Horngren’s accounting

Cover......Page 1
Dedication......Page 4
About the Authors......Page 5
Brief Contents......Page 6
Contents......Page 7
Changes to This Edition......Page 15
Horngren’s Accounting . . . Redefining Tradition......Page 19
Student and Instructor Resources......Page 23
Acknowledgments......Page 25
Chapter 1 : Accounting and the Business Environment......Page 27
  Decision Makers: The Users of Accounting Information......Page 29
  The Accounting Profession......Page 30
  Generally Accepted Accounting Principles......Page 32
  The Cost Principle......Page 33
  Ethics in Accounting and Business......Page 34
  Equity......Page 36
 How Do You Analyze a Transaction?......Page 37
  Transaction Analysis for Smart Touch Learning......Page 38
  Income Statement......Page 43
  Statement of Owner’s Equity......Page 44
  Balance Sheet......Page 45
  Statement of Cash Flows......Page 46
  Return on Assets (ROA)......Page 48
  Things You Should Know......Page 51
  Solution......Page 53
  Key Terms......Page 55
  Quick Check......Page 56
  Review Questions......Page 58
  Short Exercises......Page 59
  Exercises......Page 63
  Problems Group A......Page 71
  Problems Group B......Page 75
  Continuing Problem......Page 79
  Decision Cases......Page 80
  Fraud Case 1-1......Page 82
  Team Projects......Page 83
  Communication Activity 1-1......Page 84
  Quick Check Answers......Page 86
Chapter 2 : Recording Business Transactions......Page 87
  Assets......Page 89
  Liabilities......Page 90
  Chart of Accounts......Page 91
  Ledger......Page 92
  Increases and Decreases in the Accounts......Page 93
  The Normal Balance of an Account......Page 94
  Determining the Balance of a T-Account......Page 95
  Source Documents—The Origin of the Transactions......Page 96
  Journalizing and Posting Transactions......Page 97
  The Ledger Accounts After Posting......Page 108
  The Four-Column Account: An Alternative to the T-Account......Page 110
  Preparing Financial Statements from the Trial Balance......Page 112
  Correcting Trial Balance Errors......Page 113
 How Do You Use the Debt Ratio to Evaluate Business Performance?......Page 114
  Things You Should Know......Page 117
  Summary Problem......Page 118
  Solution......Page 119
  Quick Check......Page 122
  Review Questions......Page 125
  Short Exercises......Page 126
  Exercises......Page 129
  Problems Group A......Page 137
  Problems Group B......Page 144
  Continuing Problem......Page 151
  Practice Set......Page 152
  Ethical Issue 2-1......Page 153
  Team Project 2-1......Page 154
  Communication Activity 2-1......Page 155
  Quick Check Answers......Page 156
Chapter 3 : The Adjusting Process......Page 157
 What is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?......Page 159
  The Revenue Recognition Principle......Page 161
  The Matching Principle......Page 162
 What are Adjusting Entriesand How Do We Record Them?......Page 163
  Prepaid Expenses......Page 164
  Unearned Revenues......Page 170
  Accrued Expenses......Page 171
  Accrued Revenues......Page 175
 What is the Purpose of the Adjusted Trial Balance and How Do We Prepare It?......Page 179
 What is the Impact of Adjusting Entries on the Financial Statements?......Page 181
 How Could a Worksheet Help in Preparing Adjusting Entries and the Adjusted Trial Balance?......Page 182
  Prepaid Expenses......Page 185
  Unearned Revenues......Page 186
  Things You Should Know......Page 188
  Summary Problem 3-1......Page 190
  Solution......Page 191
  Key Terms......Page 193
  Quick Check......Page 194
  Review Questions......Page 197
  Short Exercises......Page 198
  Exercises......Page 203
  Problems Group A......Page 211
  Problems Group B......Page 216
  Continuing Problem......Page 221
  Practice Set......Page 222
  Decision Cases......Page 223
  Fraud Case 3-1......Page 225
  Communication Activity 3-1......Page 226
  Quick Check Answers......Page 230
Chapter 4 : Completing the Accounting Cycle......Page 231
 How Do We Prepare Financial Statements?......Page 233
  Relationships Among the Financial Statements......Page 234
  Section 7—Determine Net Income or Net Loss......Page 238
 What is the Closing Process, and How Do We Close the Accounts?......Page 240
  Closing Temporary Accounts—Net Income......Page 242
  Closing Temporary Accounts—Net Loss......Page 244
 How Do We Prepare a Post-Closing Trial Balance?......Page 246
 What is the Accounting Cycle?......Page 248
 How Do We Use the Current Ratio to Evaluate Business Performance?......Page 249
  Accounting for Accrued Expenses......Page 251
  Accounting Without a Reversing Entry......Page 252
  Accounting With a Reversing Entry......Page 253
  Things You Should Know......Page 255
  Summary Problem......Page 257
  Solution......Page 258
  Key Terms......Page 261
  Quick Check......Page 262
  Review Questions......Page 265
  Short Exercises......Page 266
  Exercises......Page 270
  Problems Group A......Page 279
  Problems Group B......Page 286
  Practice Set......Page 292
  Decision Case 4-1......Page 293
  Financial Statement Case 4-1......Page 294
  Team Project 4-1......Page 295
 Comprehensive Problem 1 for Chapters 1–4......Page 296
 Comprehensive Problem 2 for Chapters 1–4......Page 298
  Quick Check Answers......Page 300
Chapter 5 : Merchandising Operations......Page 301
  The Operating Cycle of a Merchandising Business......Page 303
  Merchandise Inventory Systems: Perpetual and Periodic Inventory Systems......Page 305
 How are Purchases of Merchandise Inventory Recorded in a Perpetual Inventory System?......Page 306
  Purchase of Merchandise Inventory......Page 307
  Purchase Discounts......Page 308
  Purchase Returns and Allowances......Page 309
  Transportation Costs......Page 311
  Cost of Inventory Purchased......Page 312
  Sale of Merchandise Inventory......Page 313
  Sales Discounts......Page 315
  Sales Returns and Allowances......Page 316
  Transportation Costs—Freight Out......Page 317
  Net Sales Revenue and Gross Profit......Page 318
  Adjusting Merchandise Inventory Based on a Physical Count......Page 319
  Worksheet for a Merchandising Business—Perpetual Inventory System......Page 320
  Income Statement......Page 323
 How Do We Use the Gross Profit Percentage to Evaluate Business Performance?......Page 325
  Purchases of Merchandise Inventory......Page 327
  Adjusting and Closing Entries......Page 329
  Preparing Financial Statements......Page 332
  Things You Should Know......Page 337
  Summary Problem 5-1......Page 339
  Solution......Page 340
  Summary Problem 5-2......Page 342
  Key Terms......Page 345
  Quick Check......Page 346
  Review Questions......Page 349
  Short Exercises......Page 350
  Exercises......Page 354
  Problems Group A......Page 361
  Problems Group B......Page 368
  Continuing Problem......Page 375
  Practice Set......Page 376
  Decision Cases......Page 378
  Ethical Issue 5-1......Page 379
  Financial Statement Case 5-1......Page 380
  Communication Activity 5-1......Page 381
 Comprehensive Problem for Chapters 1–5......Page 382
  Quick Check Answers......Page 386
Chapter 6 : Merchandise Inventory......Page 387
  Accounting Principles......Page 389
  Control Over Merchandise Inventory......Page 390
 How are Merchandise Inventory Costs Determined Under a Perpetual Inventory System?......Page 391
  Specific Identification Method......Page 393
  First-In, First-Out (FIFO) Method......Page 394
  Last-In, First-Out (LIFO) Method......Page 395
  Weighted-Average Method......Page 398
 How are Financial Statements Affected by Using Different Inventory Costing Methods?......Page 400
  Balance Sheet......Page 401
  Recording the Adjusting Journal Entry to Adjust Merchandise Inventory......Page 404
 What are the Effects of Merchandise Inventory Errors on the Financial Statements?......Page 406
  Days’ Sales in Inventory......Page 409
 How are Merchandise Inventory Costs Determined Under a Periodic Inventory System?......Page 410
  Weighted-Average Method......Page 412
  Gross Profit Method......Page 414
  The Retail Method......Page 415
  Things You Should Know......Page 417
  Summary Problem......Page 419
  Solution......Page 420
  Key Terms......Page 423
  Quick Check......Page 424
  Short Exercises......Page 426
  Exercises......Page 430
  Problems Group A......Page 436
  Problems Group B......Page 440
  Continuing Problem......Page 444
  Practice Set......Page 445
  Decision Cases......Page 446
  Fraud Case 6-1......Page 447
  Communication Activity 6-1......Page 448
  Quick Check Answers......Page 452
Chapter 7 : Accounting Information Systems......Page 453
  Effective Accounting Information Systems......Page 455
  Components of an Accounting Information System......Page 456
 How are Sales and Cash Receipts Recorded in a Manual Accounting Information System?......Page 458
  Subsidiary Ledgers......Page 459
  The Sales Journal......Page 460
  The Cash Receipts Journal......Page 463
  The Purchases Journal......Page 467
  The Cash Payments Journal......Page 469
  The General Journal......Page 472
  QuickBooks......Page 474
  Things You Should Know......Page 479
  Summary Problem......Page 480
  Solution......Page 481
  Quick Check......Page 483
  Short Exercises......Page 485
  Exercises......Page 491
  Problems Group A......Page 495
  Problems Group B......Page 501
  Continuing Problem......Page 508
  Practice Set......Page 509
  Decision Cases......Page 511
  Ethical Issue 7-1......Page 512
  Communication Activity 7-1......Page 513
 Comprehensive Problem for Chapters 1–7......Page 514
  Quick Check Answers......Page 516
Chapter 8 : Internal Control and Cash......Page 517
  Internal Control and the Sarbanes-Oxley Act......Page 519
  The Components of Internal Control......Page 520
  Internal Control Procedures......Page 521
  The Limitations of Internal Control—Costs and Benefits......Page 524
  Cash Receipts by Mail......Page 525
  Controls Over Payment by Check......Page 526
  Setting Up the Petty Cash Fund......Page 529
  Replenishing the Petty Cash Fund......Page 530
  Changing the Amount of the Petty Cash Fund......Page 532
  Check......Page 533
  Bank Statement......Page 534
  Bank Reconciliation......Page 535
  Examining a Bank Reconciliation......Page 538
  Journalizing Transactions From the Bank Reconciliation......Page 539
 How Can the Cash Ratio Be Used to Evaluate Business Performance?......Page 540
  Things You Should Know......Page 542
  Solution......Page 543
  Summary Problem 8-2......Page 544
  Solution......Page 546
  Key Terms......Page 547
  Quick Check......Page 549
  Short Exercises......Page 551
  Exercises......Page 553
  Problems Group A......Page 558
  Problems Group B......Page 563
  Continuing Problem......Page 567
  Practice Set......Page 568
  Decision Cases......Page 569
  Fraud Case 8-1......Page 570
  Communication Activity 8-1......Page 571
  Quick Check Answers......Page 572
Chapter 9 : Receivables......Page 573
  Types of Receivables......Page 575
  Recording Sales on Credit......Page 576
  Recording Credit Card and Debit Card Sales......Page 577
  Factoring and Pledging Receivables......Page 579
  Recording and Writing Off Uncollectible Accounts—Direct Write-Off Method......Page 580
  Limitations of the Direct Write-Off Method......Page 581
  Recording Bad Debts Expense—Allowance Method......Page 582
  Writing Off Uncollectible Accounts—Allowance Method......Page 583
  Recovery of Accounts Previously Written Off—Allowance Method......Page 584
  Estimating and Recording Bad Debts Expense—Allowance Method......Page 585
  Comparison of Accounting for Uncollectibles......Page 590
 How are Notes Receivable Accounted for?......Page 592
  Identifying Maturity Date......Page 593
  Accruing Interest Revenue and Recording Honored Notes Receivable......Page 594
 How Do We Use the Acid-Test Ratio, Accounts Receivable Turnover Ratio, and Days’ Sales in Receivables to Evaluate Business Performance?......Page 597
  Acid-Test (or Quick) Ratio......Page 598
  Days’ Sales in Receivables......Page 599
  Things You Should Know......Page 601
  Summary Problem 9-1......Page 602
  Solution......Page 603
  Summary Problem 9-2......Page 604
  Key Terms......Page 605
  Quick Check......Page 606
  Review Questions......Page 608
  Short Exercises......Page 609
  Exercises......Page 612
  Problems Group A......Page 618
  Problems Group B......Page 622
  Continuing Problem......Page 626
  Practice Set......Page 627
  Decision Cases......Page 628
  Financial Statement Case 9-1......Page 629
  Communication Activity 9-1......Page 630
  Quick Check Answers......Page 632
Chapter 10 : Plant Assets, Natural Resources, and Intangibles......Page 633
 How Does a Business Measure the Cost of a Plant Asset?......Page 635
  Land and Land Improvements......Page 636
  Machinery and Equipment......Page 637
  Lump-Sum Purchase......Page 638
  Capital and Revenue Expenditures......Page 639
  Factors in Computing Depreciation......Page 641
  Depreciation Methods......Page 642
  Changing Estimates of a Depreciable Asset......Page 648
  Reporting Plant Assets......Page 649
  Discarding Plant Assets......Page 650
  Selling Plant Assets......Page 652
 How are Natural Resources Accounted For?......Page 657
  Specific Intangibles......Page 658
  Reporting of Intangible Assets......Page 661
 How Do We Use the Asset Turnover Ratio to Evaluate Business Performance?......Page 662
  Exchange of Plant Assets—Gain Situation......Page 663
  Exchange of Plant Assets—Loss Situation......Page 664
  Things You Should Know......Page 666
  Summary Problem......Page 667
  Solution......Page 668
  Key Terms......Page 669
  Quick Check......Page 670
  Short Exercises......Page 672
  Exercises......Page 675
  Problems Group A......Page 679
  Problems Group B......Page 682
  Continuing Problem......Page 684
  Fraud Case 10-1......Page 685
  Communication Activity 10-1......Page 686
  Quick Check Answers......Page 688
Chapter 11 : Current Liabilities and Payroll......Page 689
  Accounts Payable......Page 691
  Unearned Revenues......Page 692
  Short-Term Notes Payable......Page 693
  Current Portion of Long-Term Notes Payable......Page 694
 How Do Companies Account for and Record Payroll?......Page 695
  Employee Payroll Withholding Deductions......Page 696
  Payroll Register......Page 699
  Employer Payroll Taxes......Page 700
  Internal Control Over Payroll......Page 702
  Bonus Plans......Page 703
  Warranties......Page 704
 How are Contingent Liabilities Accounted For?......Page 706
  Probable Contingent Liability......Page 707
 How Do We Use the Times-Interest-Earned Ratio to Evaluate Business Performance?......Page 709
  Things You Should Know......Page 711
  Summary Problem 11-1......Page 712
  Solution......Page 713
  Solution......Page 714
  Key Terms......Page 715
  Quick Check......Page 716
  Short Exercises......Page 718
  Exercises......Page 721
  Problems Group A......Page 725
  Problems Group B......Page 727
  Continuing Problem......Page 730
  Ethical Issue 11-1......Page 731
  Financial Statement Case 11-1......Page 732
  Communication Activity 11-1......Page 733
  Quick Check Answers......Page 734
Chapter 12 : Partnerships......Page 735
  Partnership Characteristics......Page 737
  Types of Partnerships......Page 739
  Other Forms of Business......Page 740
  The Start-up of a Partnership......Page 742
 How are Partnership Profits and Losses Allocated?......Page 743
  Allocation Based on a Stated Ratio......Page 744
  Allocation Based on Services, Capital Balances, and Stated Ratios......Page 745
  Partner Withdrawal of Cash and Other Assets......Page 748
  Statement of Partners’ Equity......Page 749
  Admission by Purchasing an Existing Partner’s Interest......Page 750
  Admission by Contributing to the Partnership......Page 751
 How is the Withdrawal of a Partner Accounted For?......Page 754
  Sale of Assets at a Gain......Page 756
  Sale of Assets at a Loss With Capital Deficiency......Page 760
  Things You Should Know......Page 764
  Summary Problem 12-1......Page 766
  Solution......Page 767
  Key Terms......Page 769
  Quick Check......Page 770
  Short Exercises......Page 772
  Exercises......Page 775
  Problems Group A......Page 780
  Problems Group B......Page 786
  Continuing Problem......Page 792
  Decision Cases......Page 793
  Fraud Case 12-1......Page 794
  Team Project 12-1......Page 795
  Communication Activity 12-1......Page 796
  Quick Check Answers......Page 798
Chapter 13 : Corporations......Page 799
  Characteristics of Corporations......Page 801
  Stockholders’ Equity Basics......Page 802
  Issuing Common Stock at Par Value......Page 805
  Issuing Common Stock at a Premium......Page 806
  Issuing No-Par Common Stock......Page 807
  Issuing Common Stock for Assets Other Than Cash......Page 808
  Issuing Preferred Stock......Page 809
  Cash Dividends......Page 810
  Stock Dividends......Page 813
  Stock Splits......Page 817
  Cash Dividends, Stock Dividends, and Stock Splits Compared......Page 818
  Purchase of Treasury Stock......Page 819
  Sale of Treasury Stock......Page 820
  Retirement of Stock......Page 823
  Statement of Retained Earnings......Page 824
  Statement of Stockholders’ Equity......Page 825
  Earnings per Share......Page 826
  Rate of Return on Common Stock......Page 827
  Things You Should Know......Page 829
  Summary Problem 13-1......Page 831
  Solution......Page 832
  Key Terms......Page 834
  Quick Check......Page 835
  Review Questions......Page 837
  Short Exercises......Page 838
  Exercises......Page 842
  Problems Group A......Page 848
  Problems Group B......Page 852
  Continuing Problem......Page 855
  Decision Cases......Page 856
  Ethical Issue 13-1......Page 857
  Financial Statement Case 13-1......Page 858
  Communication Activity 13-1......Page 859
  Quick Check Answers......Page 862
Chapter 14 : Long-Term Liabilities......Page 863
  Long-Term Notes Payable......Page 865
  Mortgages Payable......Page 866
 What are Bonds?......Page 869
  Bond Prices......Page 870
  Present Value......Page 871
  Bond Interest Rates......Page 872
  Bond Financing Versus Issuing Stock......Page 873
  Issuing Bonds Payable at Face Value......Page 874
  Issuing Bonds Payable at a Discount......Page 875
  Issuing Bonds Payable at a Premium......Page 877
  Retirement of Bonds Before Maturity......Page 880
 How are Liabilities Reported on the Balance Sheet?......Page 882
 How Do We Use the Debt to Equity Ratio to Evaluate Business Performance?......Page 884
  Time Value of Money Concepts......Page 885
  Present Value of an Annuity......Page 888
  Present Value of Bonds Payable......Page 889
  Effective-Interest Amortization for a Bond Discount......Page 891
  Effective-Interest Amortization of a Bond Premium......Page 892
  Things You Should Know......Page 895
  Summary Problem 14-1......Page 896
  Key Terms......Page 897
  Quick Check......Page 898
  Short Exercises......Page 901
  Exercises......Page 905
  Problems Group A......Page 909
  Problems Group B......Page 911
  Continuing Problem......Page 914
  Fraud Case 14-1......Page 915
  Communication Activity 14-1......Page 916
  Quick Check Answers......Page 920
Chapter 15 : Investments......Page 921
  Reasons to Invest......Page 923
  Classification and Reporting of Investments......Page 924
  Disposition at Maturity......Page 926
  Equity Securities With Less Than 20% Ownership (Cost Method)......Page 927
  Equity Securities With 20% or More, But Less Than 50%, Ownership (Equity Method)......Page 928
  Equity Securities With 50% or More Ownership (Consolidations)......Page 931
  Trading Investments......Page 932
  Available-for-Sale Investments......Page 933
  Held-to-Maturity Investments......Page 935
 How Do We Use the Rate of Return on Total Assets to Evaluate Business Performance?......Page 936
  Things You Should Know......Page 938
  Summary Problem 15-1......Page 939
  Solutions......Page 940
  Key Terms......Page 941
  Quick Check......Page 942
  Short Exercises......Page 944
  Exercises......Page 947
  Problems Group A......Page 950
  Problems Group B......Page 951
  Continuing Problem......Page 952
  Fraud Case 15-1......Page 953
  Communication Activity 15-1......Page 954
  Quick Check Answers......Page 956
Chapter 16 : The Statement of Cash Flows......Page 957
  Purpose of the Statement of Cash Flows......Page 959
  Classification of Cash Flows......Page 960
 How is the Statement of Cash Flows Prepared Using the Indirect Method?......Page 962
  Cash Flows From Operating Activities......Page 965
  Cash Flows From Investing Activities......Page 969
  Cash Flows From Financing Activities......Page 971
  Net Change in Cash and Cash Balances......Page 975
  Non-cash Investing and Financing Activities......Page 976
 How is the Statement of Cash Flows Prepared Using the Direct Method?......Page 978
  Cash Flows From Operating Activities......Page 979
 How is the Statement of Cash Flows Prepared Using the Indirect Method and a Spreadsheet?......Page 985
  Things You Should Know......Page 989
  Summary Problem 16-1......Page 990
  Solution......Page 992
  Key Terms......Page 993
  Quick Check......Page 994
  Review Questions......Page 996
  Short Exercises......Page 997
  Exercises......Page 1002
  Problems Group A......Page 1012
  Problems Group B......Page 1019
  Continuing Problem......Page 1026
  Decision Cases......Page 1027
  Fraud Case 16-1......Page 1029
  Team Projects......Page 1030
  Communication Activity 16-1......Page 1031
  Quick Check Answers......Page 1032
Chapter 17 : Financial Statement Analysis......Page 1033
  Tools of Analysis......Page 1035
  Corporate Financial Reports......Page 1036
 How Do We Use Horizontal Analysis to Analyze a Business?......Page 1038
  Horizontal Analysis of the Balance Sheet......Page 1039
  Trend Analysis......Page 1040
 How Do We Use Vertical Analysis to Analyze a Business?......Page 1042
  Common-Size Statements......Page 1044
  Benchmarking......Page 1045
 How Do We Use Ratios to Analyze a Business?......Page 1046
  Evaluating the Ability to Pay Current Liabilities......Page 1048
  Evaluating the Ability to Sell Merchandise Inventory and Collect Receivables......Page 1050
  Evaluating the Ability to Pay Long-Term Debt......Page 1053
  Evaluating Profitability......Page 1055
  Evaluating Stock as an Investment......Page 1058
  Red Flags in Financial Statement Analyses......Page 1060
 How is the Complete Corporate Income Statement Prepared?......Page 1063
  Continuing Operations......Page 1064
  Extraordinary Items......Page 1065
  Earnings per Share......Page 1066
  Things You Should Know......Page 1067
  Summary Problem 17-1......Page 1068
  Solution......Page 1069
  Summary Problem 17-2......Page 1070
  Key Terms......Page 1071
  Quick Check......Page 1073
  Short Exercises......Page 1075
  Exercises......Page 1080
  Problems Group A......Page 1084
  Problems Group B......Page 1090
  Continuing Problem......Page 1096
  Ethical Issue 17-1......Page 1097
  Financial Statement Case 17-1......Page 1098
  Communication Activity 17-1......Page 1099
 Comprehensive Problem for Chapter 17......Page 1100
  Quick Check Answers......Page 1102
Chapter 18 : Introduction to Managerial Accounting......Page 1103
  Financial Versus Managerial Accounting......Page 1105
  Management Accountability......Page 1106
  Today’s Business Environment......Page 1107
  Ethical Standards......Page 1108
  Merchandising Companies......Page 1110
  Manufacturing Companies......Page 1111
  Direct and Indirect Costs......Page 1113
  Prime and Conversion Costs......Page 1114
  Calculating Cost of Goods Manufactured......Page 1116
  Flow of Costs Through the Inventory Accounts......Page 1119
  Calculating Unit Product Cost......Page 1120
  Calculating Cost per Item......Page 1122
  Things You Should Know......Page 1123
  Summary Problem 18-1......Page 1124
  Solution......Page 1125
  Solution......Page 1126
  Key Terms......Page 1127
  Quick Check......Page 1128
  Review Questions......Page 1130
  Short Exercises......Page 1131
  Exercises......Page 1135
  Problems Group A......Page 1140
  Problems Group B......Page 1144
  Continuing Problem......Page 1149
  Decision Cases......Page 1150
  Fraud Case 18-1......Page 1151
  Team Project 18-1......Page 1152
  Communication Activity 18-1......Page 1153
  Quick Check Answers......Page 1154
Chapter 19 : Job Order Costing......Page 1155
 How Do Manufacturing Companies Use Job Order and Process Costing Systems?......Page 1157
 How Do Materials and Labor Costs Flow Through the Job Order Costing System?......Page 1158
  Materials......Page 1159
  Labor......Page 1163
 How Do Overhead Costs Flow Through the Job Order Costing System?......Page 1165
  Before the Period—Calculating the Predetermined Overhead Allocation Rate......Page 1166
  During the Period—Allocating Overhead......Page 1167
  At the End of the Period—Adjusting for Overallocated and Underallocated Overhead......Page 1169
  Transferring Costs to Finished Goods Inventory......Page 1170
  Transferring Costs to Cost of Goods Sold......Page 1171
 How is the Manufacturing Overhead Account Adjusted?......Page 1173
  Summary......Page 1174
 How Do Service Companies Use a Job Order Costing System?......Page 1178
  Things You Should Know......Page 1180
  Summary Problem 19-1......Page 1181
  Solution......Page 1182
  Quick Check......Page 1184
  Review Questions......Page 1187
  Short Exercises......Page 1188
  Exercises......Page 1191
  Problems Group A......Page 1197
  Problems Group B......Page 1204
  Continuing Problem......Page 1210
  Decision Cases......Page 1211
  Fraud Case 19-1......Page 1213
  Team Project 19-1......Page 1214
  Communication Activity 19-1......Page 1215
  Quick Check Answers......Page 1216
Chapter 20 : Process Costing......Page 1217
  Job Order Costing Versus Process Costing......Page 1219
  Flow of Costs Through a Process Costing System......Page 1220
 What are Equivalent Units of Production, and How Do You Calculate Them?......Page 1222
  Conversion Costs......Page 1223
 How is a Production Cost Report Prepared?......Page 1224
  Production Cost Report—First Process—Assembly Department......Page 1225
  Production Cost Report—Second Process—Cutting Department......Page 1231
 What Journal Entries are Required in a Process Costing System?......Page 1240
 How Can the Production Cost Report Be Used to Make Decisions?......Page 1245
 How is a Production Cost Report Prepared Using the FIFO Method?......Page 1246
  Comparison of Weighted-Average and FIFO Methods......Page 1257
  Things You Should Know......Page 1258
  Summary Problem 1......Page 1259
  Summary Problem 1 Solution......Page 1260
  Summary Problem 2......Page 1261
  Summary Problem 2 Solution......Page 1262
  Quick Check......Page 1263
  Review Questions......Page 1266
  Short Exercises......Page 1267
  Exercises......Page 1270
  Problems Group A......Page 1278
  Problems Group B......Page 1283
  Decision Case 20-1......Page 1287
  Ethical Issue 20-1......Page 1288
  Team Project 20-1......Page 1289
  Communication Activity 20-1......Page 1290
  Quick Check Answers......Page 1292
Chapter 21 : Cost-Volume-Profit Analysis......Page 1293
  Variable Costs......Page 1295
  Fixed Costs......Page 1296
  Mixed Costs......Page 1298
  Contribution Margin Income Statement......Page 1303
  Target Profit—Three Approaches......Page 1305
  CVP Graph—A Graphic Portrayal......Page 1308
  Changes in the Selling Price......Page 1310
  Changes in Fixed Costs......Page 1311
  Margin of Safety......Page 1312
  Operating Leverage......Page 1313
  Sales Mix......Page 1316
  Variable Costing......Page 1319
  Comparison of Unit Costs......Page 1320
  Production Equals Sales......Page 1322
  Production Exceeds Sales......Page 1323
  Production is Less than Sales......Page 1326
  Summary......Page 1329
  Things You Should Know......Page 1331
  Summary Problem 21-1......Page 1332
  Solution......Page 1333
  Summary Problem 21-2......Page 1334
  Solution......Page 1335
  Key Terms......Page 1336
  Quick Check......Page 1337
  Review Questions......Page 1339
  Short Exercises......Page 1340
  Exercises......Page 1346
  Problems Group A......Page 1353
  Problems Group B......Page 1357
  Continuing Problem......Page 1361
  Ethical Issue 21-1......Page 1362
  Team Project 21-1......Page 1363
  Communication Activity 21-1......Page 1364
  Quick Check Answers......Page 1368
Chapter 22 : Master Budgets......Page 1369
  Budgeting Benefits......Page 1371
  Budgeting and Human Behavior......Page 1374
  Static and Flexible Budgets......Page 1375
  Master Budgets......Page 1376
  Sales Budget......Page 1378
  Production Budget......Page 1379
  Direct Materials Budget......Page 1380
  Manufacturing Overhead Budget......Page 1382
  Cost of Goods Sold Budget......Page 1383
  Selling and Administrative Expense Budget......Page 1384
  Capital Expenditures Budget......Page 1385
  Cash Budget......Page 1386
  Budgeted Income Statement......Page 1393
  Budgeted Balance Sheet......Page 1394
  Budgeted Statement of Cash Flows......Page 1395
  Budgeting Software......Page 1397
 Appendix 22A: Budgeting for Merchandising Companies......Page 1398
  Sales Budget......Page 1399
  Inventory, Purchases, and Cost of Goods Sold Budget......Page 1401
  Selling and Administrative Expense Budget......Page 1402
  Cash Budget......Page 1403
  Budgeted Income Statement......Page 1407
  Budgeted Balance Sheet......Page 1408
  Budgeted Statement of Cash Flows......Page 1409
  Things You Should Know......Page 1411
  Solution......Page 1413
  Summary Problem 22-2......Page 1414
  Solution......Page 1415
  Quick Check......Page 1416
  Review Questions......Page 1419
  Short Exercises......Page 1420
  Exercises......Page 1424
  Problems Group A......Page 1432
  Problems Group B......Page 1440
  Continuing Problem......Page 1448
  Decision Cases......Page 1449
  Fraud Case 22-1......Page 1451
  Team Project 22-1......Page 1452
  Communication Activity 22-1......Page 1453
  Quick Check Answers......Page 1454
Chapter 23 : Flexible Budgets and Standard Cost Systems......Page 1455
  Performance Reports Using Static Budgets......Page 1458
  Performance Reports Using Flexible Budgets......Page 1459
  Setting Standards......Page 1464
  Standard Cost System Benefits......Page 1466
  Variance Analysis for Product Costs......Page 1467
 How are Standard Costs Used to Determine Direct Materials and Direct Labor Variances?......Page 1469
  Direct Materials Variances......Page 1470
  Direct Labor Variances......Page 1473
  Allocating Overhead in a Standard Cost System......Page 1475
  Variable Overhead Variances......Page 1476
  Fixed Overhead Variances......Page 1478
  Variance Relationships......Page 1482
  Variance Responsibilities......Page 1483
  Journal Entries......Page 1485
  Standard Cost Income Statement......Page 1489
  Things You Should Know......Page 1492
  Summary Problem 23-1......Page 1494
  Solution......Page 1495
  Solution......Page 1496
  Key Terms......Page 1498
  Quick Check......Page 1499
  Short Exercises......Page 1501
  Exercises......Page 1506
  Problems Group A......Page 1510
  Problems Group B......Page 1513
  Continuing Problem......Page 1517
  Decision Cases......Page 1518
  Ethical Issues......Page 1519
  Fraud Case 23-1......Page 1520
  Communication Activity 23-1......Page 1521
  Quick Check Answers......Page 1524
Chapter 24 : Cost Allocation and Responsibility Accounting......Page 1525
 How Do Companies Assign and Allocate Costs?......Page 1527
  Single Plantwide Rate......Page 1528
  Multiple Department Rates......Page 1530
  Activity-Based Costing......Page 1531
  Traditional Costing Systems Compared to ABC Systems......Page 1536
 Why Do Decentralized Companies Need Responsibility Accounting?......Page 1537
  Disadvantages of Decentralization......Page 1538
  Responsibility Accounting......Page 1539
  Goals of Performance Evaluation Systems......Page 1542
  Limitations of Financial Performance Measurement......Page 1543
  The Balanced Scorecard......Page 1544
  Responsibility Reports......Page 1549
 How Does Performance Evaluation InInvestment Centers Differ From Other Centers?......Page 1554
  Return on Investment (ROI)......Page 1555
  Residual Income (RI)......Page 1558
  Limitations of Financial Performance Measures......Page 1560
  Setting Transfer Prices......Page 1562
  Things You Should Know......Page 1565
  Summary Problem 24-1......Page 1567
  Solution......Page 1568
  Solution......Page 1569
  Key Terms......Page 1570
  Quick Check......Page 1571
  Review Questions......Page 1573
  Short Exercises......Page 1574
  Exercises......Page 1578
  Problems Group A......Page 1584
  Problems Group B......Page 1588
  Continuing Problem......Page 1592
  Fraud Case 24-1......Page 1593
  Communication Activity 24-1......Page 1594
  Quick Check Answers......Page 1596
Chapter 25 : Short-Term Business Decisions......Page 1597
  Relevant Information......Page 1599
  Differential Analysis......Page 1600
  Setting Regular Prices......Page 1602
  Special Pricing......Page 1607
  Dropping Unprofitable Products and Segments......Page 1611
  Product Mix......Page 1614
  Sales Mix......Page 1618
  Outsourcing......Page 1619
  Sell or Process Further......Page 1624
  Things You Should Know......Page 1627
  Summary Problem 25-1......Page 1629
  Solution......Page 1630
  Summary Problem 25-2......Page 1631
  Key Terms......Page 1632
  Quick Check......Page 1633
  Review Questions......Page 1635
  Short Exercises......Page 1636
  Exercises......Page 1639
  Problems Group A......Page 1645
  Problems Group B......Page 1648
  Continuing Problem......Page 1652
  Decision Case 25-1......Page 1653
  Ethical Issue 25-1......Page 1654
  Team Project 25-1......Page 1655
  Communication Activity 25-1......Page 1656
  Quick Check Answers......Page 1658
Chapter 26 : Capital Investment Decisions......Page 1659
  The Capital Budgeting Process......Page 1661
  Focus on Cash Flows......Page 1664
  Payback......Page 1665
  Accounting Rate of Return (ARR)......Page 1668
  Time Value of Money Concepts......Page 1672
  Present Value of an Annuity......Page 1675
  Summary......Page 1676
 How Do Discounted Cash Flow Methods Work?......Page 1678
  Net Present Value (NPV)......Page 1679
  Internal Rate of Return (IRR)......Page 1684
  Comparing Capital Investment Analysis Methods......Page 1687
  Sensitivity Analysis......Page 1689
  Capital Rationing......Page 1692
  Things You Should Know......Page 1695
  Summary Problem 26-1......Page 1697
  Summary Problem 26-2......Page 1698
  Key Terms......Page 1699
  Quick Check......Page 1700
  Review Questions......Page 1702
  Short Exercises......Page 1703
  Exercises......Page 1707
  Problems Group A......Page 1711
  Problems Group B......Page 1713
  Continuing Problem......Page 1716
  Ethical Issue 26-1......Page 1717
  Team Project 26-1......Page 1718
  Communication Activity 26-1......Page 1719
  Quick Check Answers......Page 1720
  Green Mountain CoffeeRoasters, Inc.......Page 1722
  Present Value Tables......Page 1768
  Future Value Tables......Page 1770
Glossary......Page 1772
Subject Index......Page 1782
Photo Credits......Page 1798