Principles of accounting

Front Cover......Page 1
Title Page......Page 2
Copyright......Page 3
Brief Contents......Page 4
Contents......Page 6
Preface......Page 16
User’s Guide......Page 22
Check Figures......Page 30
About the Authors......Page 33
CHAPTER 1 Uses of Accounting Information and the Financial Statements......Page 35
DECISION POINT: A USER’S FOCUS CVS CORPORATION......Page 36
Accounting as an Information System......Page 37
Business Goals, Activities, and Performance Measures......Page 38
Processing Accounting Information......Page 40
Ethical Financial Reporting......Page 41
Management......Page 43
Users with an Indirect Financial Interest......Page 45
Accounting Measurement......Page 46
Money Measure......Page 47
The Forms of Business Organization......Page 48
Financial Position and the Accounting Equation......Page 50
Owner’s Equity......Page 51
Statement of Owner’s Equity......Page 53
Statement of Cash Flows......Page 54
Relationships Among the Financial Statements......Page 55
Generally Accepted Accounting Principles......Page 57
GAAP and the Independent CPA’s Report......Page 58
Organizations That Influence GAAP......Page 59
Corporate Governance......Page 60
A LOOK BACK AT CVS CORPORATION......Page 61
CHAPTER REVIEW......Page 63
CHAPTER ASSIGNMENTS......Page 68
CHAPTER 2 Analyzing Business Transactions......Page 83
DECISION POINT: A USER’S FOCUS THE BOEING COMPANY......Page 84
Recognition......Page 85
Valuation......Page 87
Ethics and Measurement Issues......Page 88
Double-Entry System......Page 89
The T Account......Page 90
Rules of Double-Entry Accounting......Page 91
Owner’s Equity Accounts......Page 92
Owners’ Investment to Form the Business......Page 94
Purchase of an Asset on Credit......Page 95
Payment of a Liability......Page 96
Revenue on Credit......Page 97
Collection on Account......Page 98
Expense to Be Paid Later......Page 99
Summary of Transactions......Page 100
Preparation and Use of a Trial Balance......Page 102
Finding Trial Balance Errors......Page 103
Cash Flows and the Timing of Transactions......Page 104
Recording and Posting Transactions......Page 106
General Journal......Page 108
General Ledger......Page 109
Some Notes on Presentation......Page 111
A LOOK BACK AT THE BOEING COMPANY......Page 112
CHAPTER REVIEW......Page 113
CHAPTER ASSIGNMENTS......Page 117
CHAPTER 3 Measuring Business Income......Page 135
DECISION POINT: A USER’S FOCUS YAHOO! INC.......Page 136
Income Measurement Assumptions......Page 137
Ethics and the Matching Rule......Page 139
Adjusting the Accounts......Page 141
Adjustments and Ethics......Page 142
The Adjustment Process......Page 143
Type 1 Adjustment: Allocating Recorded Costs (Deferred Expenses)......Page 144
Type 2 Adjustment: Recognizing Unrecorded, Incurred Expenses (Accrued Expenses)......Page 148
Type 3 Adjustment: Allocating Recorded, Unearned Revenues (Deferred Revenues)......Page 149
Type 4 Adjustment: Recognizing Unrecorded, Earned Revenues (Accrued Revenues)......Page 150
A Note About Journal Entries......Page 152
Using the Adjusted Trial Balance to Prepare Financial Statements......Page 154
Cash Flows from Accrual-Based Information......Page 156
A LOOK BACK AT YAHOO! INC.......Page 157
CHAPTER REVIEW......Page 159
CHAPTER ASSIGNMENTS......Page 165
CHAPTER 4 Completing the Accounting Cycle......Page 181
DECISION POINT: A USER’S FOCUS BEST BUY ENTERPRISE SERVICE, INC.......Page 182
Closing Entries......Page 183
Preparing Closing Entries......Page 185
Step 1: Closing the Credit Balances......Page 187
Step 4: Closing the Withdrawals Account Balance......Page 188
The Post-Closing Trial Balance......Page 189
Reversing Entries: An Optional First Step......Page 191
Preparing the Work Sheet......Page 193
Using the Work Sheet......Page 197
A LOOK BACK AT BEST BUY ENTERPRISE SERVICES, INC.......Page 198
CHAPTER REVIEW......Page 199
CHAPTER ASSIGNMENTS......Page 201
CHAPTER 5 Financial Reporting and Analysis......Page 217
DECISION POINT: A USER’S FOCUS DELL COMPUTER CORPORATION......Page 218
Objectives of Financial Reporting......Page 219
Qualitative Characteristics of Accounting Information......Page 220
Management’s Certification of the Financial Statements......Page 221
Comparability and Consistency......Page 222
Materiality......Page 223
Full Disclosure......Page 224
Cost-Benefit......Page 225
Assets......Page 227
Owner’s Equity......Page 230
Dell’s Balance Sheets......Page 231
Multistep Income Statement......Page 234
Single-Step Income Statement......Page 238
Evaluation of Liquidity......Page 239
Evaluation of Profitability......Page 241
A LOOK BACK AT DELL COMPUTER CORPORATION......Page 247
CHAPTER REVIEW......Page 249
CHAPTER ASSIGNMENTS......Page 253
Letter to the Stockholders......Page 268
Financial Statements......Page 269
Reports of Management’s Responsibilities......Page 275
Reports of Certified Public Accountants......Page 276
Annual Report of CVS Corporation......Page 278
Financial Statements of Southwest Airlines Co.......Page 315
CHAPTER 6 The Operating Cycle and Merchandising Operations......Page 323
DECISION POINT: A USER’S FOCUS COSTCO WHOLESALE CORPORATION......Page 324
Operating Cycle......Page 325
Choice of Inventory System......Page 326
Foreign Business Transactions......Page 328
Sales and Purchases Discounts......Page 329
Transportation Costs......Page 330
Terms of Debit and Credit Card Sales......Page 331
Purchases of Merchandise......Page 332
Sales of Merchandise......Page 333
Periodic Inventory System......Page 336
Purchases of Merchandise......Page 338
Sales of Merchandise......Page 339
A LOOK BACK AT COSTCO WHOLESALE CORPORATION......Page 341
CHAPTER REVIEW......Page 342
CHAPTER ASSIGNMENTS......Page 345
CHAPTER 7 Inventories......Page 359
DECISION POINT: A USER’S FOCUS CISCO SYSTEMS, INC.......Page 360
Inventory Decisions......Page 361
Evaluating the Level of Inventory......Page 362
Effects of Inventory Misstatements on Income Measurement......Page 364
Inventory Cost and Valuation......Page 367
Goods Flows and Cost Flows......Page 368
Disclosure of Inventory Methods......Page 369
Specific Identification Method......Page 371
First-In, First-Out (FIFO) Method......Page 372
Last-In, First-Out (LIFO)......Page 373
Impact of Inventory Decisions......Page 374
Effects on the Financial Statements......Page 375
Effects on Income Taxes......Page 376
Effects on Cash Flows......Page 377
Inventory Cost Under the Perpetual Inventory System......Page 378
Retail Method......Page 380
Gross Profit Method......Page 381
A LOOK BACK AT CISCO SYSTEMS, INC.......Page 382
CHAPTER REVIEW......Page 384
CHAPTER ASSIGNMENTS......Page 388
CHAPTER 8 Cash and Receivables......Page 401
DECISION POINT: A USER’S FOCUS NIKE, INC.......Page 402
Cash Needs......Page 403
Accounts Receivable and Credit Policies......Page 404
Evaluating the Level of Accounts Receivable......Page 406
Financing Receivables......Page 407
Ethics and Estimates in Accounting for Receivables......Page 409
Cash Control Methods......Page 411
Bank Reconciliations......Page 412
The Allowance Method......Page 415
Estimating Uncollectible Accounts Expense......Page 416
Writing Off Uncollectible Accounts......Page 421
Maturity Date......Page 423
Duration of a Note......Page 424
Accrued Interest......Page 425
Dishonored Note......Page 426
A LOOK BACK AT NIKE, INC.......Page 427
CHAPTER REVIEW......Page 428
CHAPTER ASSIGNMENTS......Page 430
CHAPTER 9 Current Liabilities and the Time Value of Money......Page 443
DECISION POINT: A USER’S FOCUS AMAZON.COM, INC.......Page 444
Evaluating Accounts Payable......Page 445
Reporting Liabilities......Page 447
Definitely Determinable Liabilities......Page 449
Estimated Liabilities......Page 456
Contingent Liabilities and Commitments......Page 460
The Time Value of Money......Page 461
Future Value......Page 462
Present Value......Page 464
Valuing an Asset......Page 467
Deferred Payment......Page 468
Accumulation of a Fund for Loan Repayment......Page 469
Other Applications......Page 470
A LOOK BACK AT AMAZON.COM, INC.......Page 471
CHAPTER REVIEW......Page 472
CHAPTER ASSIGNMENTS......Page 475
CHAPTER 10 Internal Control......Page 489
DECISION POINT: A USER’S FOCUS HOME DEPOT, INC.......Page 490
The Need for Internal Controls......Page 491
Management’s Responsibility for Internal Control......Page 492
Independent Accountant’s Audit of Internal Control......Page 493
Control Activities......Page 494
Internal Control over Merchandising Transactions......Page 496
Control of Cash......Page 497
Control of Cash Receipts......Page 498
Control of Purchases and Cash Disbursements......Page 499
Making Disbursements from the Petty Cash Fund......Page 504
Reimbursing the Petty Cash Fund......Page 505
A LOOK BACK AT HOME DEPOT, INC.......Page 506
CHAPTER REVIEW......Page 507
CHAPTER ASSIGNMENTS......Page 509
CHAPTER 11 Long-Term Assets......Page 523
DECISION POINT: A USER’S FOCUS APPLE COMPUTER, INC.......Page 524
Management Issues Related to Long-Term Assets......Page 525
Acquiring Long-Term Assets......Page 527
Financing Long-Term Assets......Page 528
Applying the Matching Rule......Page 529
Acquisition Cost of Property, Plant, and Equipment......Page 530
General Approach to Acquisition Costs......Page 531
Specific Applications......Page 532
Depreciation......Page 535
Methods of Computing Depreciation......Page 536
Special Issues in Depreciation......Page 540
Discarded Plant Assets......Page 542
Plant Assets Sold for Cash......Page 543
Natural Resources......Page 544
Depletion......Page 545
Development and Exploration Costs in the Oil and Gas Industry......Page 546
Intangible Assets......Page 547
Research and Development Costs......Page 550
Goodwill......Page 551
A LOOK BACK AT APPLE COMPUTER, INC.......Page 552
CHAPTER REVIEW......Page 554
CHAPTER ASSIGNMENTS......Page 558
CHAPTER 12 Contributed Capital......Page 573
DECISION POINT: A USER’S FOCUS GOOGLE, INC.......Page 574
The Corporate Organization......Page 575
Advantages and Disadvantages of Incorporation......Page 576
Equity Financing......Page 577
Dividend Policies......Page 579
Using Return on Equity to Measure Performance......Page 581
Stock Options as Compensation......Page 582
Components of Stockholders’ Equity......Page 583
Preference as to Dividends......Page 587
Preference as to Assets......Page 588
Convertible Preferred Stock......Page 589
Callable Preferred Stock......Page 590
Par Value Stock......Page 591
No-Par Stock......Page 592
Issuance of Stock for Noncash Assets......Page 593
Purchase of Treasury Stock......Page 594
Sale of Treasury Stock......Page 595
Retirement of Treasury Stock......Page 597
A LOOK BACK AT GOOGLE, INC.......Page 598
CHAPTER REVIEW......Page 599
CHAPTER ASSIGNMENTS......Page 603
CHAPTER 13 Long-Term Liabilities......Page 617
DECISION POINT: A USER’S FOCUS MCDONALD’S CORPORATION......Page 618
Deciding to Issue Long-Term Debt......Page 619
Evaluating Long-Term Debt......Page 620
Types of Long-Term Debt......Page 622
The Nature of Bonds......Page 627
Bond Issue: Prices and Interest Rates......Page 628
Characteristics of Bonds......Page 629
Bonds Issued at Face Value......Page 631
Bonds Issued at a Discount......Page 632
Bond Issue Costs......Page 633
Case 1: Market Rate Above Face Rate......Page 634
Case 2: Market Rate Below Face Rate......Page 635
Amortizing a Bond Discount......Page 636
Amortizing a Bond Premium......Page 640
Calling Bonds......Page 645
Sale of Bonds Between Interest Dates......Page 646
Year-End Accrual of Bond Interest Expense......Page 648
A LOOK BACK AT MCDONALD’S CORPORATION......Page 649
CHAPTER REVIEW......Page 651
CHAPTER ASSIGNMENTS......Page 655
CHAPTER 14 The Corporate Income Statement and the Statement of Stockholders’Equity......Page 671
DECISION POINT: A USER’S FOCUS MOTOROLA, INC.......Page 672
Performance Measurement: Quality of Earnings Issues......Page 673
The Effect of Accounting Estimates and Methods......Page 674
Write-downs and Restructurings......Page 676
Quality of Earnings and Cash Flows......Page 677
Income Taxes......Page 679
Deferred Income Taxes......Page 680
Net of Taxes......Page 681
Extraordinary Items......Page 683
Basic Earnings per Share......Page 684
Diluted Earnings Per Share......Page 686
The Statement of Stockholders’ Equity......Page 687
Retained Earnings......Page 689
Stock Dividends......Page 690
Stock Splits......Page 692
Book Value......Page 695
A LOOK BACK AT MOTOROLA, INC.......Page 696
CHAPTER REVIEW......Page 697
CHAPTER ASSIGNMENTS......Page 701
CHAPTER 15 The Statement of Cash Flows......Page 717
DECISION POINT: A USER’S FOCUS MARRIOTT INTERNATIONAL, INC.......Page 718
Uses of the Statement of Cash Flows......Page 719
Classification of Cash Flows......Page 720
Format of the Statement of Cash Flows......Page 721
Ethical Considerations and the Statement of Cash Flows......Page 723
Cash-Generating Efficiency......Page 724
Free Cash Flow......Page 725
Operating Activities......Page 727
Depreciation......Page 729
Gains and Losses......Page 730
Changes in Current Liabilities......Page 731
Schedule of Cash Flows from Operating Activities......Page 732
Investments......Page 734
Plant Assets......Page 735
Financing Activities......Page 737
Common Stock......Page 738
Retained Earnings......Page 739
Treasury Stock......Page 740
A LOOK BACK AT MARRIOTT INTERNATIONAL, INC.......Page 742
CHAPTER REVIEW......Page 743
CHAPTER ASSIGNMENTS......Page 747
CHAPTER 16 Investments......Page 765
DECISION POINT: A USER’S FOCUS eBAY, INC.......Page 766
Classification......Page 767
Ethics of Investing......Page 769
Trading Securities......Page 771
Noninfluential and Noncontrolling Investment......Page 774
Influential but Noncontrolling Investment......Page 777
Consolidated Financial Statements......Page 779
Consolidated Balance Sheet......Page 780
Consolidated Income Statement......Page 785
Restatement of Foreign Subsidiary Financial Statements......Page 786
Investments in Debt Securities......Page 787
Long-Term Investments in Bonds......Page 788
A LOOK BACK AT EBAY, INC.......Page 789
CHAPTER REVIEW......Page 791
CHAPTER ASSIGNMENTS......Page 794
CHAPTER 17 Financial Performance Measurement......Page 809
DECISION POINT: A USER’S FOCUS STARBUCKS CORPORATION......Page 810
Financial Performance Measurement: Creditors’ and Investors\' Objectives......Page 811
Standards of Comparison......Page 812
Sources of Information......Page 815
Executive Compensation......Page 816
Horizontal Analysis......Page 819
Trend Analysis......Page 822
Vertical Analysis......Page 823
Comprehensive Illustration of Ratio Analysis......Page 826
Evaluating Liquidity......Page 827
Evaluating Profitability......Page 829
Evaluating Long-term Solvency......Page 830
Evaluating the Adequacy of Cash Flows......Page 831
Evaluating Market Strength......Page 833
A LOOK BACK AT STARBUCKS CORPORATION......Page 835
CHAPTER REVIEW......Page 836
CHAPTER ASSIGNMENTS......Page 842
CHAPTER 18 The Changing Business Environment: A Manager’s Perspective......Page 859
DECISION POINT: A MANAGER’S FOCUS WAL-MART STORES, INC.......Page 860
Management Accounting and Financial Accounting: A Corporation......Page 861
Management Accounting and the Management Process......Page 862
Primary Processes and Support Services......Page 869
Managers and Value Chain Analysis......Page 871
Continuous Improvement......Page 873
Management Tools for Continuous Improvement......Page 874
Achieving Continuous Improvement......Page 876
Using Performance Measures in the Management Process......Page 877
The Balanced Scorecard......Page 878
Analysis of Nonfinancial Data in a Retail Organization......Page 880
Standards of Ethical Conduct......Page 882
A LOOK BACK AT WAL-MART STORES, INC.......Page 884
CHAPTER REVIEW......Page 886
CHAPTER ASSIGNMENTS......Page 890
CHAPTER 19 Cost Concepts and Cost Allocation......Page 909
DECISION POINT: A MANAGER’S FOCUS SOUTHWEST AIRLINES......Page 910
Managers’ Use of Cost Information......Page 911
Cost Classifications and Their Uses......Page 913
Cost Traceability......Page 914
Cost Behavior......Page 915
Cost Classifications for Financial Reporting......Page 916
Cost Reporting and Accounting for Inventories......Page 917
Statement of Cost of Goods Manufactured......Page 919
Cost of Goods Sold and a Manufacturer’s Income Statement......Page 921
Document Flows and Cost Flows Through the Inventory Accounts......Page 922
The Manufacturing Cost Flow......Page 924
Elements of Product Costs......Page 927
Computing Product Unit Cost......Page 928
Computing Service Unit Cost......Page 931
Cost Allocation......Page 932
Allocating the Costs of Overhead......Page 933
The Importance of Good Estimates......Page 935
Allocating Overhead:The Traditional Approach......Page 936
Allocating Overhead:The ABC Approach......Page 938
Planning Overhead Rates......Page 939
Applying the Overhead Rates......Page 941
A LOOK BACK AT SOUTHWEST AIRLINES......Page 942
CHAPTER REVIEW......Page 943
CHAPTER ASSIGNMENTS......Page 947
CHAPTER 20 Costing Systems: Job Order and Process Costing......Page 967
DECISION POINT: A MANAGER’S FOCUS COLD STONE CREAMERY, INC.......Page 968
Performing......Page 969
Communicating......Page 970
Job Order Versus Process Costing......Page 971
Cost Flow in a Job Order Costing System for a Manufacturing Company......Page 973
The Job Order Cost Card and Computation of Product Unit Costs......Page 980
Job Order Costing in a Service Organization......Page 981
The Process Costing System......Page 984
Patterns of Product Flows and Cost Flows......Page 985
Cost Flows Through the Work in Process Inventory Accounts......Page 987
Computing Equivalent Production......Page 988
Equivalent Production for Direct Materials......Page 989
Summary of Equivalent Production......Page 990
Accounting for Units......Page 991
Accounting for Costs......Page 993
Assigning Costs......Page 994
Process Costing for Two or More Production Departments......Page 995
Using Information About Product Cost to Evaluate Performance......Page 996
A LOOK BACK AT COLD STONE CREAMERY, INC.......Page 997
CHAPTER REVIEW......Page 998
CHAPTER ASSIGNMENTS......Page 1002
CHAPTER 21 Activity-Based Systems: ABM and JIT......Page 1019
DECISION POINT: A MANAGER’S FOCUS LA-Z-BOY, INC.......Page 1020
Activity-Based Systems......Page 1021
Using Activity-Based Cost Information......Page 1022
Value Chains and Supply Chains......Page 1024
ABM in a Service Organization......Page 1026
Value-Adding and Nonvalue-Adding Activities And Process Value Analysis......Page 1027
Value-Adding and Nonvalue-Adding Activities in a Service Organization......Page 1028
Process Value Analysis......Page 1029
Activity-Based Costing......Page 1030
The Cost Hierarchy and the Bill of Activities......Page 1031
Activity-Based Costing for Selling and Administrative Activities......Page 1034
The New Operating Environment and JIT Operations......Page 1035
Minimum Inventory Levels......Page 1036
A Multiskilled Work Force......Page 1037
Continuous Improvement of the Work Environment......Page 1038
Assigning Costs......Page 1039
Backflush Costing......Page 1040
Comparison of ABM and JIT......Page 1044
A LOOK BACK AT LA-Z-BOY, INC.......Page 1045
CHAPTER REVIEW......Page 1046
CHAPTER ASSIGNMENTS......Page 1051
CHAPTER 22 Cost Behavior Analysis......Page 1067
DECISION POINT: A MANAGER’S FOCUS KRAFT FOODS......Page 1068
Planning......Page 1069
Evaluating and Communicating......Page 1070
Variable Costs......Page 1071
Fixed Costs......Page 1075
Mixed Costs......Page 1076
Cost-Volume-Profit Analysis......Page 1080
Breakeven Analysis......Page 1082
Using Contribution Margin to Determine the Breakeven Point......Page 1084
The Breakeven Point for Multiple Products......Page 1085
Applying C-V-P to a Manufacturing Business......Page 1087
Applying C-V-P Analysis to a Service Business......Page 1091
A LOOK BACK AT KRAFT FOODS......Page 1093
CHAPTER REVIEW......Page 1094
CHAPTER ASSIGNMENTS......Page 1097
CHAPTER 23 The Budgeting Process......Page 1113
DECISION POINT: A MANAGER’S FOCUS JOHNSON & JOHNSON......Page 1114
The Budgeting Process......Page 1115
Budgeting and Goals......Page 1116
The Importance of Participation......Page 1117
Managers and the Budgeting Process......Page 1118
The Master Budget......Page 1120
The Sales Budget......Page 1124
The Production Budget......Page 1125
The Direct Materials Purchases Budget......Page 1126
The Direct Labor Budget......Page 1128
The Selling and Administrative Expense Budget......Page 1129
The Cost of Goods Manufactured Budget......Page 1130
The Capital Expenditures Budget......Page 1132
The Cash Budget......Page 1133
The Budgeted Balance Sheet......Page 1137
A LOOK BACK AT JOHNSON & JOHNSON......Page 1139
CHAPTER REVIEW......Page 1141
CHAPTER ASSIGNMENTS......Page 1145
CHAPTER 24 Performance Management and Evaluation......Page 1169
DECISION POINT: A MANAGER’S FOCUS VAIL RESORTS......Page 1170
The Balanced Scorecard and Management......Page 1171
Other Measurement Issues......Page 1175
Types of Responsibility Centers......Page 1176
Organizational Structure and Performance Management......Page 1179
Evaluating Cost Center Performance Using Flexible Budgeting......Page 1181
Evaluating Profit Center Performance Using Variable Costing......Page 1182
Return on Investment......Page 1184
Residual Income......Page 1186
Economic Value Added......Page 1187
The Importance of Multiple Performance Measures......Page 1189
Linking Goals, Performance Objectives, Measures, and Performance Targets......Page 1190
The Coordination of Goals......Page 1191
A LOOK BACK AT VAIL RESORTS......Page 1192
CHAPTER REVIEW......Page 1194
CHAPTER ASSIGNMENTS......Page 1199
CHAPTER 25 Standard Costing and Variance Analysis......Page 1215
DECISION POINT: A MANAGER’S FOCUS COACH, INC.......Page 1216
Standard Costs and Managers......Page 1217
Computing Standard Costs......Page 1219
Standard Direct Labor Cost......Page 1220
Total Standard Unit Cost......Page 1221
The Role of Flexible Budgets in Variance Analysis......Page 1223
Using Variance Analysis to Control Costs......Page 1225
Computing Direct Materials Variances......Page 1227
Analyzing and Correcting Direct Materials Variances......Page 1229
Computing Direct Labor Variances......Page 1231
Analyzing and Correcting Direct Labor Variances......Page 1232
Using a Flexible Budget to Analyze Overhead Variances......Page 1234
Computing Overhead Variances......Page 1235
Using Cost Variances to Evaluate Managers’ Performance......Page 1240
A LOOK BACK AT COACH, INC.......Page 1243
CHAPTER REVIEW......Page 1244
CHAPTER ASSIGNMENTS......Page 1250
CHAPTER 26 Analysis for Decision Making......Page 1265
DECISION POINT: A MANAGER’S FOCUS BANK OF AMERICA......Page 1266
Planning......Page 1267
Performing......Page 1268
Communicating......Page 1269
Irrelevant Costs and Revenues......Page 1270
Opportunity Costs......Page 1271
Incremental Analysis for Outsourcing Decisions......Page 1272
Incremental Analysis for Special Order Decisions......Page 1274
Incremental Analysis for Segment Profitability Decisions......Page 1276
Incremental Analysis for Sales Mix Decisions......Page 1278
Incremental Analysis for Sell or Process-Further Decisions......Page 1280
Capital Investment Analysis......Page 1282
Measures Used in Capital Investment Analysis......Page 1283
Interest......Page 1285
Present Value......Page 1286
Present Value of a Single Sum Due in the Future......Page 1287
Present Value of an Ordinary Annuity......Page 1288
The Net Present Value Method Illustrated......Page 1289
The Payback Period Method......Page 1292
The Accounting Rate-of-Return Method......Page 1293
A LOOK BACK AT BANK OF AMERICA......Page 1295
CHAPTER REVIEW......Page 1296
CHAPTER ASSIGNMENTS......Page 1301
Appendix A: Future Value and Present Value Tables......Page 1317
Endnotes......Page 1368
Company Name Index......Page 1374
Subject Index......Page 1376