Solutions Manual for Accounting 8th Edition by Charles T.Horngren, Walter T.Harrison and M.Suzanne Oliver CHAPTER Accounting and the Business Environment For Principle of Accounting Courses Give your students more “I get it!” moments with the Student Learning System Students understand, or “get it”, right after a problem is demonstrated in class but often struggle to complete similar problems on their homework hours later In order to ensure students don't fall behind, Accounting provides its winning combination of student textbook features, study resources and online homework system that make up the Student Learning System Overall, the Student Learning System works together to provide students with “I get it!” moments anytime, anywhere In the new edition, Charles Horngren and Tom Harrison have invited Suzanne Oliver, a loyal Accounting user and community college instructor, to share her extensive insight with their already solid author team Features What makes up our Student Learning System? Accounting 8e Student Textbook, Student Study Resources including Demo Docs and MyAccountingLab Each component of the Student Learning System was designed to work together to enhance students' learning In addition, each component was created by the same team of authors to provide consistency in terminology and problem set-ups across all mediums (text to study guide to MyAccountingLab) Textbook Component of our Student Learning System ***NEW*** Restructured Table of Contents The authors restructured the table of contents to respond to customers' current level of coverage in the Principles of Accounting course **NEW** Pg 63 Success Keys/ Learning Objectives To build cohesiveness, clearly defined learning objectives are labeled throughout the chapter sections, end-of-chapter questions and also in MyAccountingLab After a student finishes reading a section within a chapter, they can turn to the back of the chapter and complete the labeled questions in order to self-assess their understanding If the student doesn't “get it,” they can sign on to MyAccountingLab for interactive learning resources to answer their questions and also to complete additional practice Every learning Objective has at least one Starter, Exercise or Problem to teach and assess the students Pg 64 Clutter-Free Design The reviewer-inspired design is built on the premise that “Less is More.” Extraneous boxes and features, as well as non-essential bells and whistles, removed The authors know that excess crowds out what really matters-the concepts, the problems, and the learning objectives In addition, the equations are called out in a blue box so students can quickly locate them when studying ***NEW*** Consistent Examples The same three sets of 'Company Facts' carry through all “in chapter examples.” As a result, students gain a sense of familiarity with the context of these examples throughout the text This consistency provides a level of comfort with the examples and allows students to focus on learning the accounting principles as they are presented Pg 75 (runs through pg 80) Consistent Transaction Details For EVERY transaction, the same set of information is presented to the students in several different formats - in text, in journal entry, and in ledger accounts These exact same formats are shown for EVERY transaction In repeating these formats, the authors eliminate the assumption that the student understands the concept completely As such, the chapter explains each detail for EVERY transaction to provide repetition and reinforcement of the concepts Pg, 81 **UPDATED** "STOP and Think" The 'Stop and Think' sections relate accounting concepts to students everyday lives by using examples that make sense to students Pg 85 **Updated** Decision Guidelines: Decision Guidelines explain why the accounting concepts addressed in the chapter are important in business The left hand side of the table explains the decision or action being asked of the student in the simplest terms The right hand side of the table shows the accounting topics that will help them facilitate those decisions In accounting, good numbers equate to good decisions while inaccurate numbers can lead to poor decisions The Decision Guidelines help illustrate this concept for students Pg 100 **NEW** Naming of Ending of Chapter Material (Ex/ E2-23 Journalizing Transactions) Every question in the End of Chapter material lists the Learning Objective/ Success Key it is associated with along with a description of what is being asked of the student in the question, which matches the subheadings in the chapter So if a student gets stuck on E2-23, they know that they need help “Journalizing Transactions” The students can then quickly look up that concept by finding the heading in the chapter (in the same wording) or communicate to their instructor what exact concept they need assistance on **NEW** Completion Time for End-of-Chapter Material All Starters, Exercises and Problems in the textbook list the average completion time so students can plan ahead for completing homewor In addition, instructors can use these times to help assign the right amount of homework to their students **NEW** Five Book-Match Sets of Problems and Exercises (A, B, C, D, E) Problems: Students will have access to A and B Problems within the text Static Problem Sets C, D and E can be assigned by the instructor and completed by students through MyAccountingLab Exercises: Students will have access to exercise set A within the text Static exercise sets B, C, D, E can be assigned by the instructor and completed by the student through MyAccountingLab Instructors have a full solutions manual for the problems and exercises through MyAccountingLab Pg 118 ***NEW*** Continuing Exercise The unique 'Continuing Exercise' takes a single company and adds transactions or questions in each chapter to the existing fact pattern As students move throughout the text, they complete additional “steps” in this comprehensive exercise Students are able to see the 'big picture' and learn how the accounting topics build off one another Accounting is a process and the continuing exercise allows students to put it all together Pg 119 ***NEW*** Continuing Problem For more detailed and in-depth practice, a 'Continuing Problem' is also available Like the Continuing Exercise, the Continuing Problems takes a single company and adds transactions or questions in each chapter to the existing fact pattern As students move throughout the text, they complete additional “steps” in completing this comprehensive problem Students are able to see the 'big picture' and learn how the accounting topics build off one another Pg 120 ***NEW*** Unique Practice Set Within Chapters 1-8 An in-text 'Practice Set' is built into Chapters 1-8 of the student text Students not have to purchase any additional material for their practice sets and instructors no longer have to create their own Since the Practice Set is written by the same authors that write the student textbook, students will once again have consistency Students will also be able to complete the Practice Set within MyAccountingLab, for automatic grading and immediate feedback Pg 123 **UNIQUE** Demo Docs Demo Docs will aid students when they are trying to solve exercises and problems on their own with the goal being to help students duplicate the classroom experience outside of class Entire problems that mirror end-of-chapter material are presented and then solved along with annotated with explanations written in a conversational style, essentially imitating what an instructor might say if standing over a student's shoulder All Demo Docs are in textbook in print, online at myaccountinglab, and in the study guide- in print and on CD in Flash, so students can easily refer to them when they need them Study Resource Component of our Student Learning System Demo Docs allows students to duplicate the classroom experience Introductory accounting students consistently tell us “When doing homework, I get stuck trying to solve problems the way they were demonstrated in class.” Likewise, instructors consistently tell us, “I have so much to cover in so little time; I can't afford to go backward and review homework in class.” Those challenges inspired us to develop Demo Docs Demo Docs are comprehensive, worked-through problems that are available for every chapter of our introductory accounting text Demo Docs will aid students when they are trying to solve exercises and problems on their own with the goal being to help students duplicate the classroom experience outside of class Entire problems, mirroring end-of-chapter material, are presented and then solved along with annotated explanations written in a conversational style; essentially imitating what an instructor might say if standing over a student's shoulder All Demo Docs are in the textbook in print, in the study guide in print version as well as on CD in Flash, and online in MyAccountingLab so that students can easily refer to them as needed MyAccountingLab Component of our Student Learning System MyAccountingLab is web-based, tutorial and assessment software for accounting that not only gives students more "I Get It" moments, but gives instructors the flexibility to make technology an integral part of their course, or a supplementary resource for students MyAccountingLab offers algorithmic questions because practice makes perfect It is also includes the exact same end-of-chapter material in the text that instructors can assign for homework MyAccountingLab features the same look and feel for exercises and problems with journal entries and financial statements so that students are familiar and comfortable working with the material With the new edition of Accounting 8e, Pearson released a new MyAccountingLab Player! In addition to previously released features like auto-graded problems and interactive 'Help Me Solve' This questions, the new player offers: Support for both Macintosh® and Windows® platforms Compatibility with Internet Explorer®, Firefox®, and Safari™ browsers Freedom from downloads by no longer requiring an ActiveX plug-in The new MyAccountingLab Player can be used on any computer running the latest version of the Adobe® Flash® Player A new player design that updates the MyAccountingLab "easy to use" look and feel, and incorporates new features like an expandable content area that allows students and instructors to widen the question area and gain even more room for viewing questions as needed For a full listing of the new changes, visit www.myaccountinglab.com New to this Edition What makes up our Student Learning System? Accounting 8e Student Textbook, Student Study Resources including Demo Docs and MyAccountingLab Each component of the Student Learning System was designed to work together to enhance students' learning In addition, each component was created by the same team of authors to provide consistency in terminology and problem set-ups across all mediums (text to study guide to MyAccountingLab) ***NEW*** Restructured Table of Contents The authors restructured the table of contents to respond to customers' current level of coverage in the Principles of Accounting course **NEW** Pg 63 Success Keys/ Learning Objectives - To build cohesiveness, clearly defined learning objectives are labeled throughout the chapter sections, end-of-chapter questions and also in MyAccountingLab After a student finishes reading a section within a chapter, they can turn to the back of the chapter and complete the labeled questions in order to self-assess their understanding If the student doesn't “get it,” they can sign on to MyAccountingLab for interactive learning resources to answer their questions and also to complete additional practice Every learning Objective has at least one Starter, Exercise or Problem to teach and assess the students Pg 64 Clutter-Free Design - The reviewer-inspired design is built on the premise that “Less is More.” Extraneous boxes and features, as well as non-essential bells and whistles, removed The authors know that excess crowds out what really matters-the concepts, the problems, and the learning objectives In addition, the equations are called out in a blue box so students can quickly locate them when studying ***NEW*** Consistent Examples The same three sets of 'Company Facts' carry through all “in chapter examples.” As a result, students gain a sense of familiarity with the context of these examples throughout the text This consistency provides a level of comfort with the examples and allows students to focus on learning the accounting principles as they are presented Pg 75 (runs through pg 80) Consistent Transaction Details For EVERY transaction, the same set of information is presented to the students in several different formats - in text, in journal entry, and in ledger accounts These exact same formats are shown for EVERY transaction In repeating these formats, the authors eliminate the assumption that the student understands the concept completely As such, the chapter explains each detail for EVERY transaction to provide repetition and reinforcement of the concepts Pg 81 **UPDATED** "STOP and Think": The 'Stop and Think' sections relate accounting concepts to students everyday lives by using examples that make sense to students Pg 85 **Updated** Decision Guidelines: Decision Guidelines explain why the accounting concepts addressed in the chapter are important in business The left hand side of the table explains the decision or action being asked of the student in the simplest terms The right hand side of the table shows the accounting topics that will help them facilitate those decisions In accounting, good numbers equate to good decisions while inaccurate numbers can lead to poor decisions The Decision Guidelines help illustrate this concept for students Pg 100 **NEW** Naming of Ending of Chapter Material (Ex/ E2-23 Journalizing Transactions) Every question in the End of Chapter material lists the Learning Objective/ Success Key it is associated with along with a description of what is being asked of the student in the question, which matches the subheadings in the chapter So if a student gets stuck on E2-23, they know that they need help “Journalizing Transactions” The students can then quickly look up that concept by finding the heading in the chapter (in the same wording) or communicate to their instructor what exact concept they need assistance on **NEW** Completion Time for End-of-Chapter Material All Starters, Exercises and Problems in the textbook list the average completion time so students can plan ahead for completing homewor In addition, instructors can use these times to help assign the right amount of homework to their students **NEW** Five Book-Match Sets of Problems and Exercises (A, B, C, D, E) Problems: Students will have access to A and B Problems within the text Static Problem Sets C, D and E can be assigned by the instructor and completed by students through MyAccountingLab Exercises: Students will have access to exercise set A within the text Static exercise sets B, C, D, E can be assigned by the instructor and completed by the student through MyAccountingLab Instructors have a full solutions manual for the problems and exercises through MyAccountingLab Pg 118 ***NEW*** Continuing Exercise The unique 'Continuing Exercise' takes a single company and adds transactions or questions in each chapter to the existing fact pattern As students move throughout the text, they complete additional “steps” in this comprehensive exercise Students are able to see the 'big picture' and learn how the accounting topics build off one another Accounting is a process and the continuing exercise allows students to put it all together Pg 119 ***NEW*** Continuing Problem For more detailed and in-depth practice, a 'Continuing Problem' is also available Like the Continuing Exercise, the Continuing Problems takes a single company and adds transactions or questions in each chapter to the existing fact pattern As students move throughout the text, they complete additional “steps” in completing this comprehensive problem Students are able to see the 'big picture' and learn how the accounting topics build off one another Pg 120 ***NEW*** Unique Practice Set Within Chapters 1-8 An in-text 'Practice Set' is built into Chapters 1-8 of the student text Students not have to purchase any additional material for their practice sets and instructors no longer have to create their own Since the Practice Set is written by the same authors that write the student textbook, students will once again have consistency Students will also be able to complete the Practice Set within MyAccountingLab, for automatic grading and immediate feedback Pg 123 **UPDATED** Demo Doc Demo Docs will aid students when they are trying to solve exercises and problems on their own with the goal being to help students duplicate the classroom experience outside of class Entire problems that mirror end-of-chapter material are presented and then solved along with annotated with explanations written in a conversational style, essentially imitating what an instructor might say if standing over a student's shoulder All Demo Docs are in textbook in print, online at myaccountinglab, and in the study guide- in print and on CD in Flash, so students can easily refer to them when they need them Study Resource Component of our Student Learning System **UPDATED** Demo Docs Demo Docs allows students to duplicate the classroom experience Introductory accounting students consistently tell us “When doing homework, I get stuck trying to solve problems the way they were demonstrated in class.” Likewise, instructors consistently tell us, “I have so much to cover in so little time; I can't afford to go backward and review homework in class.” Those challenges inspired us to develop Demo Docs Demo Docs are comprehensive, worked-through problems that are available for every chapter of our introductory accounting text Demo Docs will aid students when they are trying to solve exercises and problems on their own with the goal being to help students duplicate the classroom experience outside of class Entire problems, mirroring end-of-chapter material, are presented and then solved along with annotated explanations written in a conversational style; essentially imitating what an instructor might say if standing over a student's shoulder All Demo Docs are in the textbook in print, in the study guide in print version as well as on CD in Flash, and online in MyAccountingLab so that students can easily refer to them as needed **UPDATED** MyAccountingLab Component of our Student Learning System MyAccountingLab is web-based, tutorial and assessment software for accounting that not only gives students more "I Get It" moments, but gives instructors the flexibility to make technology an integral part of their course, or a supplementary resource for students MyAccountingLab offers algorithmic questions because practice makes perfect It is also includes the exact same end-of-chapter material in the text that instructors can assign for homework MyAccountingLab features the same look and feel for exercises and problems with journal entries and financial statements so that students are familiar and comfortable working with the material WIth the new edition of Accounting 8e, Pearson releaseda new MyAccountingLab Player! In addition to previously released features like auto-graded problems and interactive Help Me Solve This questions, the new player offers: Support for both Macintosh® and Windows® platforms Compatibility with Internet Explorer®, Firefox®, and Safari™ browsers Freedom from downloads by no longer requiring an ActiveX plug-in The new MyAccountingLab Player can be used on any computer running the latest version of the Adobe® Flash® Player A new player design that updates the MyAccountingLab "easy to use" look and feel, and incorporates new features like an expandible content area that allows students and instructors to widen the question area and gain even more room for viewing questions as needed For a full listing of the new changes, visit www.myaccountinglab.com Table of Contents CHAPTER Accounting and the Business Environment CHAPTER Recording Business Transactions CHAPTER The Adjusting Process Appendix 3A Alternative Treatment of Prepaid Expenses and Unearned Revenues CHAPTER Completing the Accounting Cycle Appendix 4A Reversing Entries: An Optional Step CHAPTER Merchandising Operations Appendix 5A Work Sheet for a Merchandising Business Appendix 5B Accounting for Merchandise in a Periodic Inventory System CHAPTER Merchandise Inventory Appendix 6A Accounting for Inventory in a Periodic System CHAPTER Internal Control and Cash CHAPTER Receivables Appendix 8A Discounting a Note Receivable CHAPTER Plant Assets and Intangibles CHAPTER 10 Current Liabilities, Payroll, and Long-Term Liabilities Appendix 10A The Time Value of Money: Present Value of a Bond and Effective-Interest Amortization Appendix 10B Retiring and Converting Bonds Payable CHAPTER 11 Corporations: Paid-In Capital and the Balance Sheet CHAPTER 12 Corporations: Effects on Retained Earnings and the Income Statement CHAPTER 13 The Statement of Cash Flows Appendix 13A Preparing the Statement of Cash Flows by the Direct Method Appendix 13B Preparing the Indirect Statement of Cash Flows Using a Spreadsheet CHAPTER 14 Financial Statement Analysis Appendix A: Amazon.com Annual Report A-1 Appendix B: Present Value Tables B-1 Appendix C: Check Figures C-1 Photo Credits PC-1 Glindex G-1 Company Index I-1 Author Charles Horngren Edmund W Littlefield Professor of Accounting, Emeritus, at Stanford University A graduate of Marquette University, he received his M.B.A from Harvard University and his Ph.D from the University of Chicago He is also the recipient of honorary doctorates from Marquette University and DePaul University.A Certified Public Accountant, Horngren served on the Accounting Principles Board for six years, the Financial Accounting Standards Board Advisory Council for five years, and the Council of the American Institute of Certified Public Accountants for three years For six years, he served as a trustee of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board and the Government Accounting Standards Board Horngren is a member of the Accounting Hall of Fame A member of the American Accounting Association, Horngren has been its President and its Director of Research He received its first annual Outstanding Accounting Educator Award The California Certified Public Accountants Foundation gave Horngren its Faculty Excellence Award and its Distinguished Professor Award He is the first person to have received both awards The American Institute of Certified Public Accountants presented its first Outstanding Educator Award to Horngren Horngren was named Accountant of the Year, Education, by the national professional accounting fraternity, Beta Alpha Psi Professor Horngren is also a member of the Institute of Management Accountants, from whom he has received its Distinguished Service Award He was a member of the Institute's Board of Regents, which administers the Certified Management Accountant examinations Tom Harrison Professor Emeritus of Accounting at the Hankamer School of Business, Baylor University He received his B.B.A degree from Baylor University, his M.S from Oklahoma State University, and his Ph.D from Michigan State University Professor Harrison, recipient of numerous teaching awards from student groups as well as from university administrators, has also taught at Cleveland State Community College, Michigan State University, the University of Texas, and Stanford University A member of the American Accounting Association and the American Institute of Certified Public Accountants, Professor Harrison has served as Chairman of the Financial Accounting Standards Committee of the American Accounting Association, on the Teaching/Curriculum Development Award Committee, on the Program Advisory Committee for Accounting Education and Teaching, and on the Notable Contributions to Accounting Literature Committee Professor Harrison has lectured in several foreign countries and published articles in numerous journals, including Journal of Accounting Research, Journal of Accountancy, Journal of Accounting and Public Policy, Economic Consequences of Financial AccountingStandards, Accounting Horizons, Issues in Accounting Education, and Journal of Lawand Commerce Professor Harrison has received scholarships, fellowships, and research grants or awards from PriceWaterhouse Coopers, Deloitte & Touche, the Ernst & Young Foundation, and the KPMG Foundation M Suzanne Oliver M Suzanne Oliver is an assistant professor of accounting at Northwest Florida State College in Niceville, Florida She received her B.A in Accounting Information Systems and her Masters in Accountancy from the University of West Florida Professor Oliver began her career in accounting in the tax department of a regional accounting firm, specializing in benefit plan administration She has served as a software analyst for a national software development firm (CPASoftware) and as the Oracle Fixed Assets Analyst for Spirit Energy, formerly part of Union Oil of California.(Unocal) A Certified Public Accountant, Oliver is a member of the Florida Institute of Certified Public Accountants Professor Oliver has taught Financial Accounting, Managerial Accounting, Intermediate Accounting, Tax Accounting, Accounting Software Applications, Payroll Accounting, Auditing, Accounting Systems, Advanced Accounting, Managerial Finance, Business Math, and Supervision She has also taught Pension continuing education classes for CPAs and has developed and instructed online courses using myaccountinglab.com, WebCT, and other proprietary software Professor Oliver lives in Niceville where she is a member if the First United Methodist Church with her husband Greg and son C.J