Financial Accounting

Cover
Title Page
Copyright Page
About the Authors
Brief Contents
Contents
Preface
Acknowledgments
Chapter 1: The Financial Statements
	Spotlight: The Walt Disney Company
	Explain Why Accounting Is Critical to Businesses
		Describe the Decision Makers Who Use Accounting
		Describe the Two Types of Accounting and Who Uses Each Type
		Explain How Businesses Are Organized
	Explain and Apply Underlying Accounting Concepts, Assumptions, and Principles
		The Entity Assumption
		The Continuity (Going-Concern) Assumption
		The Historical Cost Principle
		The Stable-Monetary-Unit Assumption
	Apply the Accounting Equation to Business Organizations
		Assets and Liabilities
		Equity
	Construct Financial Statements and Analyze the Relationships Among Them
		The Income Statement
		The Statement of Retained Earnings
		The Balance Sheet
		The Statement of Cash Flows
	Evaluate Business Decisions Ethically
		American Institute of Certified Public Accountants Code of Professional Conduct
	End-of-Chapter: Summary Problem
Chapter 2: Transaction Analysis
	Spotlight: The Walt Disney Company Records Millions of Transactions a Year!
	Recognize a Business Transaction and the Various Types of Accounts in Which It Can Be Recorded
		Assets
		Liabilities
		Stockholders’ Equity
	Analyze the Impact of Business Transactions on the Accounting Equation
		Example: Alladin Travel, Inc.
		Transactions and Financial Statements
	Mid-Chapter: Summary Problem
	Analyze the Impact of Business Transactions on Accounts
		The T-Account
		Increases and Decreases in the Accounts: The Rules of Debit and Credit
		Additional Stockholders’ Equity Accounts: Revenues and Expenses
	Journalize Transactions and Post Journal Entries to the Ledger
		Posting from the Journal to the Ledger
		The Flow of Accounting Data
		Accounts After Posting to the Ledger
	Construct a Trial Balance
		Analyzing Accounts
		Correcting Accounting Errors
		Chart of Accounts
		The Normal Balance of an Account
	End-of-Chapter: Summary Problem
Chapter 3: Accrual Accounting and Income
	Spotlight: September Is Busy at Walt Disney World Headquarters
	Explain How Accrual Accounting Differs from Cash-Basis Accounting
		Accrual Accounting and Cash Flows
		The Time-Period Concept
	Apply the Revenue and Expense Recognition Principles
		The Revenue Principle
		The Expense Recognition Principle
	Adjust the Accounts
		Which Accounts Need to Be Updated (Adjusted)?
		Categories of Adjusting Entries
		Prepaid Expenses
		Depreciation of Plant Assets
		Accrued Expenses
		Accrued Revenues
		Unearned Revenues
		Summary of the Adjusting Process
		The Adjusted Trial Balance
	Construct the Financial Statements
	Mid-Chapter: Summary Problem
	Close the Books
		Classifying Assets and Liabilities
		Reporting Assets and Liabilities: The Walt Disney Company
		Formats for the Financial Statements
	Analyze and Evaluate a Company’s Debt-Paying Ability
		Net Working Capital
		Current Ratio
		Debt Ratio
		How Do Transactions Affect the Ratios?
	End-of-Chapter: Summary Problem
Chapter 4: Internal Control and Cash
	Spotlight: Cooking the Books at Green Valley Coffee Company: $10 Million Is a Lot of Beans!
	Describe Fraud and Its Impact
		Fraud and Ethics
	Explain the Objectives and Components of Internal Control
		The Components of Internal Control
		Internal Control Procedures
		Information Technology
		Safeguard Controls
		Internal Controls for E-Commerce
		Security Measures
	Evaluate Internal Controls over Cash Receipts and Cash Payments
		Cash Receipts over the Counter
		Cash Receipts by Mail
		Controls over Payments Made by Check or EFT
		The Limitations of Internal Control—Costs and Benefits
	Mid-Chapter: Summary Problem
	Prepare a Bank Reconciliation
		Signature Card
		Deposit Ticket
		Check
		Bank Statement
		Bank Reconciliation
		Preparing the Bank Reconciliation
		Online Banking
	Report Cash on the Balance Sheet
	End-of-Chapter: Summary Problem
Chapter 5: Receivables and Revenue
	Spotlight: Apple’s Accounts Receivable Are Small Compared to the Company’s Net Sales Revenue and Are Mostly Collectible
	Apply Generally Accepted Accounting Principles (GAAP) for Proper Revenue Recognition
		Shipping Terms
		Collection
		Speeding up the Cash Flow from Sales
	Account for Sales Returns and Allowances
	Account for Sales Discounts
		Disclosure of Net Revenues on the Income Statement
	Account for Accounts Receivable
		Types of Receivables
		Managing and Accounting for Receivables
	Evaluate Collectibility Using the Allowance for Uncollectible Accounts
		Allowance Method
		Direct Write-Off Method
		Computing Cash Collections from Customers
	Account for Notes Receivable and Interest Revenue
		Accounting for Notes Receivable
	Evaluate Liquidity Using Three New Ratios
		Quick (Acid-Test) Ratio
		Accounts Receivable Turnover and Days’ Sales Outstanding
	End-of-Chapter: Summary Problem
Chapter 6: Inventory and Cost of Goods Sold
	Spotlight: Under Armour, Inc.’s Performance Slips
	Show How to Account for Inventory
		Sale Price versus Cost of Inventory
		Periodic versus Perpetual Inventory Systems
	Apply and Compare Various Inventory Cost Methods
		Apply the Various Inventory Costing Methods
		Compare the Effects of FIFO, LIFO, and Average-Cost Methods on Gross Profit and Ending Inventory
		The Tax Advantage of LIFO
	Mid-Chapter: Summary Problem
	Explain and Apply Underlying U.S. GAAP for Inventory
		Disclosure Principle
		Lower-of-Cost-or-Market Rule
	Compute and Evaluate Gross Profit (Margin) Percentage, Inventory Turnover, and Days’ Inventory Outstanding (DIO)
		Gross Profit Percentage
		Inventory Turnover and Days Inventory Outstanding (DIO)
	Use the Cost-of-Goods-Sold (COGS) Model to Make Management Decisions
		Computing Budgeted Purchases
		Estimating Inventory Using the Gross Profit Method
	Analyze Effects of Inventory Errors
	End-of-Chapter: Summary Problem
Chapter 7: Plant Assets, Natural Resources, and Intangibles
	Spotlight: FedEx Corporation
	Explain How to Account for the Cost of Plant Assets
		Land
		Buildings, Machinery, and Equipment
		Land Improvements and Leasehold Improvements
		Lump-Sum (or Basket) Purchases of Assets
	Distinguish a Capital Expenditure from an Immediate Expense
	Explain How to Account for Depreciation on Plant Assets
		How to Measure Depreciation
		Depreciation Methods
		Comparing Depreciation Methods
	Mid-Chapter: Summary Problem
		Other Issues in Accounting for Plant Assets
		Depreciation for Tax Purposes
		Depreciation for Partial Years
		Changing the Useful Life of a Depreciable Asset
		Fully Depreciated Assets
	Analyze the Effect of a Plant Asset Disposal
		Disposing of a Fully Depreciated Asset for No Proceeds
		Selling a Plant Asset
		Exchanging a Plant Asset
		T-Accounts for Analyzing Plant Asset Transactions
	Apply GAAP for Natural Resources and Intangible Assets
		Accounting for Natural Resources
		Accounting for Intangible Assets
		Accounting for Specific Intangibles
		Accounting for Research and Development Costs
	Explain the Effect of an Asset Impairment on the Financial Statements
	Analyze Rate of Return on Assets
		DuPont Analysis: A More Detailed View of ROA
	Analyze the Cash Flow Impact of Long-Lived Asset Transactions
	End-of-Chapter: Summary Problem
Chapter 8: Current and Contingent Liabilities
	Spotlight: Amazon.com Moves a Lot of Merchandise and Incurs Many Liabilities
	Distinguish Between Current and Long-Term Liabilities
	Account for Accounts Payable and Analyze Accounts Payable Turnover
	Account for Notes Payable and Accrued Interest
	Account for Accrued Liabilities and Unearned Revenue
	Account for Contingent Liabilities
	End-of-Chapter: Summary Problem
Chapter 9: Long-Term Liabilities
	Spotlight: Southwest Airlines Is Flying High
	Account for Bonds Payable and Interest Expense with Straight-Line Amortization
		Issuing Bonds Payable at Par (Face Value)
		Issuing Bonds Payable at a Discount
		Issuing Bonds Payable at a Premium
	Account for Bonds Payable and Interest Expense with Effective-Interest Amortization
		Issuing Bonds Payable at a Discount
		Interest Expense on Bonds Issued at a Discount
		Issuing Bonds Payable at a Premium
	Account for Other Features of Bonds Payable
		Accounting for Partial-Period Interest Amounts
		Retiring Bonds Payable Before Their Maturity
		Accounting for Convertible Bonds and Notes
	Describe Other Long-Term Liabilities
		Deferred Income Taxes
		Commitments
		Leases
	Analyze the Impact of Leverage on the Financial Statements
		The Leverage Ratio
		The Times-Interest-Earned Ratio
	Report Long-Term Liabilities on the Financial Statements
		Reporting on the Balance Sheet
		Disclosing the Fair Value of Long-Term Debt
		Reporting Financing Activities on the Statement of Cash Flows
	End-of-Chapter: Summary Problem
Chapter 10: Stockholders’ Equity
	Spotlight: The Home Depot: Building Toward Success
	Explain the Features of a Corporation
		Organizing a Corporation
		Stockholders’ Rights
		Stockholders’ Equity
		Classes of Stock
	Account for the Issuance of Stock
		Common Stock
		How an “Other Than Cash” Stock Issuance Can Create an Ethical Challenge
		Preferred Stock
	Mid-Chapter: Summary Problem
		Authorized, Issued, and Outstanding Stock
	Explain How Treasury Stock Affects a Company
		How Is Treasury Stock Recorded?
		Retirement of Treasury Stock
		Resale of Treasury Stock
		Issuing Stock for Employee Compensation
		Summary of Treasury-Stock Transactions
	Account for Retained Earnings, Dividends, and Stock Splits
		Should the Company Declare and Pay Cash Dividends?
		Cash Dividends
		Analyzing the Stockholders’ Equity Accounts
		Dividends on Preferred Stock
		Stock Dividends
		Stock Splits
		Summary of the Effects on Assets, Liabilities, and Stockholders’ Equity
	Evaluate a Company’s Performance Using New Ratios
		ROE: Relating Profitability to Stockholder Investment
		Earnings Per Share (EPS)
		Effect of Equity Financing on EPS
		Market Capitalization and the Price-Earning Ratio
	Report Stockholders’ Equity Transactions in the Financial Statements
		Statement of Cash Flows
		Statement of Stockholders’ Equity
		A Detailed Stockholders’ Equity Section of the Balance Sheet
	End-of-Chapter: Summary Problems
Chapter 11: The Statement of Cash Flows
	Spotlight: Google: The Ultimate Answer (and Cash) Machine
	Identify the Purposes of the Statement of Cash Flows
		How’s Your Cash Flow? Telltale Signs of Financial Difficulty
	Distinguish Among Operating, Investing, and Financing Activities
		Two Formats for Operating Activities
	Prepare a Statement of Cash Flows by the Indirect Method
		Cash Flows from Operating Activities
		Cash Flows from Investing Activities
		Cash Flows from Financing Activities
		Noncash Investing and Financing Activities
	Mid-Chapter: Summary Problem
	Prepare a Statement of Cash Flows Using the Direct Method
		Cash Flows from Operating Activities
		Depreciation, Depletion, and Amortization Expense
		Cash Flows from Investing Activities
		Cash Flows from Financing Activities
		Noncash Investing and Financing Activities
		Computing Operating Cash Flows Using the Direct Method
		Computing Investing and Financing Cash Flows
		Measuring Cash Adequacy: Free Cash Flow
	End-of-Chapter: Summary Problems
Chapter 12: Financial Statement Analysis
	Spotlight: Evaluating Under Armour, Inc., and Apple Inc., Using Different Financial Analysis Tools
	Perform an Industry and Company Analysis
	Perform a Horizontal Analysis
		Trend Percentages
	Perform a Vertical Analysis
		Prepare Common-Size Financial Statements
		Benchmarking
		Benchmarking Against a Key Competitor
	Mid-Chapter: Summary Problem
	Use Ratios to Make Business Decisions
		Remember to Start at the Beginning: Company and Industry Information
		Now Let’s Do the Numbers
		Measuring Ability to Pay Current Liabilities
		Measuring Turnover and the Cash Conversion Cycle
		Measuring Leverage: The Overall Ability to Pay Debts
		Measuring Profitability
		Analyzing Stock as an Investment
		The Limitations of Ratio Analysis
	Evaluate the Quality of Earnings
		An Audit Adds Credibility to Financial Statements
		Red Flags in Financial Statement Analysis
		Efficient Markets
	End-of-Chapter: Summary Problems
Appendix A: Apple Inc. Annual Report 2016
Appendix B: Typical Charts of Accounts for Different Types of Businesses
Appendix C: Summary of U.S. Generally Accepted Accounting Principles (GAAP)
Appendix D: Summary of Differences Between U.S. GAAP and IFRS Cross Referenced to Chapter
Appendix E: Investments
	Explain Why Companies Invest in Other Companies
		Investments in Equity Securities
	Account for Investments in Equity Securities When the Investor Has Insignificant Influence
		Recording the Purchase of Equity Securities
		Recording Cash Dividends
		Adjusting Equity Investments to Their Fair Value
		Recording the Sale of an Equity Investment
	Account for Investments in Equity Securities When the Investor Has Significant Influence
		Purchase of Equity-Method Investments
	Account for Investments in Equity Securities When the Investor Has Controlling Influence
		Consolidation Accounting
	Account for Investments in Debt Securities
Appendix F: Time Value of Money
	Explain the Impact the Time Value of Money Has on Certain Types of Investments
		Present Value
		Present-Value Tables
		Present Value of an Ordinary Annuity
		Using Microsoft Excel to Calculate Present Value
		Using the PV Model to Compute Fair Value of Available-for- Sale Investments
		Present Value of an Investment in Bonds
Company Index
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