Horgren financial managerial accounting the Financial chapters 5th global edtion

Horgren financial managerial accounting the Financial chapters 5th global edtion Horgren financial managerial accounting the Financial chapters 5th global edtion Horgren financial managerial accounting the Financial chapters 5th global edtion Horgren financial managerial accounting the Financial chapters 5th global edtion Horgren financial managerial accounting the Financial chapters 5th global edtion

Horngren’s Financial & Managerial Accounting THe Financial cHapTers Global Edition FiFth Edition Tracie Miller-Nobles Austin Community College Brenda Mattison Tri-County Technical College Ella Mae Matsumura University of Wisconsin-Madison Boston Columbus Indianapolis New York San Francisco Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Vice President, Business Publishing: Donna Battista Senior Acquisitions Editor: Lacey Vitetta Editorial Assistant: Christine Donovan Vice President, Product Marketing: Maggie Moylan Director of Marketing, Digital Services and Products: Jeanette Koskinas Senior Product Marketing Manager: Alison Haskins Executive Field Marketing Manager: Lori DeShazo Senior Strategic Marketing Manager: Erin Gardner Team Lead, Program Management: Ashley Santora Program Manager: Mary Kate Murray Team Lead, Project Management: Jeff Holcomb Project Manager: Roberta Sherman 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Financial & Managerial Accounting, The Financial Chapters, 5th edition, ISBN 978-0-13-385125-0, by Tracie L Miller-Nobles, Brenda L Mattison and Ella Mae Matsumurato, published by Pearson Education © 2016 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC 1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners ISBN-10: 1-29-211710-9 ISBN-13: 978-1-29-211710-2 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 Typeset in 11/13, Adobe Garamond Pro Regular by Integra Software Services Pvt Ltd Printed and bound by About the Authors Tracie L Miller-Nobles, CPA, received her bachelor’s and master’s degrees in accounting from Texas A&M University and is currently pursuing her Ph.D in adult learning also at Texas A&M University She is an Associate Professor at Austin Community College, Austin, TX Previously she served as a Senior Lecturer at Texas State University, San Marcos, TX, and has served as department chair of the Accounting, Business, Computer Information Systems, and Marketing/Management department at Aims Community College, Greeley, CO In addition, Tracie has taught as an adjunct professor at University of Texas and has public accounting experience with Deloitte Tax LLP and Sample & Bailey, CPAs Tracie is a recipient of the Texas Society of CPAs Rising Star Award, TSCPAs Outstanding Accounting Educator Award, NISOD Teaching Excellence Award and the Aims Community College Excellence in Teaching Award She is a member of the Teachers of Accounting at Two Year Colleges, the American Accounting Association, the American Institute of Certified Public Accountants, and the Texas State Society of Certified Public Accountants She is currently serving on the Board of Directors as secretary/webmaster of Teachers of Accounting at Two Year Colleges, as a member of the American Institute of Certified Public Accountants nominations committee, and as chair of the Texas Society of CPAs Relations with Education Institutions committee In addition, Tracie served on the Commission on Accounting Higher Education: Pathways to a Profession Tracie has spoken on such topics as using technology in the classroom, motivating non-business majors to learn accounting, and incorporating active learning in the classroom at numerous conferences In her spare time she enjoys spending time with her friends and family and camping, kayaking, and quilting Brenda L Mattison has a bachelor’s degree in education and a master’s degree in account- ing, both from Clemson University She is currently an Accounting Instructor at Tri-County Technical College in Pendleton, South Carolina Brenda previously served as Accounting Program Coordinator at TCTC and has prior experience teaching accounting at Robeson Community College, Lumberton, North Carolina; University of South Carolina Upstate, Spartanburg, South Carolina; and Rasmussen Business College, Eagan, Minnesota She also has accounting work experience in retail and manufacturing businesses Brenda is a member of Teachers of Accounting at Two Year Colleges and the American Accounting Association She is currently serving on the board of directors as Vice President of Conference Administration of Teachers of Accounting at Two Year Colleges Brenda previously served as Faculty Fellow at Tri-County Technical College She has presented at several conferences on topics including active learning, course development, and student engagement In her spare time, Brenda enjoys reading and spending time with her family She is also an active volunteer in the community, serving her church and other organizations Ella Mae Matsumura, Ph.D is a professor in the Department of Accounting and Information Systems in the School of Business at the University of Wisconsin–Madison, and is affiliated with the university’s Center for Quick Response Manufacturing She received an A.B in mathematics from the University of California, Berkeley, and M.Sc and Ph.D degrees from the University of British Columbia Ella Mae has won two teaching excellence awards at the University of Wisconsin–Madison and was elected as a lifetime fellow of the university’s Teaching Academy, formed to promote effective teaching She is a member of the university team awarded an IBM Total Quality Management Partnership grant to develop curriculum for total quality management education Ella Mae was a co-winner of the 2010 Notable Contributions to Management Accounting Literature Award She has served in numerous leadership positions in the American Accounting Association (AAA) She was coeditor of Accounting Horizons and has chaired and served on numerous AAA committees She has been secretary-treasurer and president of the AAA’s Management Accounting Section Her past and current research articles focus on decision making, performance evaluation, compensation, supply chain relationships, and sustainability She coauthored a monograph on customer profitability analysis in credit unions Brief Contents Chapter Accounting and the Business Environment 25 Chapter Recording Business Transactions 79 Chapter The Adjusting Process 141 Chapter Completing the Accounting Cycle 207 Chapter Merchandising Operations 270 Chapter Merchandise Inventory 348 Chapter Internal Control and Cash 398 Chapter Receivables 447 Chapter Plant Assets, Natural Resources, and Intangibles 498 Chapter 10 Investments 547 Chapter 11 Current Liabilities and Payroll 579 Chapter 12 Long-Term Liabilities 620 Chapter 13 Stockholders’ Equity 669 Chapter 14 The Statement of Cash Flows 722 Chapter 15 Financial Statement Analysis 788 AppENdix A—2013 Green Mountain Coffee Roasters, Inc Annual Report 851 AppENdix B—Present Value Tables 899 AppENdix C—Accounting Information Systems 901 GlossAry 959 iNdEx 973 phoTo CrEdiTs 987 Contents Chapter Accounting and the Business Environment 25 Why Is Accounting Important? 26 Decision Makers: The Users of Accounting Information The Accounting Profession 28 27 What Are the Organizations and Rules That Govern Accounting? 30 Governing Organizations 30 Generally Accepted Accounting Principles 30 The Economic Entity Assumption 30 The Cost Principle 33 The Going Concern Assumption 34 The Monetary Unit Assumption 34 International Financial Reporting Standards 34 Ethics in Accounting and Business 34 What Is the Accounting Equation? Assets 36 Liabilities 36 Equity 36 35 Transaction Analysis for Smart Touch Learning 37 How Do You Prepare Financial Statements? 43 Income Statement 43 Statement of Retained Earnings Balance Sheet 45 Statement of Cash Flows 46 44 How Do You Use Financial Statements to Evaluate Business Performance? 48 Green Mountain Coffee Roasters, Inc Return on Assets (ROA) 48 48 50 ■ assess Your progress ■ Critical thinking How Do You Use the Debt Ratio to Evaluate Business Performance? 105 ■ review 107 ■ assess Your progress ■ Critical thinking 114 139 Chapter The Adjusting process 141 What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting? 142 What Concepts and Principles Apply to Accrual Basis Accounting? 144 77 What Is an Account? What Are Adjusting Entries, and How Do We Record Them? 146 Deferred Expenses Deferred Revenues Accrued Expenses Accrued Revenues 80 What Is the Purpose of the Adjusted Trial Balance, and How Do We Prepare It? 162 What Is the Impact of Adjusting Entries on the Financial Statements? 164 How Could a Worksheet Help in Preparing Adjusting Entries and the Adjusted Trial Balance? 165 What Is an Alternative Treatment of Recording Deferred Expenses and Deferred Revenues? 167 Deferred Expenses 167 Deferred Revenues 169 ■ review 170 ■ assess Your progress ■ Critical thinking 82 What Is Double-Entry Accounting? 147 153 154 157 AppENdix 3A: Alternative Treatment of Recording Deferred Expenses and Deferred Revenues 167 55 Chapter recording Business Transactions 79 Assets 80 Liabilities 80 Equity 82 Chart of Accounts Ledger 83 103 Preparing Financial Statements from the Trial Balance 103 Correcting Trial Balance Errors 104 The Time Period Concept 144 The Revenue Recognition Principle 144 The Matching Principle 145 How Do You Analyze a Transaction? 37 ■ review What Is the Trial Balance? 84 The T-Account 84 Increases and Decreases in the Accounts 84 Expanding the Rules of Debit and Credit 85 The Normal Balance of an Account 85 Determining the Balance of a T-Account 86 How Do You Record Transactions? 87 Source Documents—The Origin of the Transactions 87 Journalizing and Posting Transactions 88 The Ledger Accounts After Posting 99 The Four-Column Account: An Alternative to the T-Account 101 178 204 Chapter Completing the Accounting Cycle 207 How Do We Prepare Financial Statements? 208 Relationships Among the Financial Statements 209 How Could a Worksheet Help in Preparing Financial Statements? 213 Section 5—Income Statement 213 Section 6—Balance Sheet 213 Section 7—Determine Net Income or Net Loss 213 What Is the Closing Process, and How Do We Close the Accounts? 215 Closing Temporary Accounts—Net Income for the Period 217 Closing Temporary Accounts—Net Loss for the Period 219 How Do We Prepare a Post-Closing Trial Balance? 221 What Is the Accounting Cycle? 223 How Do We Use the Current Ratio to Evaluate Business Performance? 224 ■ review ■ Critical thinking Accounting Principles 349 Control Over Merchandise Inventory 350 238 ■ Comprehensive problem for Chapters 1–4 265 ■ Comprehensive problem for Chapters 1–4 266 ■ Critical thinking How Are Merchandise Inventory Costs Determined Under a Perpetual Inventory System? 351 267 Specific Identification Method 353 First-In, First-Out (FIFO) Method 354 Last-In, First-Out (LIFO) Method 355 Weighted-Average Method 357 Chapter Merchandising operations 270 What Are Merchandising Operations? 271 The Operating Cycle of a Merchandising Business 271 Merchandise Inventory Systems: Perpetual and Periodic Inventory Systems 273 How Are Purchases of Merchandise Inventory Recorded in a Perpetual Inventory System? 274 Purchase of Merchandise Inventory 275 Purchase Discounts 276 Purchase Returns and Allowances 277 Transportation Costs 278 Cost of Inventory Purchased 280 Sale of Merchandise Inventory 281 Sales Discounts 283 Sales Returns and Allowances 283 Transportation Costs—Freight Out 285 Net Sales Revenue and Gross Profit 285 How Are a Merchandiser’s Financial Statements Prepared? 290 Computing the Lower-of-Cost-or-Market 363 Recording the Adjusting Journal Entry to Adjust Merchandise Inventory 363 How Are Merchandise Inventory Costs Determined Under a Periodic Inventory System? 369 First-In, First-Out (FIFO) Method 370 Last-In, First-Out (LIFO) Method 371 Weighted-Average Method 371 ■ review 372 ■ assess Your progress 293 How Do We Use the Gross Profit Percentage to Evaluate Business Performance? 293 AppENdix 5A: Accounting for Merchandise Inventory in a Periodic Inventory System 295 How Are Merchandise Inventory Transactions Recorded in a Periodic Inventory System? 295 Contents How Is Merchandise Inventory Valued When Using the Lower-of-Cost-or-Market Rule? 363 AppENdix 6A: Merchandise Inventory Costs Under a Periodic Inventory System 369 Adjusting Merchandise Inventory Based on a Physical Count 286 Closing the Accounts of a Merchandiser 287 Worksheet for a Merchandising Business—Perpetual Inventory System 289 Income Statement 360 Balance Sheet 361 Inventory Turnover 368 Days’ Sales in Inventory 368 What Are the Adjusting and Closing Entries for a Merchandiser? 286 Income Statement 290 Statement of Retained Earnings and the Balance Sheet How Are Financial Statements Affected by Using Different Inventory Costing Methods? 360 What Are the Effects of Merchandise Inventory Errors on the Financial Statements? 365 How Do We Use Inventory Turnover and Days’ Sales in Inventory to Evaluate Business Performance? 367 How Are Sales of Merchandise Inventory Recorded in a Perpetual Inventory System? 281 Purchases of Merchandise Inventory 295 Sale of Merchandise Inventory 297 Adjusting and Closing Entries 297 Preparing Financial Statements 300 What Are the Accounting Principles and Controls That Relate to Merchandise Inventory? 349 230 ■ assess Your progress 344 345 Chapter Merchandise inventory 348 Accounting for Accrued Expenses 226 Accounting Without a Reversing Entry 227 Accounting with a Reversing Entry 228 ■ review 316 ■ Comprehensive problem for Chapters 1–5 AppENdix 4A: Reversing Entries: An Optional Step 226 What Are Reversing Entries? 226 305 ■ assess Your progress ■ Critical thinking 379 396 Chapter internal Control and Cash 398 What Is Internal Control, and How Can It Be Used to Protect a Company’s Assets? 399 Internal Control and the Sarbanes-Oxley Act 399 The Components of Internal Control 400 Internal Control Procedures 401 The Limitations of Internal Control—Costs and Benefits 403 What Are the Internal Control Procedures With Respect to Cast Receipts? 404 Cash Receipts Over the Counter Cash Receipts by Mail 405 404 What Are the Internal Control Procedures With Respect to Cash Payments? 406 Controls Over Payment by Check 406 How Can a Petty Cash Fund Be Used for Internal Control Purposes? 408 Setting Up the Petty Cash Fund 409 Replenishing the Petty Cash Fund 409 Changing the Amount of the Petty Cash Fund 411 How Can the Bank Account Be Used as a Control Device? 411 Signature Card 412 Deposit Ticket 412 Check 412 Bank Statement 413 Electronic Funds Transfers 413 Bank Reconciliation 414 Examining a Bank Reconciliation 417 Journalizing Transactions from the Bank Reconciliation 418 How Can the Cash Ratio Be Used to Evaluate Business Performance? 419 ■ review 420 ■ assess Your progress ■ Critical thinking Acid-Test (or Quick) Ratio 470 Accounts Receivable Turnover Ratio 470 Days’ Sales in Receivables 471 ■ review 472 ■ assess Your progress ■ Critical thinking 478 496 Chapter plant Assets, Natural resources, and intangibles 498 How Does a Business Measure the Cost of a Plant Asset? Land and Land Improvements 500 Buildings 501 Machinery and Equipment 501 Furniture and Fixtures 501 Lump-Sum Purchase 502 Capital and Revenue Expenditures 503 499 Factors in Computing Depreciation 505 Depreciation Methods 505 Partial-Year Depreciation 511 Changing Estimates of a Depreciable Asset 512 Reporting Plant Assets 513 445 Chapter receivables 447 How Are Disposals of Plant Assets Recorded? What Are Common Types of Receivables, and How Are Credit Sales Recorded? 448 Types of Receivables 448 Exercising Internal Control Over Receivables 449 Recording Sales on Credit 449 Recording Credit Card and Debit Card Sales 450 Factoring and Pledging Receivables 452 How Are Uncollectibles Accounted for When Using the Direct Write-Off Method? 453 Recording and Writing Off Uncollectible Accounts—Direct Write-Off Method 453 Recovery of Accounts Previously Written Off—Direct Write-Off Method 453 Limitations of the Direct Write-Off Method 454 How Are Uncollectibles Accounted for When Using the Allowance Method? 455 Recording Bad Debts Expense—Allowance Method 455 Writing Off Uncollectible Accounts—Allowance Method 456 Recovery of Accounts Previously Written Off—Allowance Method 457 Estimating and Recording Bad Debts Expense—Allowance Method 457 Comparison of Accounting for Uncollectibles 462 Indentifying Maturity Date 465 Computing Interest on a Note 466 How Do We Use the Acid-Test Ratio, Accounts Receivable Turnover Ratio, and Days’ Sales in Receivables to Evaluate Business Performance? 469 What Is Depreciation, and How Is It Computed? 504 428 How Are Notes Receivable Accounted For? Accruing Interest Revenue and Recording Honored Notes Receivable 466 Recording Dishonored Notes Receivable 468 464 Discarding Plant Assets 514 Selling Plant Assets 516 514 How Are Natural Resources Accounted For? 520 How Are Intangible Assets Accounted For? 521 Accounting for Intangibles 521 Specific Intangibles 521 Reporting of Intangible Assets 524 How Do We Use the Asset Turnover Ratio to Evaluate Business Performance? 525 AppENdix 9A: Exchanging Plant Assets 526 How Are Exchanges of Plant Assets Accounted For? 526 Exchange of Plant Assets—Gain Situation 526 Exchange of Plant Assets—Loss Situation 527 ■ review 528 ■ assess Your progress ■ Critical thinking 533 545 10 Chapter investments 547 Why Do Companies Invest? 548 Debt Securities Versus Equity Securities 548 Reasons to Invest 548 Classification and Reporting of Investments 549 Contents How Are Investments in Debt Securities Accounted For? Purchase of Debt Securities 551 Interest Revenue 551 Disposition at Maturity 551 551 How Are Investments in Equity Securities Accounted For? 552 Equity Securities with Less Than 20% Ownership (Cost Method) 552 Equity Securities with 20% to 50% Ownership (Equity Method) 553 Equity Securities with More Than 50% Ownership (Consolidations) 556 Trading Investments 556 Available-for-Sale Investments 558 Held-to-Maturity Investments 560 Retirement of Bonds at Maturity 635 Retirement of Bonds Before Maturity 636 562 ■ Critical thinking How Are Liabilities Reported on the Balance Sheet? 638 How Do We Use the Debt to Equity Ratio to Evaluate Business Performance? 639 568 576 11 AppENdix 12A: The Time Value of Money 640 Chapter Current liabilities and payroll 579 What Is the Time Value of Money, and How Is the Present Value of a Future Amount Calculated? 640 How Are Current Liabilities of Known Amounts Accounted For? 580 Accounts Payable 580 Sales Tax Payable 581 Income Tax Payable 581 Unearned Revenues 582 Short-Term Notes Payable 582 Current Portion of Long-Term Notes Payable Time Value of Money Concepts 641 Present Value of a Lump Sum 643 Present Value of an Annuity 643 Present Value of Bonds Payable 644 AppENdix 12B: Effective-Interest Method of Amortization 646 584 How Do Companies Account for and Record Payroll? Gross Pay and Net (Take-Home) Pay 585 Employee Payroll Withholding Deductions 585 Payroll Register 588 Journalizing Employee Payroll 589 Employer Payroll Taxes 589 Internal Control Over Payroll 591 584 ■ review Remote Contingent Liability 595 Reasonably Possible Contingent Liability Probable Contingent Liability 595 595 595 598 ■ assess Your progress ■ Critical thinking 604 618 12 How Are Long-Term Notes Payable and Mortgages Payable Accounted For? 621 Contents 667 13 What Is a Corporation? 670 Characteristics of Corporations 670 Stockholders’ Equity Basics 671 How Is the Issuance of Stock Accounted For? 621 674 Issuing Common Stock at Par Value 674 Issuing Common Stock at a Premium 674 Issuing No-Par Common Stock 675 Issuing Stated Value Common Stock 676 Issuing Common Stock for Assets Other Than Cash 677 Issuing Preferred Stock 678 How Is Treasury Stock Accounted For? Chapter long-Term liabilities 620 Long-Term Notes Payable Mortgages Payable 622 ■ Critical thinking 654 Chapter stockholders’ Equity 669 How Do We Use the Times-Interest-Earned Ratio to Evaluate Business Performance? 597 ■ review 649 ■ assess Your progress 593 How Are Contingent Liabilities Accounted For? How Are Bonds Payable Accounted for Using the Effective-Interest Amortization Method? 646 Effective-Interest Amortization for a Bond Discount 646 Effective-Interest Amortization of a Bond Premium 647 How Are Current Liabilities That Must Be Estimated Accounted For? 592 Bonus Plans 592 Vacation, Health, and Pension Benefits Warranties 593 How Are Bonds Payable Accounted for Using the Straight-Line Amortization Method? 629 How Is the Retirement of Bonds Payable Accounted For? 635 How Do We Use the Rate of Return on Total Assets to Evaluate Business Performance? 561 ■ assess Your progress Types of Bonds 626 Bond Prices 626 Present Value 627 Bond Interest Rates 627 Issuing Bonds Versus Issuing Stock 628 Issuing Bonds Payable at Face Value 630 Issuing Bonds Payable at a Discount 630 Issuing Bonds Payable at a Premium 633 How Are Debt and Equity Securities Reported? 556 ■ review What Are Bonds? 624 Treasury Stock Basics 679 Purchase of Treasury Stock 679 Sale of Treasury Stock 679 Retirement of Stock 682 679 How Are Dividends and Stock Splits Accounted For? 683 Cash Dividends 683 Stock Dividends 686 Stock Splits 690 Cash Dividends, Stock Dividends, and Stock Splits Compared 690 How Is Equity Reported for a Corporation? 691 Statement of Retained Earnings 691 Statement of Stockholders’ Equity 692 How Do We Use Stockholders’ Equity Ratios to Evaluate Business Performance? 693 Earnings per Share 693 Price/Earnings Ratio 694 Rate of Return on Common Stock ■ review 694 ■ Critical thinking How Do We Use Horizontal Analysis to Analyze a Business? 791 Horizontal Analysis of the Income Statement 792 Horizontal Analysis of the Balance Sheet 793 Trend Analysis 794 How Do We Use Vertical Analysis to Analyze a Business? 795 Vertical Analysis of the Income Statement 796 Vertical Analysis of the Balance Sheet 796 Common-Size Statements 798 Benchmarking 799 696 ■ assess Your progress Tools of Analysis 789 Corporate Financial Reports 789 703 720 How Do We Use Ratios to Analyze a Business? 800 14 Chapter The statement of Cash Flows 722 What Is the Statement of Cash Flows? 723 Purpose of the Statement of Cash Flows 723 Classification of Cash Flows 724 Two Formats for Operating Activities 726 How Is the Statement of Cash Flows Prepared Using the Indirect Method? 726 Cash Flows from Operating Activities 729 Cash Flows from Investing Activities 733 Cash Flows from Financing Activities 735 Net Change in Cash and Cash Balances 738 Non-cash Investing and Financing Activities 739 Evaluating the Ability to Pay Current Liabilities 801 Evaluating the Ability to Sell Merchandise Inventory and Collect Receivables 803 Evaluating the Ability to Pay Long-Term Debt 806 Evaluating Profitability 808 Evaluating Stock as an Investment 811 Red Flags in Financial Statement Analyses 813 AppENdix 15A: The Corporate Income Statement 816 How Is the Complete Corporate Income Statement Prepared? 816 Continuing Operations 817 Discontinued Operations 818 Extraordinary Items 818 Earnings per Share 819 How Do We Use Free Cash Flow to Evaluate Business Performance? 741 ■ review AppENdix 14A: Preparing the Statement of Cash Flows by the Direct Method 742 ■ Comprehensive problem for Chapter 15 819 ■ assess Your progress ■ Critical thinking 827 848 849 How Is the Statement of Cash Flows Prepared Using the Direct Method? 742 Cash Flows from Operating Activities 742 AppENdix 14B: Preparing the Indirect Statement of Cash Flows Using a Spreadsheet 748 How Is the Statement of Cash Flows Prepared Using the Indirect Method and a Spreadsheet? 748 ■ review 752 ■ assess Your progress ■ Critical thinking 758 786 AppENdix A—2013 Green Mountain Coffee Roasters, Inc Annual Report 851 AppENdix B—Present Value Tables 899 AppENdix C—Accounting Information Systems GlossAry iNdEx 901 959 973 phoTo CrEdiTs 987 15 Chapter Financial statement Analysis 788 How Are Financial Statements Used to Analyze a Business? 789 Purpose of Analysis 789 Contents 978 Subject Index Financial statement analysis (Continued ) purpose of, 789 quick check, 825–826 red flags, 813 review, 819–820 summary problems, 821–824 tools of, 789 using horizontal analysis, 791–795 using vertical analysis, 795–797 Financial statements, 43 adjusting entries and, 164–165 in annual reports, 791 balance sheets, 45 in business environment accounting, 43–47 ethical issues, 46 to evaluate business performance, 48–49 income statements, 43–44 merchandise inventory costing methods, 360–363 merchandising operations, 272, 290–293, 300–304 balance sheets, 293 income statements, 290–292 statement of retained earnings, 293 preparing from trial balance, 103–104 statement of cash flows, 46–47 statement of retained earnings, 44–45 year-end, 208–215 assets, 211 classified balance sheet, 210–212 liabilities, 211 relationships among, 209–212 stockholders’ equity, 211 worksheets and, 213–215 Financing activities, in statement of cash flows, 724, 735–738 Firewalls, 402–403 First-in, first-out (FIFO) method in merchandise inventory, 354–355, 360–363, 369–372 Fiscal year, 144 FOB destination, 279 FOB shipping point, 279 Form 10-K/Form 10-Q (SEC), 790, 851–898 Four-column accounts, 101–102 Franchises, 523 Free cash flow, 741–742 Freight in, 279–280 Freight out, 279 Furniture and fixtures, 501 G Generally Accepted Accounting Principles (GAAP), 30 auditor’s report, 790 cash basis accounting, not allowed, 142 external audits, 401 goodwill, 524 infrequent, defined, 818 MACRS, exclusion from reporting under, 511 plant assets, 512 reversing entries, as non-requirement of, 226 SEC requirements, 34 Going concern assumption, 34 Goodwill, 523–524 Gross pay, 585 Gross profit, 273, 285–286 Gross profit percentage, 293–294, 805, 814 H Hardware, 921 Held-to-maturity (HTM) investments, 549, 550, 560 Historical cost See Actual cost Horizontal analysis, 791–795 balance sheets, 793–794 income statements, 792–793 trend analysis, 794–795 I Impairment, of intangible assets, 521 Imprest system, 409 Income-statement approach See Percent-of-sales method Income statement revenues See Revenue expenditures Income statements in financial statements, 43–44 horizontal analysis of, 792–793 multi-step income statements, 291–292, 300–302 single-step income statements, 290–291 vertical analysis, 796 See also Financial statements Income Summary account, 216 Income tax expense, 292, 746 Income tax payable, 581–582 Income tax withholding, 586 Indirect method, 726 statement of cash flows, 726–741 steps for, 728 using spreadsheets, 748–751 Inflation, 34 Institute of Management Accountants (IMA), 28, 30 Intangible assets, 211, 521–525 copyrights and trademarks, 522–523 franchises and licenses, 523 goodwill, 523–524 patents, 522 reporting of, 524 Interest, 464 Interest-coverage ratio See Times-interest-earned ratio Interest expense, 746 Interest periods, 464 Interest rates, 464, 627–628 Internal auditors, 401 Internal control, 399 Internal control and cash, 398–446 assess your progress continuing problems, 443 exercises, 430–434 practice sets, 444 Subject Index problems, 435–442 review questions, 428 short exercises, 429–430 bank accounts as control method, 411–419 business performance evaluation using cash ratio, 419–420 cash payment procedures, 406–408 cash receipt procedures, 404–406 components of, 400–401 costs and benefits, 403–404 critical thinking communication activities, 446 decision cases, 445 financial statement cases, 446 ethical issues, 401 fraud cases, 445 petty cash funds, 408–411 procedures, 401–403 quick check, 427–428 review, 420–421 Sarbanes-Oxley Act, 399–400 summary problems, 422–426 Internal control reports, 400 International Accounting Standards Board (IASB), 30, 34 International Financial Reporting Standards (IFRS), 34 common equation, 83 Cost of Goods Sold (COGS), 291 current fair value, 33 current liabilities and payroll, 580, 592, 595 internal controls, 400 lower-of-cost-or-market (LCM) rule, 363 plant assets, 513 receivables, 455 required statements, 208 statement of cash flows, 725 stockholders’ equity, 692 Inventory costing method, 353 Inventory shrinkage, 287 Inventory systems, types, 273 Inventory turnover, 368, 804, 814 Inventory turnover ratio, 804, 814 Investees, 548 Investing activities, in statement of cash flows, 724, 733–735 Investments, 547–578 assess your progress continuing problems, 576 exercises, 570–573 problems, 573–575 review questions, 568 short exercises, 568–570 business performance evaluation using rate of return on total assets, 561–562 classification of, 549–550 critical thinking communication activities, 578 decision cases, 576 ethical issues, 576 financial statement cases, 577 fraud cases, 577 team projects, 577 debt securities, 548, 551–552 equity securities, 548–550 purpose of, 548 quick check, 566–567 reporting of securities available-for-sale, 549, 550, 558–560 held-to-maturity, 549, 550, 560 trading investments, 549, 550, 556–558 review, 562–563 summary problems, 564–565 Investors, 28, 548 Invoices, 274 Issued stock, 671–672 Issue price, 674 J Journal, 88 bank reconciliation transactions, 418 compound journal entry, 93 employee payroll, 589–591 memorandum entry, 690 petty cash funds, 410 L Land and land improvements, 500–501 Large stock dividends, 687, 689–690 Last-in, first-out (LIFO) method, 355–357, 360–363, 369–372 Ledgers, 83, 88 Legal capital, 683 LexisNexis, 800 Liabilities, 580 in accounting equation, 36 in classified balance sheet, 211 Liability accounts, 80, 81 Licenses, 523 Limited-liability company (LLC), 31 Liquidity in classified balance sheet, 210–211 Lock-box system, 405 Long-term assets, 211 AFS investment reporting as, 558–559 in statement of cash flows, 730, 733–735, 746–747 Long-term investments, 211, 549, 554 Long-term liabilities, 211, 580, 620–668 assess your progress continuing problems, 667 exercises, 658–661 problems, 662–666 review questions, 654 short exercises, 654–657 balance sheets, 638–639 bonds payable, 624–629 business performance evaluation using debt to equity ratio, 639–640 979 980 Subject Index Long-term liabilities (Continued ) critical thinking decision cases, 667 ethical issues, 667 financial statement cases, 668 fraud cases, 668 effective-interest amortization method, 646–648 long-term notes payable, 621–622, 624 mortgages payable, 622–624 present value of annuities, 643–644 present value of bonds payable, 644–645 present value of lump sum, 643 quick check, 652–653 retirement of bonds payable, 635–638 review, 649–650 in statement of cash flows, 735–736 straight-line amortization method, 629–635 summary problems, 650–651 time value of money and, 640–643 Long-term notes payable, 621–622, 624 Lower-of-cost-or-market (LCM) rule, 363–364 Lump-sum purchase, 502 M Machinery and equipment, 501 Maker, 412, 464 Management’s discussion and analysis of financial condition and results of operations (MD&A), 790 Managerial accounting, 27 Manufacturing companies unit product cost, 667 Market interest rates, 628, 646–648 Matching principle, 145 Materiality concept, 350 Maturity dates, 448, 464, 465, 626 Maturity value, 464 See also Face value Memorandum entry, 690 Merchandise inventory, 271, 348–397 assess your progress continuing problems, 394 exercises, 383–388 practice sets, 395 review questions, 379 short exercises, 380–382 business performance evaluation using gross profit percentage, 367–369 conservatism, 350 consistency principle, 349 controls, 350–351 costs in periodic inventory systems, 369–372 costs in perpetual inventory systems, 351–360 critical thinking decision cases, 396 financial statement cases, 397 fraud cases, 396–397 team projects, 397 disclosure principle, 349–350 ethical issues, 367 financial statements, 360–363 effects of errors in, 365–367 lower-of-cost-or-market (LCM) rule, 363–364 materiality concept, 350 quick check, 378–379 review, 372–374 summary problems, 374–377 Merchandisers, 271 Merchandising operations, 270–347 adjusting and closing entries, 286–290 assess your progress continuing problems, 342 exercises, 321–327 practice sets, 343–344 problems, 328–341 review questions, 316–317 short exercises, 317–321 business performance evaluation using gross profit percentage, 293–294 comprehensive problems, chapters 1-5, 344–345 critical thinking decision cases, 345–346 ethical issues, 346 financial statement cases, 347 fraud cases, 346 financial statements, 272, 290–293, 300–304 balance sheets, 293 income statements, 290–292 statement of retained earnings, 293 inventory systems, types of, 273 operating cycle of, 271–273 periodic inventory system records, 273, 295–304 purchase records in perpetual inventory system, 274–281 quick check, 314–315 review, 305–307 sales records in perpetual inventory system, 281–286 summary problems, 307–313 worksheets and, 289–290 Modified Accelerated Cost Recovery System (MACRS), 511 Monetary unit assumption, 34 Mortgages payable, 622–624 Multi-step income statements, 291–292, 300–302 N Natural resources, 520–521 Net income, 37 Net loss, 37 Net pay, 585 Net purchases, 296 Net realizable value, 455 Net Sales Revenue, 285–286 Network, 921 Nominal accounts See Temporary accounts Non-cash investing/financing activities, in statement of cash flows, 725, 739–741 Subject Index Noncumulative preferred stock, 685–686 Nonsufficient funds (NSF) checks, 415 No-par stock, 674, 675–676 Normal balance, 85–86 Notes payable, 81 Notes receivable, 81, 448–449, 464–469 accruing interest revenue, 466–468 computing interest, 466 identifying maturity dates, 465 recording dishonored notes, 468–469 recording honored notes, 466–468 O OASDI (old age, survivors, and disability insurance), 586–587, 589–591 Obsolete, in asset depreciation, 504–505 Operating activities, in statement of cash flows, 724, 729–733, 742–748 Operating cycle, 211 Operating expenses, 273 Operating income, 291 Oracle®, 921 Organizations vs corporations, 30–33 Other revenues and expenses, 292 Outstanding checks, 414–415 Outstanding stock, 672, 693 P Paid-in capital, 36, 673 Paid-in capital in excess of par, 675 Parent company, 556 Partnerships, 31 Par value, 673, 674 See also Face value Patents, 522 Pathways Commission, 26–27 Pathways Vision Model, 26–27 Payable, 36 Payee, 412, 464 Payroll, 584–592 employer payroll taxes, 589–591 gross/net pay, 585 internal controls, 591 journal entries, 589–591 payroll register, 588–589 W-28, 586 withholding deductions, 585–588 Payroll registers, 588–589 Pension plans, 593 Percent-of-receivables method, 458–459 Percent-of-sales method, 457–458 Performance evaluation financial statement analysis using ratios, 800–816 using accounts receivable turnover ratio, 470–471 using acid-test ratio, 470 using asset turnover ratio, 525 using cash ratio, 419–420 using current ratio, 224–226 using days’ sales in receivables, 471 using debt ratio, 105–106 using debt to equity ratio, 639–640 using financial statements, 48–49 using free cash flow, 741–742 using gross profit percentage, 293–294 using inventory turnover and days’ sales, 367–369 using rate of return on total assets, 561–562 See also Responsibility accounting and performance evaluation Periodic inventory systems, 273, 295–304, 369–372 financial statements income statements, 300–302 first-in, first-out (FIFO) method in, 369–372 last-in, first-out (LIFO) method in, 369–372 vs perpetual inventory system, 302–304 recording purchases, 295–296 purchase returns and allowances, 296 transportation costs, 296 recording sales, 297 closing entries, 297–300 weighted-average method in, 369–372 Permanent accounts, 216 Perpetual inventory systems, 273, 351–360 first-in, first-out (FIFO) method, 354–355, 360–363 inventory costing method, 353 last-in, first-out (LIFO) method, 355–357, 360–363 vs periodic inventory system, 302–304 purchase invoice example, 275 recording purchases, 274–281 cost of inventory purchased, 280 purchase discounts, 276–277 purchase returns and allowances, 277–278 transportation costs, 278–280 recording sales, 281–286 of merchandise inventory, 281–282 net sales revenue and gross profit, 285–286 sales discounts, 283 sales returns and allowances, 283–285 transportation costs, 285 specific identification method, 353, 360–363 weighted-average method, 357–359, 360–363 worksheets and, 289–290 Petty cash, 408–411 Plant assets, 149–150, 153, 211, 498–519 assess your progress continuing problems, 544 exercises, 536–539 problems, 540–544 review questions, 533 short exercises, 534–536 business performance evaluation using asset turnover ratio, 525 computing depreciation, 504–513 changing estimates of depreciable assets, 512–513 981 982 Subject Index Plant assets (Continued ) factors in, 505 methods of, 505–511 partial-year, 511–512 reporting plant assets, 513 for tax purposes, 511 critical thinking communication activities, 546 ethical issues, 545 financial statement cases, 545–546 fraud cases, 545 exchanges of, 526–528 intangible assets, 521–525 copyrights and trademarks, 522–523 franchises and licenses, 523 goodwill, 523–524 patents, 522 reporting of, 524 measurement of costs, 499–504 buildings, 501 capital and revenue expenditures, 503–504 furniture and fixtures, 501 land and land improvements, 500–501 lump-sum purchase, 502 machinery and equipment, 501 natural resources, 520–521 quick check, 532–533 recording disposal of, 514–519 discarding assets, 514–516 selling assets, 516–519 review, 528–529 summary problems, 529–531 Post-closing trial balance, 221–222 Posting, 88 Preemptive right, 672 Preferred stock, 673, 678, 684–686 Premium on bonds payable, 626–627 Premiums, of common stock, 674–675 Prepaid expenses, 81, 147–149 Present value, 627, 642–645 Present value tables, 899–900 Price/earnings ratio, 694, 811, 815 Principal, 464 Principal amount See Face value Prior-period adjustments, 692 Privately held corporations, 670 Probable contingent liability, 595–596 Profit margin ratio, 808, 815 Promissory notes, 448–449, 464, 465, 583 Public company, 399 Public Company Accounting Oversight Board (PCAOB), 30, 35, 400 Public corporations, 670 Purchase allowance, 277 Purchase discount, 276–277 Purchase invoice, example of, 275 Purchase invoices, 88 Purchase return, 277 Purchases journals, 914–916 Q Qualified opinions, 790 QuickBooks™, 903, 921, 922–925 entering bills, 924 income statements, 924–925 sales invoices, 923 R Rate of return on common stockholders’ equity, 694–695, 809–810, 815 Rate of return on total assets, 561, 808–809, 815 Ratios accounts receivable turnover, 470–471, 805–806, 814 acid-test, 470, 803, 814 cash, 419–420, 802–803, 814 current, 224–226, 802, 814 days’ sales in inventory, 804–805, 814 debt, 105–106, 806–807, 815 debt to equity, 639–640, 807, 815 dividend payout, 812–813, 815 dividend yield, 811–812, 815 earnings per share, 693, 810–811, 815, 819 gross profit percentage, 293–294, 805, 814 inventory turnover, 804, 814 price/earnings, 694, 811, 815 profit margin, 808, 815 rate of return on common stockholders’ equity, 694–695, 809–810, 815 rate of return on total assets, 561, 808–809, 815 stockholders’ equity, 693–695 times-interest-earned, 597, 807–808, 815 year-end accounting cycle, 224–226 Reasonably possible contingent liability, 595–596 Receivables, 447–497 allowance method for uncollectibles, 455–464 comparison of methods, 462–463 estimating and recording bad debts expense, 457–462 recording bad debts expense, 455 recovery of accounts previously written off, 457 writing off accounts, 456–457 assess your progress continuing problems, 495 exercises, 482–487 practice sets, 495 problems, 487–494 review questions, 478–479 short exercises, 479–482 business performance evaluation, 469–471 using accounts receivable turnover ratio, 470–471 using acid-test ratio, 470 using days’ sales, 471 critical thinking decision cases, 496 Subject Index financial statement cases, 497 fraud cases, 497 direct write-off method for uncollectibles, 453–454, 462–463 ethical issues, 456 factoring and pledging, 452 internal controls, 450 notes receivable, 464–469 quick check, 476–478 recording credit/debit card sales, 450–451 recording sales on credit, 450–451 review, 472–473 summary problems, 473–476 types of, 448–449 Records See Transactions, recording of Relative-market-value method, 502 Remittance advice, 405 Remote contingent liability, 595–596 Residual value, 150 asset depreciation, 505, 509, 511 Retailers, 271 Retained earnings, 673 as form of equity, 36–37 in merchandising operations financial statements, 293 Return on assets (ROA), 48–49 Return on equity See Rate of return on common stockholders’ equity Revenue expenditures, 503–504 Revenue recognition principle, 144–145 Revenues accounting equation and, 85 as form of equity, 36 Reversing entries in year-end accounting cycle, 226–229 accrued expenses, 226–227 cash payments and, 227–228 example of, 228–229 Routing numbers, 412 S Sage 50™ Accounting, 903, 921 Salary range comparisons, 29 Sale journals, 907–910 Sales discount, 283 Sales invoices, 88 Sales Returns and Allowances, 283–285 Sales revenue, 282 Sales tax payable, 581 Salvage value See Residual value SAP®, 921 Sarbanes-Oxley Act (SOX), 35, 399–400 Secured bonds, 626 Securities, 548 Securities and Exchange Commission (SEC), 28, 30, 34, 790, 851–898 Selling expenses, 291 Separate legal entity, 30–31 Separation of duties, 402 Serial bonds, 626 Servers, 904 Shareholders, 31 Short-term investments, 549 Short-term notes payable, 582–584 Signature cards, 412 Significant interest investments, 550, 560 Simple interest, 641–642 Single-step income statements, 290–291 Small stock dividends, 687–689 Social Security (FICA) tax, 586–587 Software, 921 Sole proprietorship, 31 Source documents, 903–904, 87–88 Special journals, 905–906, 920 Specific identification method, 353, 360–363 Spreadsheets in statement of cash flows, 748–751 State corporate taxes, 32 Stated interest rate, 626, 646–647 Stated value stock, 674, 676 Statement of cash flows, 722–787 assess your progress continuing problems, 784–785 exercises, 764–772 problems, 773–784 review questions, 758–759 short exercises, 759–764 business performance evaluation using free cash flow, 741–742 classification of, 724–725 critical thinking decision cases, 786 ethical issues, 786 financial statement cases, 786–787 direct method, 726 operating activities, 742–748 in financial statements, 46–47 indirect method, 726–741 financing activities, 735–738 investing activities, 733–735 net change in cash/cash balances, 738–739 non-cash investing/financing activities, 739–741 operating activities, 729–733 steps for, 728 using spreadsheets, 748–751 purpose of, 723 quick check, 757–758 review, 752–753 summary problems, 753–756 Statement of earnings See Income statements Statement of financial position See Annual reports Statement of operations See Annual reports Statement of retained earnings, 44–45, 293, 691–692 Statement of stockholders’ equity, 692–693 State Unemployment Tax Act (SUTA), 590–591 Stock certificates, 671–672 Stock dividends, 686–690 983 984 Subject Index Stockholders, 31 continuous life and transferability of ownership, 31 equity of, 36 limited liability of, 32 no mutual agency, 31 separation of ownership and management, 32 voting rights, 32 Stockholders’ equity, 669–721 assess your progress continuing problems, 719 exercises, 707–713 problems, 713–719 review questions, 703 short exercises, 703–707 business performance evaluation using stockholders’ equity ratios, 693–695 cash dividends, 683–686, 690 characteristics of corporations, 670–671 in classified balance sheet, 211 critical thinking communication activities, 721 decision cases, 720 financial statement cases, 720–721 team projects, 721 explanation of, 671–674 issuance of common stock for assets other than cash, 677 no-par, 675–676 at par value, 674 with premium, 674–675 stated value, 676 issuance of preferred stock, 673, 678 quick check, 701–702 reporting equity statement of retained earnings, 691–692 statement of stockholders’ equity, 692–693 review, 696–698 sources of, 673 stock dividends, 686–690 stockholders’ rights, 672 stock splits, 690 summary problems, 698–700 Treasury stock explanation of, 679 purchase of, 679 retirement of, 682 sale of, 679–682 Stockholders’ rights, 672 Stock splits, 690 Straight-line amortization method for bonds, 629–635 issuing bonds at discount, 629–632 issuing bonds at face value, 629 issuing bonds at premium, 633–635 Straight-line method, 150, 506–507, 510 Subsidiary company, 556 Subsidiary ledgers, 906–907 Suppliers, 744–745 T T-accounts balance of, 86 as double-entry system, 84 vs four-column accounts, 101–102 Take-home pay See Net pay Taxing authorities, as accounting decision makers, 28 Team projects accounting cycle, year-end, 268–269 accounting information systems (AIS), 957 financial statement analysis, 850 investments, 577 merchandise inventory, 397 stockholders’ equity, 721 Temporary accounts closing of, and net income, 217–219 closing of, and net loss, 219–220 in year-end accounting cycle, 215–221 Temporary investments See Short-term investments Term bonds, 626 Time period concept, 144 Times-interest-earned ratio, 597, 807–808, 815 Time value of money, 627 bonds and, 640–645 long-term liabilities and, 640–643 Timing differences, 414 Trademarks, 523 Trading investments, 549, 550, 556–558, 560 Trading on the equity, 810, 815 Transactions, 37 analyzing of, 39–41 example of, 38–42 Transactions, recording of, 79–140 accounts, 80–83 assess your progress continuing problems, 137 exercises, 117–124 practice sets, 138 problems, 125–136 review questions, 114 short exercises, 114–116 business performance evaluation using debt ratio, 105–106 critical thinking communication activities, 140 decision cases, 139 ethical issues, 139 financial statement cases, 140 fraud cases, 139–140 double-entry accounting, 84–87 example of, 89–99 four-column accounts, 101–102 journals, 88 ledger accounts after posting, 99–100 posting to ledgers, 88 quick check, 112–113 review, 107–108 source documents, 87–88 Subject Index summary problems, 108–111 trial balance, 103–105 Treasurers, 401, 405 Treasury stock, 679, 736–737 Trend analysis, 794–795 Trial balance error correction, 104–105 financial statement preparation from, 103–104 recording of transactions, 103–105 unadjusted, 146–147 U Unadjusted trial balance, 146–147 Uncollectible accounts, 455–464 allowance method comparison of methods, 462–463 estimating and recording bad debts expense, 457–462 recording bad debts expense, 455 recovery of accounts previously written off, 457 writing off accounts, 456–457 direct write-off method, 453–454, 462–463 Underwriters, 674 Unearned revenue, 81 Unearned revenues, 582 Unemployment compensation taxes, 590–591 Units-of-production method, 507–508, 510, 511, 520 Unqualified opinions, 790 U.S Bureau of Labor Statistics, 29 Useful life, 505 V Vacation/health/pension benefits, 593 Vendors, 272, 744–745 Vertical analysis, 795–797 balance sheets, 796–797 income statements, 796 W Warranties, 593–594 Weighted-average method in merchandise inventory, 357–359, 360–363, 369–372 W-28, 586 Wholesalers, 271 Withholding deductions, 585–588 Working capital, 801, 814 Worksheets for adjusted trial balance, 165–167 for adjusting entries, 165–167 for merchandising inventory systems, 289–290 for year-end financial statements, 213–215 985 Company Index A J Arthur Andersen LLP, 399 J.C Penny Company, Inc., 144 JPMorgan Chase & Co., 674 B Berkshire Hathaway, Inc., 547, 557 Buffalo Wild Wings Grill & Bar, 398 Burlington Northern Santa Fe, 547 K C Macy’s, 270 McDonald’s, 523 Merrill Lynch & Co., 674 Morgan Stanley, 674 CC Media Holdings, Inc., 141 Chevrolet, 523 Clear Channel Communications, 141 Clear Channel Outdoor Holdings, 141 Coca-Cola Company, 547 ConocoPhillips, 498 D Dallas Cowboys, 523 Dave’s Gourmet, Inc., 901 De Beers, 523 Deloitte, 29 Dow Jones & Company, 800 E Enron Corporation, 399 Ernst & Young, 29 Exxon Mobil Corp., 547 F Facebook, Inc., 669 G GEICO, 547 General Motors Company, 818 General Motors Financial Company, Inc (GMAC), 818 Google, Inc., 521 Green Mountain Coffee Roasters, Inc., 48–49, 106, 225, 293–294, 368–369, 419, 446, 469–471, 497, 525, 561, 597, 636, 668, 694–695, 791 KPMG LLP, 29 M N National Football League, 523 Nike, Inc., 523, 674 P PwC, 29 R Raymond James Financial, Inc., 788 Robert Half, 28 S Starbucks Corporation, 25, 49, 446, 497, 668 786–787 Subway, 523 T Target Corporation, 722 TruGreen, 498 U UnitedHealth Group Incorporated, 579 W Wal-Mart Stores, Inc., 144, 547 WorldCom, Inc., 79, 399 I Y Intel Corporation, 674 YouTube, 521 986 Photo Credits Front Matter Page 3: (top) Bill Woodhull; (middle) Richard Smith; (bottom) Kam-Wah Tsui Chapter Page 25: (top) Bragin Alexey/Shutterstock; (middle right) Barbara Tripp/Shutterstock; (bottom left) lightwavemedia/ Shutterstock; page 26: (top right) Fotolia; page 28: Monkey Business Images/Shutterstock; page 41: (top) Iodrakon/ Shutterstock; page 41: (bottom right) Shutterstock; page 45: Rido/Shutterstock; page 46: Mike Flippo/Shutterstock Chapter Page 79: (top) Djordje Radivojevic/Shutterstock; (middle right) Amasterphotographer/Shutterstock; (bottom left) Edyta Pawlowska/Shutterstock; page 80: (top left) Denis Vrublevski/Shutterstock; page 80: (bottom left) Lithian/ Shutterstock; page 83: Monkey Business Images/Shutterstock; page 84: Iodrakon/Shutterstock; page 93: Shutterstock Chapter Page 141: (top) Ragnarocks/Fotolia; (middle right) Brand X Pictures/Stockbyte/Getty Images; (bottom left) Yuri Arcurs/ Fotolia; page 142: (top right) Illustrart/Fotolia; (bottom) Lisa F Young/Shutterstock; page 151: Rido/Shutterstock Chapter Page 207: (top) Dimedrol68/Shutterstock; (middle right) Njaj/Shutterstock; (bottom left) Mountainpix/Shutterstock; page 208 (top right) Andrew Buckin/Shutterstock; page 214: Mike Flippo/Shutterstock; page 219: Lithian/Shutterstock Chapter Page 270: (top) Wasanajai/Shutterstock; (middle left) R Gino Santa Maria/Shutterstock; (bottom right) Pavelbendov/ Fotolia; page 271: (top right) Eimantas Buzas/Shutterstock; (middle right) Diana Taliun/Shutterstock; page 273: Monkey Business Images/Shutterstock; page 276: Iodrakon/Shutterstock Chapter Page 348: (top) Ari N./Shutterstock;(middle left) K Miri Photography/Shutterstock (bottom right) Blend Images/ Alamy; p 349: (top right) Tritooth/Fotolia; (middle right) Steshkin Yevgeniy/Shutterstock; page 361: Shutterstock Chapter Page 398: (top) Todd Taulman/Shutterstock; (middle left) Eric Gevaert/Shutterstock; (bottom right) Michaeljung/ Shutterstock; page 399: (middle right) Krungchingpixs/Shutterstock; page 410: Rido/Shutterstock Chapter Page 447: (top) Jmiks/Shutterstock; (middle right) Nenetus/shutterstock; (bottom left) Andresr/ Shutterstock; Artjazz/ Shutterstock; page 448: (top right) Photobac/Shutterstock; page 456: Mike Flippo/Shutterstock; page 460: Lithian/ Shutterstock Chapter Page 498: (top) J Helgason/Shutterstock; (middle left) Kjpargeter/Shutterstock; (bottom right) Dmitry Kalinovsky/ Shutterstock; page 499 (middle right) JPL Designs/Shutterstock; page 511: Monkey Business Images/Shutterstock; page 522: Iodrakon/Shutterstock; page 524: (bottom right) Mim Friday/Alamy Chapter 10 Page 547: (top) Iodrakon/Shutterstock; (middle right) Bambuh/Shutterstock; (bottom left) Peter Bernik/Shutterstock; page 528: (top right) Jeka84/Shutterstock; page 554: Monkey Business Images/Shutterstock Chapter 11 Page 579: (top) Y.H Lim/Alamy; (middle right) Elisanth/Shutterstock; (bottom left) Carlo Dapino/Shutterstock; page 580: (top right) Pan Xunbin/Shutterstock; page 587: Shutterstock Chapter 12 Page 620: (top) Albachiaraa/Fotolia; (middle right) arfo/Fotolia; (bottom right) PeopleImages.com/Getty; page 621: (top right) Shutterstock; (middle right) Alex Staroseltsev/Shutterstock; page 624: Mike Flippo/Shutterstock; page 628: Lithian/Shutterstock Chapter 13 Page 669: (top) AG-Photos/Shutterstock; (middle right) Nuttapong/Shutterstock; (bottom left) StockLite Shutterstock; page 670: (top right) David Castillo DominiciShutterstock; page 673: Rido/Shutterstock 987 988 Photo Credits Chapter 14 Page 722: (top) Nielskliim/Shutterstock; (middle left) Kongsky/Shutterstock; (bottom right) HomeArt/Shutterstock; page 723: (top right) Aaron Amat/Shutterstock; (middle right) Sean Gladwell/Shutterstock; page 731: Iodrakon/ Shutterstock; page 746: Shutterstock Chapter 15 Page 788: (top) Get4net/Fotolia; (middle left) Rangizzz/Fotolia; (bottom right) Imagemore Co Ltd./Alamy; page 789: (middle right) Pokomeda/Shutterstock; page 795: Lisa F Young/Shutterstock Appendix C Page 901: (top) Zhukov Oleg/Shutterstock; (middle right) Vincent Pen/Fotolia; (bottom left) Nat Ulrich/Shutterstock; page 902: (top right) Djama/Fotolia This page intentionally left blank Prepare, Apply, and • Enhanced eText Features—Keep students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material through author-created solutions videos, opportunities to Try It!, and live 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two major fields: financial accounting and managerial accounting Financial accounting provides information... financial accounting and managerial accounting Regardless of whether they are external or internal to the company, all decision makers need information to make the best choices The bigger the decision,... Decision Making: Financial Versus Managerial Accounting Financial Accounting Managerial Accounting External Decision Makers: Internal Decision Makers: Should I invest in the business? Is the business