 698 Two-stage cost allocation, 858–860, 885 activity-based allocation compared, 862, 863 illustration of, 859–860 Tyco International, 13 Type of business, 698 Typo-squatting, 320 Unadjusted financial statements, 66 Unadjusted trial balance, 106, 139, 140 Unavoidable expenses, 1053–1054 Uncertainties, 449 Uncertainty in liabilities, 437–438 Unclassified balance sheet, 147 Uncollectible accounts See Bad debts Uncollectible Accounts Expense, 365 Uncollectible items, 331–332 Uncontrollable costs, 875 Underapplied overhead, 787, 788, 793 Underfunded pension plan, 578 Underwriters, 554n Underwriting, 511 Undistributed earnings, 602 Unearned revenue(s), 52–53, 53n, 100 adjusting entries, 100–101, 115 alternative accounting for, 114–115 financial statement links, 105 as known liabilities, 439 subscriptions, 53, 100, 444 ticket sales, 53, 100 Uneven cash flows computing payback period, 1038 internal rate of return with, 1044, 1060 net present value method with, 1042 Unfavorable variance, 991 causes of, 998–999 fixed v flexible budgets and, 994, 1014 long-term, 997n Uniform Partnership Act, 481 Unit contribution margin, 914 Units-of-production depreciation, 399–402, 409, 418 Units-of-production depreciation schedule, 400 Unlimited liability, 11, 12, 481 Unrealized gain (loss), 599, 607 Unregistered bonds, 566 Unsecured bonds, 566 Unsold merchandise, 189 Unusual and infrequent items, 561 Unusual gain or loss, 710 Upper Deck, 228 UPS, 286 U.S Marine, 603 Useful life of asset, 394, 397, 398 change in, 525 computing, 413 estimates of, 399, 403 ethical issues, 404, 418 IFRS requirements, 407 patents, 410 Utilities expense, 867, 870 Vacation, mandatory, 317, 319, 343 Vacation benefits, 446 Vacation pay, 102 Valuation of agricultural assets, 240 contingent valuation, 449 of dishonored note, 372, 378 of inventory at LCM, 237, 253 computing LCM, 237–238 GAAP v IFRS on, 240 recording LCM, 238 of plant assets, 399, 412 of receivables allowance method, 364–366, 378 direct write-off method, 363–364, 378 global view of, 374 notes receivable, 372–373, 378 Value-added time, 750 Value basis allocation of joint costs, 884–885 Value chain, 748 Value engineering, 778 Variable budgets See Flexible budget(s) IND-25 Variable cost(s), 736, 737, 909 changes in, 918 in cost pools, 861 in CVP analysis, 908 manufacturing costs, 1054 per unit, 909, 912 in preparation of flexible budgets, 992, 993 Variable costing income statement, 915 Variable expenses, 450 Variable overhead cost variance, 1009, 1010–1012 Variance(s), 1014 in budget reporting, 948, 949 corrective actions and, 994–995 cost variances, 997n, 997–1000, 1008 fixed overhead cost variance, 1010–1012 labor cost variances, 999–1000, 1008 materials cost variances, 998–999, 1008 total overhead cost variance See Overhead cost variance variable overhead cost variance, 1010–1011 efficiency variance, 1010 favorable variance, 991 price variance, 995 quantity variance, 995 sales variances, 1005 spending variance, 1010 unfavorable variance, 991, 994, 1014 Variance analysis, 995 challenges in, 999 demonstration, 1008 Vendee, 339 Vendor, 338 Vertical analysis, 685, 688, 693–696, 712 common-size graphics, 695–696 common-size statements, 693–694, 695 global view of, 706 Vice president (VP), 876, 877 Virtual retinal display (VRD), 275 Visa, 366 Visa USA, 362 Volkswagen, 924 Volume, 909 Volume variance, 1002–1003, 1005, 1009 Voluntary association, 480 Voluntary deductions, 442, 443 Voucher, 325, 340, 341 Voucher(s), in job order costing, 784 Voucher register, 340 Voucher system, 324–325, 338–341, 343 invoice, 339, 340 invoice approval, 339–340 purchase order, 338, 339, 340 purchase requisition, 338, 340 receiving report, 339 voucher, 325, 340, 341 VP (vice president), 876, 877 VRD (virtual retinal display), 275 W T Grant Co., 633 Wage and Tax Statement (Form W-2), 453 Wage bracket withholding table, 458 Wages, 442, 444, 866 Waldenbooks, 189 Walls, Brian, 435 wiL10874_ind_IND-IND28.indd Page IND-26 8/20/10 9:50:10 PM user-f500 IND-26 /Users/user-f500/Desktop/TEMPWORK/Don'tDelete_Jobs/MHDQ251:Beer:201/ch04 Index Walls, Matt, 435 Wall Street, 703 The Wall Street Journal, 511, 704 Walmart, 95, 180, 206, 286–287, 324, 394, 874 Walt Disney Company, 96 Warranty(ies), 446 adjusting entries for, 452 as estimated liabilities, 446–447, 460 notes regarding, A-12, A-16 Waste elimination, 747 Wasting assets, 408–409, 416, 418 Web merchants, 362 Web sites, for online analysis, 687 Weighted average (WA), 234, 249, 252, 253 cost flow assumptions in, 230, 231 financial statement effects of, 236 periodic system, 249 perpetual system, 234–235, 245, 249 Weighted-average contribution margin, 922–923 Weighted-average method, 824 change from FIFO method to, 837, 838 process costing illustration, 822–829 assigning and reconciling costs, 824–827 cost of goods manufactures, 816, 827–828 cost per equivalent unit, 824 equivalent units of production, 823–824 physical flow of units, 823 WeMarket4U.net/FatFoe, 325 WeMarket4U.net/SundaeStation, 325 Weyerhaeuser, 408 “What-if” questions, 919, 992 “What-if” transactions, 142 Whitaker, Andrew “Jack,” B-6 Wholesaler, 180 Wi-phishing, 320 Wireless communication, 286 Withdrawals See Owner withdrawals Withdrawals account, 144, 144n, 191 Withholding Allowance Certificate (Form W-4), 458 Withholding allowances, 456, 458 Withholdings, 442 Women entrepreneurs, 49, 52, 179, 271, 315, 479, 989 Work centers, 815 Working capital, 697–698 Working paper See Spreadsheet(s) Working papers, 138 Work in process inventory, 741 Work sheets, 138–142, 156; See also Spreadsheet(s) applications and analysis, 141, 142 benefits of, 138 demonstration, 151, 152 electronic, 138 financial statements prepared from, 141 illustration of, 138–142 for periodic inventory system, 204 for perpetual inventory system, 205 in preparing budgeted balance sheet, 959n Workstations, 815 WorldCom, 8, 13, 109, 324 Write-downs of inventories, 710 Write-offs of receivables, 710 www.AICPA.org, 7, www.cityslips.com, 49 www.COSO.org, 317 www.fraud.org, 319 www.IRS.gov, 402, 442 www.SEC.gov, 403, A-1 www.SEC.gov/edgar.shtml, 15 www.SSA.gov, 442 www.standardpoors.com, 687 xe.com, 11 Xerox, 109 Yahoo!, 411 Zero balances, 55, 143 Zuckerberg, Mark, This page intentionally left blank wiL10874_CA.indd Page CA-2 8/3/10 5:57:32 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chart of Accounts Following is a typical chart of accounts, which is used in several assignments Every company has its own unique accounts and numbering system Assets Current Assets 101 102 103 104 105 106 107 108 109 110 111 119 120 121 124 125 126 128 129 131 132 133 134 135 Cash Petty cash Cash equivalents Short-term investments Fair value adjustment, _ securities (S-T) Accounts receivable Allowance for doubtful accounts Legal fees receivable Interest receivable Rent receivable Notes receivable Merchandise inventory inventory inventory Office supplies Store supplies _ supplies Prepaid insurance Prepaid interest Prepaid rent Raw materials inventory Goods in process inventory, _ Goods in process inventory, _ Finished goods inventory Long-Term Investments 141 142 144 145 Long-term investments Fair value adjustment, _ securities (L-T) Investment in _ Bond sinking fund 166 Accumulated depreciation — Store equipment 167 _ equipment 168 Accumulated depreciation — _ equipment 169 Machinery 170 Accumulated depreciation — Machinery 173 Building _ 174 Accumulated depreciation — Building _ 175 Building _ 176 Accumulated depreciation — Building _ 179 Land improvements _ 180 Accumulated depreciation — Land improvements _ 181 Land improvements _ 182 Accumulated depreciation — Land improvements _ 183 Land Natural Resources 185 Mineral deposit 186 Accumulated depletion — Mineral deposit Intangible Assets 191 192 193 194 195 196 197 Patents Leasehold Franchise Copyrights Leasehold improvements Licenses Accumulated amortization— _ Liabilities Plant Assets Current Liabilities 151 152 153 154 155 156 157 158 201 202 203 204 207 208 209 210 211 214 215 216 217 218 219 221 159 160 161 162 163 164 165 CA Automobiles Accumulated depreciation — Automobiles Trucks Accumulated depreciation — Trucks Boats Accumulated depreciation — Boats Professional library Accumulated depreciation — Professional library Law library Accumulated depreciation — Law library Furniture Accumulated depreciation — Furniture Office equipment Accumulated depreciation — Office equipment Store equipment Accounts payable Insurance payable Interest payable Legal fees payable Office salaries payable Rent payable Salaries payable Wages payable Accrued payroll payable Estimated warranty liability Income taxes payable Common dividend payable Preferred dividend payable State unemployment taxes payable Employee federal income taxes payable Employee medical insurance payable 222 223 224 225 226 Employee retirement program payable Employee union dues payable Federal unemployment taxes payable FICA taxes payable Estimated vacation pay liability Unearned Revenues 230 231 232 233 234 235 236 238 Unearned consulting fees Unearned legal fees Unearned property management fees Unearned _ fees Unearned _ fees Unearned janitorial revenue Unearned _ revenue Unearned rent Notes Payable 240 241 245 251 252 Short-term notes payable Discount on short-term notes payable Notes payable Long-term notes payable Discount on long-term notes payable Long-Term Liabilities 253 255 256 257 258 Long-term lease liability Bonds payable Discount on bonds payable Premium on bonds payable Deferred income tax liability Equity Owner’s Equity 301 302 303 304 305 306 , Capital , Withdrawals , Capital , Withdrawals , Capital , Withdrawals Paid-In Capital 307 308 309 310 311 Common stock, $ _ par value Common stock, no-par value Common stock, $ _ stated value Common stock dividend distributable Paid-in capital in excess of par value, Common stock wiL10874_CA.indd Page CA-1 8/3/10 5:57:33 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles Chart of Accounts 312 Paid-in capital in excess of stated value, No-par common stock 313 Paid-in capital from retirement of common stock 314 Paid-in capital, Treasury stock 315 Preferred stock 316 Paid-in capital in excess of par value, Preferred stock Standard Cost Variance Miscellaneous Expenses 580 581 582 583 584 585 655 656 657 658 659 661 662 663 664 667 668 671 672 673 674 676 677 678 679 680 681 682 683 684 685 687 688 689 690 691 695 Direct material quantity variance Direct material price variance Direct labor quantity variance Direct labor price variance Factory overhead volume variance Factory overhead controllable variance Retained Earnings 318 Retained earnings 319 Cash dividends (or Dividends) 320 Stock dividends Other Equity Accounts 321 Treasury stock, Common 322 Unrealized gain — Equity 323 Unrealized loss — Equity Revenues 401 402 403 404 405 406 407 408 409 410 413 414 415 fees earned fees earned services revenue services revenue Commissions earned Rent revenue (or Rent earned) Dividends revenue (or Dividend earned) Earnings from investment in _ Interest revenue (or Interest earned) Sinking fund earnings Sales Sales returns and allowances Sales discounts Cost of Sales Cost of Goods Sold 502 505 506 507 508 Cost of goods sold Purchases Purchases returns and allowances Purchases discounts Transportation-in Manufacturing 520 521 530 531 540 541 542 543 544 545 546 547 548 549 550 551 552 560 561 Raw materials purchases Freight-in on raw materials Factory payroll Direct labor Factory overhead Indirect materials Indirect labor Factory insurance expired Factory supervision Factory supplies used Factory utilities Miscellaneous production costs Property taxes on factory building Property taxes on factory equipment Rent on factory building Repairs, factory equipment Small tools written off Depreciation of factory equipment Depreciation of factory building Expenses Amortization, Depletion, and Depreciation 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 Amortization expense — _ Amortization expense — _ Depletion expense — _ Depreciation expense — Boats Depreciation expense — Automobiles Depreciation expense — Building _ Depreciation expense — Building _ Depreciation expense — Land improvements _ Depreciation expense — Land improvements _ Depreciation expense — Law library Depreciation expense — Trucks Depreciation expense — _ equipment Depreciation expense — _ equipment Depreciation expense — _ Depreciation expense — _ Employee-Related Expenses 620 621 622 623 624 625 Office salaries expense Sales salaries expense Salaries expense _ wages expense Employees’ benefits expense Payroll taxes expense Financial Expenses 630 631 632 633 Cash over and short Discounts lost Factoring fee expense Interest expense Insurance Expenses 635 Insurance expense — Delivery equipment 636 Insurance expense — Office equipment 637 Insurance expense — _ Rental Expenses 640 641 642 643 644 645 Rent expense Rent expense — Office space Rent expense — Selling space Press rental expense Truck rental expense _ rental expense Supplies Expenses 650 651 652 653 Office supplies expense Store supplies expense _ supplies expense _ supplies expense Advertising expense Bad debts expense Blueprinting expense Boat expense Collection expense Concessions expense Credit card expense Delivery expense Dumping expense Equipment expense Food and drinks expense Gas and oil expense General and administrative expense Janitorial expense Legal fees expense Mileage expense Miscellaneous expenses Mower and tools expense Operating expense Organization expense Permits expense Postage expense Property taxes expense Repairs expense — _ Repairs expense — _ Selling expense Telephone expense Travel and entertainment expense Utilities expense Warranty expense Income taxes expense Gains and Losses 701 702 703 704 705 706 801 802 803 804 805 806 807 808 809 810 811 812 Gain on retirement of bonds Gain on sale of machinery Gain on sale of investments Gain on sale of trucks Gain on _ Foreign exchange gain or loss Loss on disposal of machinery Loss on exchange of equipment Loss on exchange of _ Loss on sale of notes Loss on retirement of bonds Loss on sale of investments Loss on sale of machinery Loss on _ Unrealized gain — Income Unrealized loss — Income Impairment gain Impairment loss Clearing Accounts 901 Income summary 902 Manufacturing summary CA-1 This page intentionally left blank wiL10874_ep.indd Page 7/22/10 7:37:57 AM user-f500 /Users/user-f500/Desktop/TEMPWORK/JULY_2010/21:07:10/MHBR169:slavin MANAGERIAL ANALYSES AND REPORTS ① Cost Types Variable costs: Fixed costs: Mixed costs: Manufacturing Statement For period Ended date Total cost changes in proportion to volume of activity Total cost does not change in proportion to volume of activity Cost consists of both a variable and a fixed element Direct materials Raw materials inventory, Beginning Raw materials purchases Raw materials available for use Raw materials inventory, Ending Direct materials used Direct labor Overhead costs Total overhead costs Total manufacturing costs Add goods in process inventory, Beginning Total cost of goods in process Deduct goods in process inventory, Ending Cost of goods manufactured ② Cost Sources Direct materials: Raw materials costs directly linked to finished product Direct labor: Employee costs directly linked to finished product Overhead: Costs indirectly linked to finished product ③ Costing Systems Job order costing: Costs assigned to each unique unit or batch of units Process costing: Costs assigned to similar products that are mass-produced in a continuous manner ④ Costing Ratios Contribution margin ratio (Net sales Variable costs)yNet sales Predetermined overhead rate Estimated overhead costsy Estimated activity base Break-even point in units Total fixed costsyContribution margin per unit $ # # # (#) # # # # # # (#) # $ ⑤ Planning and Control Metrics Cost variance Actual cost Standard (budgeted) cost Sales (revenue) variance Actual sales Standard (budgeted) sales ⑥ Capital Budgeting Payback period Time expected to recover investment cost Accounting rate of return Expected annual net incomeyAverage annual investment Net present value (NPV) Present value of future cash flows Investment cost NPV rule: Compute net present value (NPV in $) If NPV $ 0, then accept project; If NPV , 0, then reject project Internal rate Compute internal rate of return (IRR in %) of return rule: If IRR $ hurdle rate, accept project; If IRR , hurdle rate, reject project ⑦ Costing Terminology Relevant range: Organization’s normal range of operating activity Direct cost: Cost incurred for the benefit of one cost object Indirect cost: Cost incurred for the benefit of more than one cost object Product cost: Cost that is necessary and integral to finished products Period cost: Cost identified more with a time period than with finished products Overhead cost: Cost not separately or directly traceable to a cost object Relevant cost: Cost that is pertinent to a decision Opportunity cost: Benefit lost by choosing an action from two or more alternatives Sunk cost: Cost already incurred that cannot be avoided or changed Standard cost: Cost computed using standard price and standard quantity Budget: Formal statement of an organization’s future plans Break-even point: Sales level at which an organization earns zero profit Incremental cost: Cost incurred only if the organization undertakes a certain action Transfer price: Price on transactions between divisions within a company ⑧ Standard Cost Variances Total materials variance Total labor variance Materials Materials price     quantity variance variance Labor efficiency Labor (rate)     (quantity) variance variance Contribution Margin Income Statement For period Ended date Net sales (revenues) Total variable costs Contribution margin Total fixed costs Net income Actual total Applied total overhead overhead from flexible budget Fixed overhead volume variance Budgeted fixed Applied fixed overhead overhead Fixed overhead variance Fixed overhead Fixed overhead spending variance volume variance Materials price variance [AQ AP] [AQ SP] Materials quantity variance [AQ SP] [SQ SP] Labor (rate) variance [AH AR] [AH SR] $ Flexible Budget Variable Amount per Unit Sales (revenues) Variable costs Examples: Direct materials, Direct labor, Other variable costs Total variable costs Contribution margin Fixed costs Examples: Depreciation, Manager salaries, Administrative salaries Total fixed costs Income from operations $ # $ # # # Sales: In units Total overhead ⎬ variance ⎪ ⎭ Labor efficiency (quantity) variance [AH SR] [SH SR] Variable overhead spending variance [AH AVR] [AH SVR] Variable overhead efficiency variance [AH SVR] [SH SVR] Fixed overhead spending variance Actual fixed overhead Budgeted fixed overhead where AQ is actual q_uantity of materials; AP is actual p_rice of materials; AH is actual hours of labor; AR is actual rate of wages; AVR is actual variable rate of overhead; SQ is standard q_uantity of materials; SP is standard p_rice of materials; SH is standard hours of labor; SR is standard rate of wages; SVR is standard variable rate of overhead In dollars Cost of sales Direct costs Indirect costs Selling expenses Examples: Commissions, Shipping expenses General and administrative expenses Examples: Administrative salaries Total expenses Income from operations $ † $ $ $ [AS AP] [AS BP] Sales volume variance [AS BP] [BS BP] where AS actual sales units; AP actual sales price; BP budgeted sales price; BS budgeted sales units (fixed budget) ISBN: 007-8110874 Authors: Wild Title: Fundamental Accounting Principles, 20/e Back endsheets Color: Black and PMS 287 Pages: 8, # # # $ # # # # Variances† # # $ # $ # F or U # # # # # F or U # F or U # # # # # F or U # F or U # # # $ $ # # # $ $ # F or U # F or U # F or U F Favorable variance; U Unfavorable variance Master Budget Sequence Prepare sales budget Develop production budget Prepare manufacturing, selling, and general and administrative expense budgets Prepare capital expenditures budget ⑨ Sales Variances Sales price variance # # # # $ # $ Flexible Budget for Unit Sales of # Fixed Cost Fixed Budget Performance Report For period Ended date Fixed Actual Budget Performance Variable overhead variance Variable overhead Variable overhead ⎫ spending variance efficiency variance ⎪ # # # # # Flexible Budget For period Ended date Fixed overhead Overhead Total overhead variance controllable    volume variance variance Overhead controllable variance $ Operating Budgets Capital Expenditures Budget Consolidate operating and capital expenditures budgets into financial budgets: • Cash budget • Budgeted income statement • Budgeted balance sheet Financial Budgets wiL10874_ep.indd Page 7/22/10 7:37:58 AM user-f500 /Users/user-f500/Desktop/TEMPWORK/JULY_2010/21:07:10/MHBR169:slavin FUNDAMENTALS ① Accounting Equation Assets ↓ Credit for decreases Liabilities ↓ Debit for decreases ↑ Credit for increases Equity ↓ Debit for decreases ↑ Credit for increases ↑ Current ratio Owner’s Capital* Owner’s Withdrawals* ↓ ↑ ↑ Dr for decreases Cr for increases Revenues ↓ ↓ Dr for Cr for increases decreases ↑ ↑ Dr for Cr for decreases increases ↓ Dr for Cr for increases decreases p 196 Net sales Average accounts receivable, net Accounts receivable turnover Credit risk ratio Indicates normal balance p 697 Cash Short-term investments Current receivables Current liabilities Expenses Income Statement* For period Ended date p 148 Working capital Current assets Current liabilities Acid-test ratio FINANCIAL REPORTS Current assets Current liabilities ⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭ ↑ Debit for increases ANALYSES ① Liquidity and Efficiency p 375 Allowance for doubtful accounts Accounts receivable, net p 375 Net sales (revenues) Cost of goods sold (cost of sales) Gross margin (gross profit) Operating expenses Examples: Depreciation, salaries, wages, rent, utilities, interest, amortization, advertising, taxes Total operating expenses Nonoperating gains and losses Net income (net profit or earnings) Statement of Owner’s Equity* For period Ended date $ $ Owner, Capital, beginning Add: Investments by owner Net income # # # $ Less: Withdrawals by owner Owner, Capital, ending # # # $ # # # $ # $ # # # # # # * For a corporation, statement of owner’s equity becomes statement of retained earnings with these changes: “owner, capital” is retained earnings; “investments by owner” is deleted; and “withdrawals by owner” is dividends *Comparable corporate accounts are Common Stock (Paid-In Capital) and Dividends Close Days’ sales in inventory Prepare adjusted trial balance Prepare statements Type Adjusting Entry Dr Dr Dr Dr Expense Liability Expense Asset Ending inventory Cost of goods sold Cr Cr Cr Cr Asset* Revenue Liability Revenue Plant asset useful life ④ 4-Step Closing Process Transfer revenue and gain account balances to Income Summary Transfer expense and loss account balances to Income Summary Transfer Income Summary balance to Owner’s Capital Transfer Withdrawals balance to Owner’s Capital ⑤ Accounting Concepts Assumptions Business entity Going concern Monetary unit Periodicity Principles Historical cost Revenue recognition Expense recognition Full disclosure Debt ratio Constraints Cost-benefit Materiality Industry practice Conservatism Ownership Transfers When Goods Passed To Transportation Costs Paid By Carrier Buyer Buyer Seller ⑦ Inventory Costing Methods Units-of-Production: Cost Salvage value Useful life in periods Cost Salvage value Useful life in units Debt-to-equity Periods expired Cost Salvage value pp 69 & 701 Times interest earned Income before interest expense and income taxes Interest expense Cash coverage of debt Cash flow from operations Cash outflow for plant assets Cash flow from operations Total noncurrent liabilities Gross margin ratio Net income Net sales p 109 Net sales Cost of goods sold Net sales Return on total assets Net income Average total assets Book value per common share Units extracted Short-Term Investment in Securities Held-to-maturity (debt) securities Trading (debt and equity) securities Available-for-sale (debt and equity) securities Long-Term Investment in Securities Held-to-maturity (debt) securities Available-for-sale (debt and equity) securities Equity securities with significant influence Equity securities with controlling influence Net income Preferred dividends Average common stockholders’ equity Stockholders’ equity applicable to common shares Number of common shares outstanding Net income Preferred dividends Basic earnings per share Weighted-average common shares outstanding Cash flow on total assets Accounting Payout ratio Cost (without any discount or premium amortization) Fair value (with fair value adjustment to income) Fair value (with fair value adjustment to equity) Cost (with any discount or premium amortization) Fair value (with fair value adjustment to equity) Equity method Equity method (with consolidation) *A fair value option allows companies to report HTM and AFS securities much like trading securities Back endsheets Color: Black and PMS 287 Page: 6, p 646 Bond life-start Bond life-end $ $# $ # par † # # $ # Bond carrying value is adjusted to par and its amortized premium to zero over the bond life (note: carrying value less unamortized bond premium equals par) * Equals total bond premium less its accumulated amortization ** Equals bond par value plus its unamortized bond premium # # # Discount Bond Amortization (Straight-Line) Table† Semiannual Period-End Unamortized Bond Discount* Bond Carrying Value** # # Bond life-start Bond life-end # $ # # $# $ # par † $ Bond carrying value is adjusted to par and its amortized discount to zero over the bond life (note: unamortized bond discount plus carrying value equals par) * Equals total bond discount less its accumulated amortization ** Equals bond par value less its unamortized bond discount # # # $ # # # # $ # # Effective Interest Amortization Table for Bonds with Semiannual Interest Payment Semiannual Interest Period-End Cash Interest PaidA Bond Interest ExpenseB Discount or Premium AmortizationC Unamortized Discount or PremiumD Carrying ValueE # # # # # # * A corporation’s equity consists of: Paid-In Capital and Retained Earnings (less any treasury stock) A Return on common stockholders’ equity Classification* p 651 Premium Bond Amortization (Straight-Line) Table† Semiannual Period-End Unamortized Bond Premium* Bond Carrying Value** Cash flow from operations Average total assets Cash dividends declared on common stock Net income p 196 p 22 p 703 p 703 Dividend yield Market value (price) per share Earnings per share Annual cash dividends per share Market price per share Residual income Net income Target net income C Cash flows from operating activities [Prepared using the indirect (see below)† or direct method] Net cash provided (used) by operating activities Cash flows from investing activities [List of individual investing inflows and outflows] Net cash provided (used) by investing activities Cash flows from financing activities [List of individual financing inflows and outflows] Net cash provided (used) by financing activities Net increase (decrease) in cash Cash (and equivalents) balance at beginning of period Cash (and equivalents) balance at end of period $ # # $ $ # # # # Period Ending Date # Installment Notes Payment Table Payments Debit Debit Beginning Interest Notes Balance Expense Payable # # # Credit Cash Ending Balance # # p 528 Attach separate schedule or note disclosure of “Noncash investing and financing transactions.” p 527 p 650 p 528 ④ Market Price-earnings ratio Par value multiplied by the semiannual contract rate Prior period’s carrying value multiplied by the semiannual market rate The difference between interest paid and bond interest expense D Prior period’s unamortized discount or premium less the current period’s discount or premium amortization E Par value less unamortized discount or plus unamortized premium B Statement of Cash Flows For period Ended date Units produced ⑩ Accounting for Investment Securities p 450 ASSETS Current assets Examples: Cash, Cash equivalents, Short-term investments, Accounts receivable, Current portion of notes receivable, Inventory, Prepaid expenses Total current assets Long-term investments Examples: Investment in stock, Investment in bonds, Land for expansion Total long-term investments Plant assets Examples: Equipment, Machinery, Buildings, Land Total plant assets, net of depreciation Intangible assets Examples: Patent, Trademark, Copyright, License, Goodwill Total intangible assets, net of amortization Total assets LIABILITIES AND EQUITY Current liabilities Examples: Accounts payable, Wages payable, Salaries payable, Current notes payable, Taxes payable, Interest payable, Unearned revenues Total current liabilities Long-term liabilities Examples: Notes payable, Bonds payable, Lease liability Total long-term liabilities Total liabilities Equity* Owner, Capital Total liabilities and equity ③ Profitability Profit margin ratio Total asset turnover ⑨ Interest Computation Interest Principal (face) Rate Time ISBN: 007-8110874 Authors: Wild Title: Fundamental Accounting Principles, 20/e Total assets p 567 *Rate is often double the straight-line rate, or (1yUseful life) Total capacity in units Total equity Total liabilities Total equity Profit margin ratio • Weighted-Average • Last-In, First-Out (LIFO) Equity ratio Declining-Balance: Rate* Beginning-of-period book value Depletion: p 322 Average daily cash expenses Total liabilities Total assets ⑧ Depreciation and Depletion Straight-Line: Cash and cash equivalents ② Solvency Cash coverage of growth • Specific Identification • First-In, First-Out (FIFO) p 413 *360 days is also commonly used ⑥ Ownership of Inventory FOB Shipping Point FOB Destination p 413 Depreciation expense Days’ cash expense coverage p 335 Balance Sheet Date p 413 Accumulated depreciation Plant asset age * A typical chart of accounts is at the end of the book and classifies all accounts by financial statement categories p 241 365* Plant asset cost Depreciation expense *For depreciation, credit Accumulated Depreciation (contra asset) Characteristics Relevance Reliability Comparability Consistency 365* Net sales Total asset turnover Average total assets ③ Adjustments and Entries Prepaid Expenses Unearned Revenues Accrued Expenses Accrued Revenues Net sales p 241 Prepare postclosing trial balance Days’ sales uncollected Accounts receivable, net Adjust Accounting Cycle (Optional) Average inventory 10 Reverse Prepare unadjusted trial balance Post Journalize Inventory turnover Analyze transactions ② Accounting Cycle Cost of goods sold p 527 p 528 † Indirect Method: Cash Flows from Operating Activities Cash flows from operating activities Net income Add: Decreases in noncash current assets Increases in current liabilities Expenses with no cash outflows (examples: depreciation, and amortization of both intangibles and bond discounts) Nonoperating losses (examples: losses from asset sales and from debt retirements) Less: Increases in noncash current assets Decreases in current liabilities Revenues with no cash inflows (examples: amortization of bond premiums) Nonoperating gains (examples: gains from asset sales and from debt retirements) Net cash provided (used) by operating activities Bank Reconciliation Date $ $ # # # Bank statement balance Add: Unrecorded deposits # Bank errors understating the balance # # # # # # $ # # $# # Less: Outstanding checks # # # Bank errors overstating the balance Adjusted bank balance # $# Book balance Add: Unrecorded bank credit memoranda Book errors understating the balance Less: Unrecorded bank debit memoranda Book errors overstating the balance Adjusted book balance Balances are equal (reconciled) $# $# $# $# $# $# $# wiL10874_ep.indd Page 7/22/10 7:37:58 AM user-f500 /Users/user-f500/Desktop/TEMPWORK/JULY_2010/21:07:10/MHBR169:slavin FUNDAMENTALS ① Accounting Equation Assets ↓ Credit for decreases Liabilities ↓ Debit for decreases ↑ Credit for increases Equity ↓ Debit for decreases ↑ Credit for increases ↑ Current ratio Owner’s Capital* Owner’s Withdrawals* ↓ ↑ ↑ Dr for decreases Cr for increases Revenues ↓ ↓ Dr for Cr for increases decreases ↑ ↑ Dr for Cr for decreases increases ↓ Dr for Cr for increases decreases p 196 Net sales Average accounts receivable, net Accounts receivable turnover Credit risk ratio Indicates normal balance p 697 Cash Short-term investments Current receivables Current liabilities Expenses Income Statement* For period Ended date p 148 Working capital Current assets Current liabilities Acid-test ratio FINANCIAL REPORTS Current assets Current liabilities ⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭ ↑ Debit for increases ANALYSES ① Liquidity and Efficiency p 375 Allowance for doubtful accounts Accounts receivable, net p 375 Net sales (revenues) Cost of goods sold (cost of sales) Gross margin (gross profit) Operating expenses Examples: Depreciation, salaries, wages, rent, utilities, interest, amortization, advertising, taxes Total operating expenses Nonoperating gains and losses Net income (net profit or earnings) Statement of Owner’s Equity* For period Ended date $ $ Owner, Capital, beginning Add: Investments by owner Net income # # # $ Less: Withdrawals by owner Owner, Capital, ending # # # $ # # # $ # $ # # # # # # * For a corporation, statement of owner’s equity becomes statement of retained earnings with these changes: “owner, capital” is retained earnings; “investments by owner” is deleted; and “withdrawals by owner” is dividends *Comparable corporate accounts are Common Stock (Paid-In Capital) and Dividends Close Days’ sales in inventory Prepare adjusted trial balance Prepare statements Type Adjusting Entry Dr Dr Dr Dr Expense Liability Expense Asset Ending inventory Cost of goods sold Cr Cr Cr Cr Asset* Revenue Liability Revenue Plant asset useful life ④ 4-Step Closing Process Transfer revenue and gain account balances to Income Summary Transfer expense and loss account balances to Income Summary Transfer Income Summary balance to Owner’s Capital Transfer Withdrawals balance to Owner’s Capital ⑤ Accounting Concepts Assumptions Business entity Going concern Monetary unit Periodicity Principles Historical cost Revenue recognition Expense recognition Full disclosure Debt ratio Constraints Cost-benefit Materiality Industry practice Conservatism Ownership Transfers When Goods Passed To Transportation Costs Paid By Carrier Buyer Buyer Seller ⑦ Inventory Costing Methods Units-of-Production: Cost Salvage value Useful life in periods Cost Salvage value Useful life in units Debt-to-equity Periods expired Cost Salvage value pp 69 & 701 Times interest earned Income before interest expense and income taxes Interest expense Cash coverage of debt Cash flow from operations Cash outflow for plant assets Cash flow from operations Total noncurrent liabilities Gross margin ratio Net income Net sales p 109 Net sales Cost of goods sold Net sales Return on total assets Net income Average total assets Book value per common share Units extracted Short-Term Investment in Securities Held-to-maturity (debt) securities Trading (debt and equity) securities Available-for-sale (debt and equity) securities Long-Term Investment in Securities Held-to-maturity (debt) securities Available-for-sale (debt and equity) securities Equity securities with significant influence Equity securities with controlling influence Net income Preferred dividends Average common stockholders’ equity Stockholders’ equity applicable to common shares Number of common shares outstanding Net income Preferred dividends Basic earnings per share Weighted-average common shares outstanding Cash flow on total assets Accounting Payout ratio Cost (without any discount or premium amortization) Fair value (with fair value adjustment to income) Fair value (with fair value adjustment to equity) Cost (with any discount or premium amortization) Fair value (with fair value adjustment to equity) Equity method Equity method (with consolidation) *A fair value option allows companies to report HTM and AFS securities much like trading securities Back endsheets Color: Black and PMS 287 Page: 6, p 646 Bond life-start Bond life-end $ $# $ # par † # # $ # Bond carrying value is adjusted to par and its amortized premium to zero over the bond life (note: carrying value less unamortized bond premium equals par) * Equals total bond premium less its accumulated amortization ** Equals bond par value plus its unamortized bond premium # # # Discount Bond Amortization (Straight-Line) Table† Semiannual Period-End Unamortized Bond Discount* Bond Carrying Value** # # Bond life-start Bond life-end # $ # # $# $ # par † $ Bond carrying value is adjusted to par and its amortized discount to zero over the bond life (note: unamortized bond discount plus carrying value equals par) * Equals total bond discount less its accumulated amortization ** Equals bond par value less its unamortized bond discount # # # $ # # # # $ # # Effective Interest Amortization Table for Bonds with Semiannual Interest Payment Semiannual Interest Period-End Cash Interest PaidA Bond Interest ExpenseB Discount or Premium AmortizationC Unamortized Discount or PremiumD Carrying ValueE # # # # # # * A corporation’s equity consists of: Paid-In Capital and Retained Earnings (less any treasury stock) A Return on common stockholders’ equity Classification* p 651 Premium Bond Amortization (Straight-Line) Table† Semiannual Period-End Unamortized Bond Premium* Bond Carrying Value** Cash flow from operations Average total assets Cash dividends declared on common stock Net income p 196 p 22 p 703 p 703 Dividend yield Market value (price) per share Earnings per share Annual cash dividends per share Market price per share Residual income Net income Target net income C Cash flows from operating activities [Prepared using the indirect (see below)† or direct method] Net cash provided (used) by operating activities Cash flows from investing activities [List of individual investing inflows and outflows] Net cash provided (used) by investing activities Cash flows from financing activities [List of individual financing inflows and outflows] Net cash provided (used) by financing activities Net increase (decrease) in cash Cash (and equivalents) balance at beginning of period Cash (and equivalents) balance at end of period $ # # $ $ # # # # Period Ending Date # Installment Notes Payment Table Payments Debit Debit Beginning Interest Notes Balance Expense Payable # # # Credit Cash Ending Balance # # p 528 Attach separate schedule or note disclosure of “Noncash investing and financing transactions.” p 527 p 650 p 528 ④ Market Price-earnings ratio Par value multiplied by the semiannual contract rate Prior period’s carrying value multiplied by the semiannual market rate The difference between interest paid and bond interest expense D Prior period’s unamortized discount or premium less the current period’s discount or premium amortization E Par value less unamortized discount or plus unamortized premium B Statement of Cash Flows For period Ended date Units produced ⑩ Accounting for Investment Securities p 450 ASSETS Current assets Examples: Cash, Cash equivalents, Short-term investments, Accounts receivable, Current portion of notes receivable, Inventory, Prepaid expenses Total current assets Long-term investments Examples: Investment in stock, Investment in bonds, Land for expansion Total long-term investments Plant assets Examples: Equipment, Machinery, Buildings, Land Total plant assets, net of depreciation Intangible assets Examples: Patent, Trademark, Copyright, License, Goodwill Total intangible assets, net of amortization Total assets LIABILITIES AND EQUITY Current liabilities Examples: Accounts payable, Wages payable, Salaries payable, Current notes payable, Taxes payable, Interest payable, Unearned revenues Total current liabilities Long-term liabilities Examples: Notes payable, Bonds payable, Lease liability Total long-term liabilities Total liabilities Equity* Owner, Capital Total liabilities and equity ③ Profitability Profit margin ratio Total asset turnover ⑨ Interest Computation Interest Principal (face) Rate Time ISBN: 007-8110874 Authors: Wild Title: Fundamental Accounting Principles, 20/e Total assets p 567 *Rate is often double the straight-line rate, or (1yUseful life) Total capacity in units Total equity Total liabilities Total equity Profit margin ratio • Weighted-Average • Last-In, First-Out (LIFO) Equity ratio Declining-Balance: Rate* Beginning-of-period book value Depletion: p 322 Average daily cash expenses Total liabilities Total assets ⑧ Depreciation and Depletion Straight-Line: Cash and cash equivalents ② Solvency Cash coverage of growth • Specific Identification • First-In, First-Out (FIFO) p 413 *360 days is also commonly used ⑥ Ownership of Inventory FOB Shipping Point FOB Destination p 413 Depreciation expense Days’ cash expense coverage p 335 Balance Sheet Date p 413 Accumulated depreciation Plant asset age * A typical chart of accounts is at the end of the book and classifies all accounts by financial statement categories p 241 365* Plant asset cost Depreciation expense *For depreciation, credit Accumulated Depreciation (contra asset) Characteristics Relevance Reliability Comparability Consistency 365* Net sales Total asset turnover Average total assets ③ Adjustments and Entries Prepaid Expenses Unearned Revenues Accrued Expenses Accrued Revenues Net sales p 241 Prepare postclosing trial balance Days’ sales uncollected Accounts receivable, net Adjust Accounting Cycle (Optional) Average inventory 10 Reverse Prepare unadjusted trial balance Post Journalize Inventory turnover Analyze transactions ② Accounting Cycle Cost of goods sold p 527 p 528 † Indirect Method: Cash Flows from Operating Activities Cash flows from operating activities Net income Add: Decreases in noncash current assets Increases in current liabilities Expenses with no cash outflows (examples: depreciation, and amortization of both intangibles and bond discounts) Nonoperating losses (examples: losses from asset sales and from debt retirements) Less: Increases in noncash current assets Decreases in current liabilities Revenues with no cash inflows (examples: amortization of bond premiums) Nonoperating gains (examples: gains from asset sales and from debt retirements) Net cash provided (used) by operating activities Bank Reconciliation Date $ $ # # # Bank statement balance Add: Unrecorded deposits # Bank errors understating the balance # # # # # # $ # # $# # Less: Outstanding checks # # # Bank errors overstating the balance Adjusted bank balance # $# Book balance Add: Unrecorded bank credit memoranda Book errors understating the balance Less: Unrecorded bank debit memoranda Book errors overstating the balance Adjusted book balance Balances are equal (reconciled) $# $# $# $# $# $# $# wiL10874_lastpage.indd Page 8/6/10 4:48:53 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles SELECTED TRANSACTIONS AND RELATIONS ① Merchandising Transactions Summary Merchandising Transactions Merchandising Entries Dr Purchasing merchandise for resale Paying freight costs on purchases; FOB shipping point Paying within discount period • Merchandise Inventory Cash or Accounts Payable • Merchandise Inventory Cash • Accounts Payable Merchandise Inventory Cash • Cash or Accounts Payable Merchandise Inventory • Cash or Accounts Receivable Sales • Cost of Goods Sold Merchandise Inventory • Cash Sales Discounts Accounts Receivable • Sales Returns and Allowances Cash or Accounts Receivable • Merchandise Inventory Cost of Goods Sold • Delivery Expense Cash # Recording purchase returns or allowances Selling merchandise Receiving payment within discount period Granting sales returns or allowances Paying freight costs on sales; FOB destination Merchandising Events ⎫ ⎪ ⎪⎪ ⎬ ⎪⎪ ⎪ ⎭ Closing ⎫ ⎬ ⎭ Adjusting Cr Net cost of purchases From supplier # Period # # # Merchandise available for sale # # # Ending inventory Cost of goods sold Beginning inventory Net cost of purchases To Income Statement To Balance Sheet # # # # From supplier # # # # # Merchandise available for sale # Ending inventory # # Cost of goods sold To Income Statement To Balance Sheet # # Adjusting and Closing Entries Adjusting due to shrinkage (occurs when recorded amount larger than physical inventory) Closing temporary accounts with credit balances Closing temporary accounts with debit balances Beginning inventory Period Sales ⎫ ⎪ ⎪ ⎪ ⎪ ⎪⎪ ⎬ ⎪⎪ ⎪ ⎪ ⎪ ⎪ ⎭ ⎫ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎭ Purchases ② Merchandising Cash Flows ③ Credit Terms and Amounts Cost of Goods Sold Merchandise Inventory # Sales Income Summary Income Summary Sales Returns and Allowances Sales Discounts Cost of Goods Sold Delivery Expense “Other Expenses” # Credit period Credit Terms # Discount* period Date of invoice # # Time # # # # # Due: Invoice price minus discount* Amount Due Due: Invoice price *Discount refers to a purchase discount for a buyer and a sales discount for a seller ⑤ Bond Valuation ④ Bad Debts Estimation Bad Debts Estimation or Market rate Bond Price Determined Contract rate > Market rate Bond sells at Premium Contract rate = Market rate Bond sells at Par Contract rate < Market rate Bond sells at Discount o n d Balance Sheet Focus Market Sets Contract rate B Income Statement Focus Bond Sets or Percent of Sales Percent of Receivables Aging of Receivables [Emphasis on Matching] [Emphasis on Realizable Value] [Emphasis on Realizable Value] Sales × Rate = Bad Debts Expense Accounts Allowance × Rate = Receivable for Doubtful Accounts Allowance Accounts Rates = for Doubtful Receivable × (by Age) Accounts (by Age) ⑦ Dividend Transactions Type of Dividend ⑥ Stock Transactions Summary Reissue Common Stock ⎫ ⎪ ⎪ ⎪⎪ ⎬ ⎪⎪ ⎪ ⎭⎪ Reacquire Common Stock ⎫ ⎬ ⎭ Issue Preferred Stock ⎫ ⎪⎪ ⎬ ⎪ ⎭⎪ ⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪⎪ ⎬ ⎪⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭ Issue Common Stock Stock Transactions Stock Entries Issue par value common stock at par (par stock recorded at par) Issue par value common stock at premium (par stock recorded at par) Cash Common Stock Cash Common Stock Paid-In Capital in Excess of Par Value, Common Stock Cash Common Stock Cash Common stock Cash Common stock Paid-In Capital in Excess of Stated Value, Common Stock Cash Preferred Stock Cash Preferred Stock Paid-In Capital in Excess of Par Value, Preferred Stock Treasury Stock, Common Cash Cash Treasury Stock, Common Cash Treasury Stock, Common Paid-In Capital, Treasury Cash Paid-In Capital, Treasury Treasury Stock, Common Retained Earnings (if necessary) Issue no-par value common stock (no-par stock recorded at amount received) Issue stated value common stock at stated value (stated stock recorded at stated value) Issue stated value common stock at premium (stated stock recorded at stated value) Issue par value preferred stock at par (par stock recorded at par) Issue par value preferred stock at premium (par stock recorded at par) Reacquire its own common stock (treasury stock recorded at cost) Reissue its treasury stock at cost (treasury stock removed at cost) Reissue its treasury stock above cost (treasury stock removed at cost) Reissue its treasury stock below cost (treasury stock removed at cost; if paid-in capital is insufficient to cover amount below cost, retained earnings is debited for remainder) Dr Cr Account Affected Cash Dividend Stock Dividend Stock Split Cash Common Stock Retained Earnings Decrease — Decrease — Increase Decrease — — — # # # # ⑧ A Rose by Any Other Name # The same financial statement sometimes receives different titles Following are some of the more common aliases.* # # # Balance Sheet Statement of Financial Position Statement of Financial Condition Income Statement Statement of Income Operating Statement Statement of Operations Statement of Operating Activity Earnings Statement Statement of Earnings Profit and Loss (P&L) Statement Statement of Cash Flows Statement of Cash Flow Cash Flows Statement Statement of Changes in Cash Position Statement of Changes in Financial Position Statement of Owner’s Equity Statement of Changes in Owner’s Equity Statement of Changes in Owner’s Capital # # # # # # # # # # # # # Statement of Shareholders’ Equity† Statement of Changes in Shareholders’ Equity† Statement of Stockholders’ Equity and Comprehensive Income† Statement of Changes in Capital Accounts† # # # # # # # * The term Consolidated often precedes or follows these statement titles to reflect † the combination of different entities, such as a parent company and its subsidiaries Corporation only wiL10874_rose.indd Page 8/3/10 5:55:55 PM user-f500 /Volumes/203/MHBR178/sLa1719X_disk1of1/007731719X/sLa1719X_pagefiles A Rose by Any Other Name The same financial statement sometimes receives different titles Following are some of the more common aliases.* Balance Sheet Statement of Financial Position Statement of Financial Condition Income Statement Statement of Income Operating Statement Statement of Operations Statement of Operating Activity Earnings Statement Statement of Earnings Profit and Loss (P&L) Statement Statement of Cash Flows Statement of Cash Flow Cash Flows Statement Statement of Changes in Cash Position Statement of Changes in Financial Position Statement of Owner’s Equity Statement of Changes in Owner’s Equity Statement of Changes in Owner’s Capital Statement of Shareholders’ Equity† Statement of Changes in Shareholders’ Equity† Statement of Stockholders’ Equity and Comprehensive Income† Statement of Changes in Capital Accounts† * The term Consolidated often precedes or follows these statement titles to reflect † the combination of different entities, such as a parent company and its subsidiaries For corporations only We thank Dr Louella Moore from Arkansas State University for suggesting this listing ... 95.00 3/ 3/2011 3/ 4/2011 3/ 5/2011 3/ 8/2011 3/ 9/2011 3/ 10/2011 3/ 11/2011 L -33 93 L -34 22 L -34 56 L -34 79 L -35 01 L -35 35 L -35 59 120.00 150.00 180.00 60.00 90.00 240.00 160.00 3/ 11/2011 160% of Direct... Materials Job B16 Overhead Costs Overhead Job B17 Finished Goods Completed Completed Completed Job B15 Job B16 Goods Sold Delivered Delivered Job B15 Job B16 Job B17 Indirect Labor Labor Job B18... Job Completion When a job is finished, its job cost sheet is completed and moved from the jobs in process file to the finished jobs file This latter file acts as a subsidiary ledger controlled