Financial Accounting The Impact on Decision Makers

Start Off Right with Porter/Norton 7/e!......Page 6
Start Off Right! How Students Actually Use the Text......Page 7
Chapter-by-Chapter Changes......Page 15
Supplements to Help You Learn More, Faster, and with Better Retention for Homework, Quizzes, and Exams......Page 18
Acknowledgments......Page 19
About the Authors......Page 21
Brief Contents......Page 22
Contents......Page 23
Ch 1: Accounting as a Form of Communication......Page 29
Making Business Decisions: Kellogg Company......Page 30
What Is Business?......Page 31
Forms of Organization......Page 33
The Nature of Business Activity......Page 35
What Is Accounting, and What Information Do Users of Accounting Reports Need?......Page 38
Using the Ratio Decision Model: Financial Decision Framework......Page 41
Financial Statements: How Accountants Communicate......Page 42
The Conceptual Framework: Foundation for Financial Statements......Page 50
Setting Accounting Standards......Page 53
Introduction to Ethics in Accounting......Page 55
Hot Topics: Kellogg’s—One of the World’s Most Ethical Companies......Page 58
Key Terms Quiz......Page 60
Alternate Terms......Page 61
Review Problem & Solution......Page 62
Brief Exercises......Page 64
Exercises......Page 65
Multi-Concept Exercises......Page 69
Problems......Page 70
Alternate Problems......Page 74
Decision Cases......Page 78
Answers to Pod Review......Page 82
Ch 2: Financial Statements and the Annual Report......Page 83
Making Business Decisions: General Mills......Page 84
Objectives of Financial Reporting......Page 85
What Makes Accounting Information Useful? Qualitative Characteristics......Page 87
The Classified Balance Sheet......Page 91
Using a Classified Balance Sheet: Introduction to Ratios......Page 97
The Income Statement......Page 99
Using an Income Statement......Page 102
The Statement of Retained Earnings......Page 103
The Statement of Cash Flows......Page 104
Looking at Financial Statements for a Real Company: General Mills, Inc.......Page 107
Using the Ratio Decision Model: Analyzing the Current Ratio......Page 109
Using the Ratio Decision Model: Analyzing the Profit Margin......Page 110
Hot Topics: Paying Dividends in Challenging Economic Times......Page 111
Key Terms Quiz......Page 115
Warmup Exercises & Solutions......Page 116
Review Problem & Solution......Page 117
Brief Exercises......Page 119
Exercises......Page 120
Problems......Page 123
Multi-Concept Problems......Page 126
Alternate Problems......Page 128
Alternate Multi-Concept Problems......Page 130
Decision Cases......Page 132
Answers to Pod Review......Page 134
Ch 3: Processing Accounting Information......Page 135
Making Business Decisions: Carnival Cruise Corporation & PLC......Page 136
Economic Events: The Basis for Recording Transactions......Page 137
Analyzing the Effects of Transactions on the Accounting Equation......Page 139
What Is an Account?......Page 145
Debits and Credits......Page 147
The Journal: The Firm’s Chronological Record of Transactions......Page 153
Hot Topics: Conserving Cash to Invest in the Future......Page 156
The Trial Balance......Page 157
Key Terms Quiz......Page 159
Warmup Exercises & Solutions......Page 160
Review Problem & Solution......Page 161
Brief Exercises......Page 163
Exercises......Page 164
Multi-Concept Exercises......Page 167
Problems......Page 169
Multi-Concept Problems......Page 171
Alternate Problems......Page 175
Alternate Multi-Concept Problems......Page 177
Decision Cases......Page 181
Answers to Pod Review......Page 186
Ch 4: Income Measurement and Accrual Accounting......Page 187
Making Business Decisions: Nordstrom, Inc.......Page 188
Recognition and Measurement in Financial Statements......Page 189
The Accrual Basis of Accounting......Page 192
The Revenue Recognition Principle......Page 196
Expense Recognition and the Matching Principle......Page 197
Accrual Accounting and Adjusting Entries......Page 199
Hot Topics: Keeping a Watchful Eye on Sales......Page 204
The Accounting Cycle......Page 217
The Closing Process......Page 218
Appendix: Accounting Tools: Work Sheets......Page 221
Accounts Highlighted......Page 224
Key Terms Quiz......Page 225
Warmup Exercises & Solutions......Page 226
Review Problem......Page 227
Appendix Review Problem......Page 229
Brief Exercises......Page 231
Exercises......Page 232
Multi-Concept Exercises......Page 240
Problems......Page 242
Multi-Concept Problems......Page 247
Alternate Problems......Page 249
Alternate Multi-Concept Problems......Page 254
Decision Cases......Page 256
Solutions to Key Terms Quiz......Page 260
Integrative Problem......Page 261
Answers to Pod Review......Page 262
Ch 5: Inventories and Cost of Goods Sold......Page 263
Making Business Decisions: Gap Inc.......Page 264
The Nature of Inventory......Page 265
Net Sales of Merchandise......Page 268
Hot Topics: Some Work and Some Don’t......Page 270
Cost of Goods Sold......Page 271
The Gross Profit Ratio......Page 279
Using the Ratio Decision Model: Analyzing the Gross Profit Ratio......Page 280
Inventory Valuation and the Measurement of Income......Page 281
Inventory Costing Methods with a Periodic System......Page 283
Selecting an Inventory Costing Method......Page 289
Inventory Errors......Page 293
Valuing Inventory at Lower of Cost or Market......Page 297
Analyzing the Management of Inventory......Page 300
Using the Ratio Decision Model: Analyzing the Management of Inventory......Page 301
How Inventories Affect the Cash Flows Statement......Page 303
Appendix: Accounting Tools: Inventory Costing Methods with the Use of a Perpetual Inventory System......Page 305
Key Terms Quiz......Page 309
Warmup Exercises......Page 311
Review Problem......Page 313
Questions......Page 314
Brief Exercises......Page 315
Exercises......Page 317
Multi-Concept Exercises......Page 321
Problems......Page 324
Multi-Concept Problems......Page 327
Alternate Problems......Page 330
Alternate Multi-Concept Problems......Page 332
Decision Cases......Page 336
Answers to Pod Review......Page 340
Ch 6: Cash and Internal Control......Page 341
Making Business Decisions: Sears Holdings Corporation......Page 342
What Constitutes Cash?......Page 343
Hot Topics: Keeping the Cash Flowing......Page 345
Control Over Cash......Page 346
An Introduction to Internal Control......Page 355
Internal Control Procedures......Page 360
Computerized Business Documents and Internal Control......Page 362
Key Terms Quiz......Page 370
Alternate Terms......Page 371
Review Problem......Page 372
Questions......Page 373
Exercises......Page 374
Multi-Concept Exercise......Page 376
Problems......Page 377
Alternate Problems......Page 378
Alternate Multi-Concept Problems......Page 379
Decision Cases......Page 380
Answers to Pod Review......Page 382
Ch 7: Receivables and Investments......Page 383
Making Business Decisions: Apple Inc.......Page 384
Accounts Receivable......Page 385
Using the Ratio Decision Model: Analyzing the Accounts Receivable Rate of Collection......Page 394
Hot Topics: GAAP and Non-GAAP......Page 396
Notes Receivable......Page 397
Accelerating the Inflow of Cash from Sales......Page 400
Accounting for Investments......Page 402
How Liquid Assets Affect the Statement of Cash Flows......Page 409
Accounts Highlighted......Page 411
Alternate Terms......Page 412
Warmup Exercises & Solutions......Page 413
Review Problem & Solution......Page 414
Brief Exercises......Page 416
Exercises......Page 417
Problems......Page 420
Alternate Problems......Page 423
Decision Cases......Page 426
Answers to Pod Review......Page 428
Ch 8: Operating Assets: Property, Plant, and Equipment, and Intangibles......Page 429
Making Business Decisions: Nike......Page 430
Operating Assets: Property, Plant, and Equipment......Page 431
Use and Depreciation of Property, Plant, and Equipment......Page 435
Disposal of Property, Plant, and Equipment......Page 445
Operating Assets: Intangible Assets......Page 447
Hot Topics: The Nike Brand: Intangible? Yes. Valuable? Absolutely!......Page 448
How Long-Term Assets Affect the Statement of Cash Flows......Page 453
Analyzing Long-Term Assets for Average Life and Asset Turnover......Page 455
Using the Ratio Decision Model: Analyzing Average Life and Asset Turnover......Page 457
Key Terms Quiz......Page 459
Warmup Exercises & Solutions......Page 460
Review Problem & Solution......Page 461
Questions......Page 463
Brief Exercises......Page 464
Exercises......Page 466
Multi-Concept Exercises......Page 468
Problems......Page 469
Multi-Concept Problems......Page 471
Alternate Problems......Page 473
Alternate Multi-Concept Problems......Page 475
Decision Cases......Page 477
Solutions to Key Terms Quiz......Page 479
Integrative Problem......Page 480
Answers to Pod Review......Page 481
Ch 9: Current Liabilities, Contingencies, and the Time Value of Money......Page 483
Making Business Decisions: Starbucks Corporation......Page 484
Current Liabilities......Page 485
Reading the Statement of Cash Flows for Changes in Current Liabilities......Page 493
Contingent Liabilities......Page 495
Hot Topics: Starbuck’s Liability for Products......Page 498
Time Value of Money Concepts: Compounding of Interest......Page 500
Present Value and Future Value: Single Amounts......Page 503
Present Value and Future Value of an Annuity......Page 506
Appendix: Accounting Tools: Using Excel® for Problems Involving Interest Calculations......Page 515
Accounts Highlighted......Page 519
Alternate Terms......Page 520
Warmup Exercises......Page 521
Review Problem......Page 522
Questions......Page 524
Exercises......Page 525
Problems......Page 530
Multi-Concept Problems......Page 533
Alternate Problems......Page 534
Alternate Multi-Concept Problems......Page 537
Decision Cases......Page 539
Answers to Pod Review......Page 543
Ch 10: Long-Term Liabilities......Page 545
Making Business Decisions: Coca-Cola......Page 546
Balance Sheet Presentation of Long-Term Liabilities......Page 547
Hot Topics: Coca-Cola versus PepsiCo......Page 548
Bonds Payable: Characteristics......Page 549
Issuance of Bonds......Page 551
Premium or Discount on Bonds......Page 554
Bond Amortization......Page 557
Redemption of Bonds......Page 561
Liability for Leases......Page 564
Analyzing Debt to Assess a Firm’s Ability to Pay Its Liabilities......Page 569
Using the Ratio Decision Model: Analyzing the Debt-to-Equity and Times Interest Earned Ratios......Page 570
How Long-Term Liabilities Affect the Statement of Cash Flows......Page 572
Appendix: Accounting Tools: Other Liabilities......Page 575
Accounts Highlighted......Page 578
Key Terms Quiz......Page 579
Warmup Exercises & Solutions......Page 580
Review Problem & Solution......Page 581
Questions......Page 583
Brief Exercises......Page 584
Exercises......Page 586
Multi-Concept Exercises......Page 589
Problems......Page 590
Multi-Concept Problems......Page 592
Alternate Problems......Page 593
Alternate Multi-Concept Problems......Page 595
Decision Cases......Page 596
Answers to Pod Review......Page 598
Ch 11: Stockholders’ Equity......Page 599
Making Business Decisions: Southwest Airlines......Page 600
An Overview of Stockholders’ Equity......Page 601
What Is Preferred Stock?......Page 606
Issuance of Stock......Page 608
What Is Treasury Stock?......Page 610
Hot Topics: Southwest Airlines’ Creation of Stockholders’ Value......Page 612
Dividends: Distribution of Income to Shareholders......Page 613
Statement of Stockholders’ Equity......Page 619
Using the Ratio Decision Model: Analyzing Book Value per Share......Page 622
How Changes in Stockholders’ Equity Affect the Statement of Cash Flows......Page 626
Appendix: Accounting Tools: Unincorporated Businesses......Page 628
Key Terms Quiz......Page 635
Warmup Exercises & Solutions......Page 636
Review Problem & Solution......Page 637
Brief Exercises......Page 641
Exercises......Page 644
Problems......Page 650
Multi-Concept Problems......Page 653
Alternate Problems......Page 655
Alternate Multi-Concept Problems......Page 658
Decision Cases......Page 660
Integrative Problem......Page 662
Answers to Pod Review......Page 664
Ch 12: The Statement of Cash Flows......Page 665
Making Business Decisions: Best Buy......Page 666
Cash Flows and Accrual Accounting......Page 668
The Definition of Cash: Cash and Cash Equivalents......Page 671
Classification of Cash Flows......Page 673
Hot Topics: Spending Money to Make Money......Page 675
Two Methods of Reporting Cash Flow from Operating Activities......Page 678
How the Statement of Cash Flows Is Put Together......Page 682
A Master T-Account Approach to Preparing the Statement of Cash Flows: Indirect Method......Page 700
The Use of Cash Flow Information......Page 705
Using the Ratio Decision Model: Analyzing Cash Flow Adequacy......Page 707
Appendix: Accounting Tools: A Work-Sheet Approach to the Statement of Cash Flows......Page 709
Key Terms Quiz......Page 712
Warmup Exercises & Solutions......Page 713
Review Problem & Solution......Page 714
Questions......Page 716
Brief Exercises......Page 717
Exercises......Page 718
Multi-Concept Exercises......Page 723
Problems......Page 725
Multi-Concept Problems......Page 730
Alternate Problems......Page 733
Alternate Multi-Concept Problems......Page 738
Decision Cases......Page 740
Solutions to Key Terms Quiz......Page 744
Answers to Pod Review......Page 745
Ch 13: Financial Statement Analysis......Page 747
Making Business Decisions: GameStop Corp.......Page 748
Precautions in Statement Analysis......Page 749
Analysis of Comparative Statements: Horizontal Analysis......Page 751
Analysis of Common-Size Statements: Vertical Analysis......Page 756
Liquidity Analysis and the
Management of Working Capital......Page 758
Solvency Analysis......Page 765
Profitability Analysis......Page 768
Appendix: Accounting Tools: Reporting and Analyzing Other Income Statement Items......Page 776
Key Terms Quiz......Page 777
Warmup Exercises......Page 779
Review Problem......Page 780
Questions......Page 783
Brief Exercises......Page 784
Exercises......Page 785
Multi-Concept Exercises......Page 791
Problems......Page 793
Multi-Concept Problems......Page 796
Alternate Problems......Page 800
Alternate Multi-Concept Problems......Page 803
Decision Cases......Page 808
Integrative Problem......Page 813
Answers to Pod Review......Page 814
Appendix A: International Financial Reporting Standards......Page 816
Why Do Accounting Standards Differ?......Page 817
Benefits from a Single Set of Standards......Page 819
Who Is Responsible for Developing Global Accounting Standards?......Page 820
Major Differences Between U.S. GAAP and IFRS......Page 823
Exercises......Page 827
Answers to Pod Review......Page 828
Appendix B: Excerpts from Kellogg’s Form 10-K for the Fiscal Year Ended January 3, 2009 [2008]......Page 830
Appendix C: Excerpts from General Mills’s Form 10-K for the Fiscal Year Ended May 31, 2009......Page 862
Glossary......Page 912
Index......Page 918
Summary of Selected Financial Ratios......Page 932