Financial Accounting

Tittle
Contents
1 Accounting Information and Decision Making
	Dell Incorporated: Computing The Success of An Entrepreneur
	Part A: Accounting as a Measurement/ Communication Process
	Defining Accounting
	Business Activities to Measure
		Example of Business Activities
		How to Measure Business Activities
		Forms of Business Organization
	Communicating through Financial Statements
		The Income Statement
		The Statement of Stockholders’ Equity
		The Balance Sheet
		The Statement of Cash Flows
		Decision Maker’s Perspective
		The Links among Financial Statements
		Other Information Reported to Outsiders
	Part B: Financial Accounting Information
	Is Financial Accounting Important?
	Rules of Financial Accounting
		Current Standard Setting
		Historical Perspective on Standard Setting
		The Role of the Auditor
		Objectives of Financial Accounting
	An Ethical Foundation
	Part C: Careers in Accounting
	Demand for Accounting
	Career Options in Accounting
		Public Accounting
		Private Accounting
	Appendix: Conceptual Framework
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
2 The Accounting  Information System
	Walmart: Shelves of Business Transactions
	Part A: Measuring Business Activities
	Measurement of External Transactions
	Effects of Transactions on the Basic Accounting Equation
		Transaction (1): Issue Common Stock
		Transaction (2): Borrow from the Bank
		Transaction (3): Purchase Equipment
		Transactions (4) and (5): Incur Costs for Rent and Supplies
	Effects of Transactions on the Expanded Accounting Equation
		Transactions (6) and (7): Provide Services to Customers
		Transaction (8): Receive Cash in Advance from Customers
		Transaction (9): Incur Costs for Salaries
		Transaction (10): Pay Dividends
	Part B: Debits and Credits
	Effects on Account Balances in the Basic Accounting Equation
	Effects on Account Balances in the Expanded Accounting Equation
	Recording Transactions
	Posting
	Summary of the Measurement Process
	Trial Balance
		Order of Accounts
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
3The Financial Reporting Process
	Federal Express: Delivering Profits to Investors
	Part A: Accrual-Basis Accounting
	Revenue and Expense Reporting
		Revenue Recognition Principle
		Matching Principle
	Accrual-Basis Compared with Cash-Basis Accounting
	Part B: The Measurement Process
	Adjusting Entries
		Prepaid Expenses
		Unearned Revenues
		Accrued Expenses
		Accrued Revenues
		No Adjustment Necessary
	Post Adjusting Entries
		Adjusted Trial Balance
	Part C: The Reporting Process: Financial Statements
	Income Statement
	Statement of Stockholders’ Equity
	Classified Balance Sheet
	Statement of Cash Flows
	Part D: The Closing Process
	Closing Entries
	Post Closing Entries
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
4 Cash and Internal Controls
	Regal Entertainment: Internal Controls Are a Box-Office Hit
	Part A: Internal Controls
	Recent Accounting Scandals and Response
		Sarbanes-Oxley Act of 2002
	Framework for Internal Control
		Components of Internal Control
		Responsibilities for Internal Control
		Limitations of Internal Control
	Part B: Cash
	Cash and Cash Equivalents
		Decision Maker’s Perspective: How Much Cash Is Enough?
	Cash Controls
		Controls over Cash Receipts
		Controls over Cash Disbursements
	Bank Reconciliation
		Step 1: Reconciling the Bank’s Cash Balance
		Step 2: Reconciling the Company’s Cash Balance
		Step 3: Adjusting the Company’s Cash Balance
	Petty Cash
	Reporting Cash
		Balance Sheet
		Statement of Cash Flows
	Analysis: Cash Analysis
	Krispy Kreme vs. Starbucks
		Comparing Net Income to Cash Flow
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
5 Receivables and Sales
	Additional Perspectives
	Tenet Healthcare: Bad Debts Cause Pain to Investors
	Part A: Recognizing Accounts Receivable
	Credit Sales and Accounts Receivable
		Other Types of Receivables
	Net Revenues
		Trade Discounts
		Sales Discounts
		Sales Returns and Allowances
	Part B: Valuing Accounts Receivable
	Allowance Method
		Estimating Uncollectible Accounts
		Writing Off Accounts Receivable
		Collection of Accounts Previously Written Off
		Estimating Uncollectible Accounts in the Following Year
		Aging of Accounts Receivable
	Direct Write-Off Method
		Decision Maker’s Perspective: Managing Bad Debt Estimates
	Part C: Notes Receivable
	Accounting for Notes Receivable
		Interest Calculation
		Collection of Notes Receivable
		Accrued Interest
	Analysis: Receivables Analysis
	Tenet vs. LifePoint
		Receivables Turnover Ratio
		Average Collection Period
	Appendix: Percentage-of-Credit-Sales Method
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
6 Inventory and Cost of Goods Sold
	Best Buy: Taking Inventory of Electronics Sold
	Understanding Inventory and Cost of Goods Sold
	Inventory
		Merchandising Companies
		Manufacturing Companies
		Flow of Inventory Costs
	Cost of Goods Sold
	Inventory Cost Methods
		Specific Identification
		First-In, First-Out
		Last-In, First-Out
		Weighted-Average Cost
	Effects of Managers’ Choice of Inventory Reporting Methods
		Decision Maker’s Perspective: FIFO or LIFO?
		Reporting the LIFO Difference
		Consistency in Reporting
	Part B: Recording Inventory Transactions
	Perpetual Inventory System
		Inventory Purchases and Sales
		Additional Inventory Transactions
		Sales Transactions: The Other Side of Purchase Transactions
	Multiple-Step Income Statement
	Part C: Lower-of-Cost-or-Market Method
		Decision Maker’s Perspective: Conservatism and the Lower-of-Cost-or-Market Method
	Analysis: Inventory Analysis
	Best Buy vs. Radio Shack
		Inventory Turnover Ratio
		Gross Profit Ratio
	Appendix A: Recording Inventory Transactions Using a Periodic Inventory System
	Appendix B: Inventory Errors
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
7 Long-Term Assets
	WorldCom: Expenses Called Assets
	Part A: Acquisitions
	Property, Plant, and Equipment
		Land
		Land Improvements
		Buildings
		Equipment
		Basket Purchases
		Natural Resources
	Intangible Assets
		Patents
		Copyrights
		Trademarks
		Franchises
		Goodwill
	Expenditures after Acquisition
		Repairs and Maintenance
		Additions
		Improvements
		Legal Defense of Intangible Assets
	Part B: Cost Allocation
	Depreciation of Property, Plant, and Equipment
		Accumulated Depreciation
		Straight-Line Depreciation
		Declining-Balance Depreciation
		Activity-Based Depreciation
		Decision Maker’s Perspective: Selecting a Depreciation Method
		Depletion
		Tax Depreciation
	Amortization of Intangible Assets
		Intangible Assets Subject to Amortization
		Intangible Assets Not Subject to Amortization
	Part C: Asset Disposition: Sale, Retirement, or Exchange
	Sale of Long-Term Assets
	Retirement of Long-Term Assets
	Exchange of Long-Term Assets
	Analysis: Asset Analysis
	Walmart vs. Abercrombie
		Return on Assets
		Profit Margin and Asset Turnover
		Decision Maker’s Perspective: Strategies for Increasing Return on Assets
	Appendix: Asset Impairment,
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
8 Current Liabilities
	United Airlines: A Future Up in the Air
	Part A: Current Liabilities
	Current vs. Long-Term Classification
	Notes Payable
	Accounts Payable
	Payroll Liabilities
		Employee Costs
		Employer Costs
	Other Current Liabilities
		Unearned Revenues
		Sales Tax Payable
		Current Portion of Long-Term Debt
		Decision Maker’s Perspective: Current or Long-Term?
		Deferred Taxes
	Part B: Contingencies
	Contingent Liabilities
		Litigation and Other Causes
		Warranties
	Contingent Gains
	Analysis: Liquidity Analysis
	United vs. Southwest
		Working Capital
		Current Ratio
		Acid-Test Ratio
		Decision Maker’s Perspective: Indicators of Liquidity
	Effect of Transactions on Liquidity Ratios
	Liquidity Management
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
9 Long-Term Liabilities
	Additional Perspectives
	Six Flags: The Ups and Downs of Borrowing
	Part A: Overview of Long-Term Debt
	Financing Alternatives
	What Are Bonds?
	Bond Characteristics
		Secured and Unsecured Bonds
		Term and Serial Bonds
		Callable Bonds
		Convertible Bonds
	Part B: Pricing a Bond
		Bonds Issued at Face Amount
		Bonds Issued at a Discount
		Bonds Issued at a Premium
	Part C: Recording Bonds Payable
	Accounting for a Bond Issue
		Recording Bonds Issued at Face Value
		Recording Bonds Issued at a Discount
		Decision Maker’s Perspective: Carrying Value and Market Value
		Recording Bonds Issued at a Premium
	Accounting for a Bond Retirement
		Bond Retirements at Maturity
		Bond Retirements before Maturity
		Decision Maker’s Perspective: Why Buy Back Debt Early?
	Part D: Other Long-Term Liabilities
	Installment Notes
	Leases
		Decision Maker’s Perspective: Why Do Some Companies Lease Rather Than Buy?
	Analysis: Debt Analysis
	Coca-Cola vs. PepsiCo
		Debt to Equity Ratio
		Times Interest Earned Ratio
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
10 Stockholders’ Equity
	Deckers Outdoor: From Down Under to Top Ten
	Part A: Invested Capital
	Corporations
		Stages of Equity Financing
		Public or Private
		Stockholder Rights
		Advantages of a Corporation
		Disadvantages of a Corporation
		Decision Maker’s Perspective: Limited Liability and Beneficial Tax Treatment
	Common Stock
		Authorized, Issued, and Outstanding Stock
		Par Value
		Accounting for Common Stock Issues
	Preferred Stock
		Comparison of Financing Alternatives
		Features of Preferred Stock
		Accounting for Preferred Stock Issues
	Treasury Stock
		Decision Maker’s Perspective: Why Corporations Repurchase Their Stock
		Accounting for Treasury Stock
	Part B: Earned Capital
	Retained Earnings and Dividends
		Decision Maker’s Perspective: Why Don’t Some Companies Pay Dividends?
	Stock Dividends and Stock Splits
		Stock Dividends
		Decision Maker’s Perspective: Why Declare a Stock Split?
	Part C: Reporting Stockholders’ Equity
	Stockholders’ Equity in the Balance Sheet
	Statement of Stockholders’ Equity
	Analysis: Equity Analysis
	Deckers Outdoor vs. Timberland
		Return on Equity
		Return on the Market Value of Equity
		Decision Maker’s Perspective: Why Doesn’t Stockholders’ Equity Equal the Market Value of Equity
		Earnings Per Share
		Price-Earnings Ratio
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
11 Statement of Cash Flows
	Apple, Inc: Cash Flows at the Core
	Part A: Formatting the Statement of Cash Flows
	Classification of Transactions
		Reporting Cash Flow Activities
		Reporting Noncash Activities
		Operating Activities—Indirect and Direct Methods
	Part B: Preparing the Statement of Cash Flows
	Steps in Preparing The Statement of Cash Flows
	Basic Format
	Operating Activities—Indirect Method
		Adjustments for Noncash Components of Net Income
		Adjustments for Changes in Current Assets and Current Liabilities
	Investing and Financing Activities
		Investing Activities
		Financing Activities
	Analysis: Cash Flow Analysis
	Apple vs. Dell
		Decision Maker’s Perspective: Cash Flow Ratios
	Return on Assets
	Cash Return on Assets
	Components of Cash Return on Assets
	Appendix: Operating Activities—Direct Method
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives
12 Financial Statement Analysis
	Under Armour: Making the Competition Sweat
	Part A: Comparison of Financial Accounting Information
	Vertical Analysis
		Vertical Analysis of the Income Statement
		Vertical Analysis of the Balance Sheet
	Horizontal Analysis
		Horizontal Analysis of the Income Statement
		Horizontal Analysis of the Balance Sheet
	Part B: Using Ratios to Assess Risk and Profitability
	Risk Analysis
		Receivables Turnover Ratio
		Average Collection Period
		Inventory Turnover Ratio
		Average Days in Inventory
		Current Ratio
		Acid-Test Ratio
		Debt to Equity Ratio
		Times Interest Earned Ratio
	Profitability Analysis
		Gross Profit Ratio
		Decision Maker’s Perspective: How Warren Buffett Interprets Financial Statements
		Return On Assets
		Profit Margin
		Asset Turnover
		Return on Equity
		Price-Earnings Ratio
	Part C: Earnings Persistence and Earnings Quality
	Earnings Persistence and One-Time Income Items
		Discontinued Operations
		Extraordinary Items
		Other Revenues and Expenses
		Decision Maker’s Perspective: Does Location in the Income Statement Matter?
	Quality of Earnings
		Financial Statements by Mr. Sampras
		Sampras Retires and McEnroe Is Hired
		Financial Statements by Mr. McEnroe
		Decision Maker’s Perspective: Look Out for Earnings Management at Year-End
		Symbolism Revealed
	Key Points by Learning Objective
	Glossary
	Self-Study Questions
	Review Questions
	Brief Exercises
	Exercises
	Problems: Set A
	Problems: Set B
	Additional Perspectives,
Appendix A: American Eagle Outfitters, Inc., 2009 Annual Report
Appendix B: The Buckle, Inc., 2009 Annual Report
Appendix C: Time Value of Money
Appendix D: Investments
Appendix E: International Financial Reporting Standards
Photo Credits
Subject Index
Company Index
Present and Future Value Tables