+ All Categories
Home > Documents > Wiley - Front Matter

Wiley - Front Matter

Date post: 11-Feb-2018
Upload: bullyray
View: 230 times
Download: 0 times
Share this document with a friend

of 33

  • 7/23/2019 Wiley - Front Matter


    Ratio Formula Purpose or Use

    Liquidity Ratios

    1. Current ratio Measures short-term debt-paying ability.

    2. Acid-test (quick) ratio Measures immediate short-term liquidity.

    3. Accounts receivableturnover

    Measures liquidity of accounts receivable.

    4. Inventory turnover Measures liquidity of inventory.

    Profitability Ratios

    5. Profit margin


    Measures net income generated by eachdollar of sales.

    6. Asset turnover Measures how efficiently assets are usedto generate sales.

    7. Return on assets Measures overall profitability of assets.

    8. Return on commonstockholders equity

    Measures profitability of stockholdersinvestment.

    9. Earnings per share (EPS)Measures net income earned on eachshare of common stock.

    10. Price-earnings (P-E) ratio Measures the ratio of the market price pershare to earnings per share.

    11. Payout ratio Measures percentage of earnings distributedin the form of cash dividends.

    Solvency Ratios

    12. Debt to total assets ratio Measures percentage of total assets providedby creditors.

    13. Times interest earnedMeasures ability to meet interest paymentsas they come due.

    14. Free cash flow Cash provided by operating activities Measures the amount of cash generatedCapital expenditures Cash dividends during the current year that is available for

    the payment of additional dividends or forexpansion.

    Income before income taxes and interest expense

    Interest expense

    Total debt

    Total assets

    Cash dividends

    Net income

    Market price per share of stock

    Earnings per share

    Net income Preferred dividends

    Weighted-average common shares outstanding

    Net income Preferred dividends

    Average common stockholders equity

    Net income

    Average assets

    Net sales

    Average assets

    Cost of goods sold

    Average inventory

    Net credit sales

    Average net accounts receivable

    Cash Short-term investments Receivables (net)

    Current liabilities

    Current assets

    Current liabilities


    Using the Information in the Financial Statements

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter



    NormalAccount Title Classification Financial Statement Balance


    Accounts Payable Current Liability Balance Sheet Credit

    Accounts Receivable Current Asset Balance Sheet DebitAccumulated DepreciationBuildings Plant AssetContra Balance Sheet Credit

    Accumulated DepreciationEquipment Plant AssetContra Balance Sheet Credit

    Administrative Expenses Operating Expense Income Statement Debit

    Advertising Expense Operating Expense Income Statement Debit

    Allowance for Doubtful Accounts Current AssetContra Balance Sheet Credit

    Amortization Expense Operating Expense Income Statement Debit


    Bad Debt Expense Operating Expense Income Statement Debit

    Bonds Payable Long-Term Liability Balance Sheet Credit

    Buildings Plant Asset Balance Sheet Debit

    CCash Current Asset Balance Sheet Debit

    Common Stock Stockholders' Equity Balance Sheet Credit

    Copyrights Intangible Asset Balance Sheet Debit

    Cost of Goods Sold Cost of Goods Sold Income Statement Debit


    Debt Investments Current Asset/Long-Term Balance Sheet DebitInvestment

    Depreciation Expense Operating Expense Income Statement Debit

    Discount on Bonds Payable Long-Term LiabilityContra Balance Sheet Debit

    Dividend Revenue Other Income Income Statement Credit

    Dividends Temporary account closed Retained Earnings Debitto Retained Earnings Statement

    Dividends Payable Current Liability Balance Sheet Credit


    Equipment Plant Asset Balance Sheet Debit


    Freight-Out Operating Expense Income Statement Debit


    Gain on Disposal of Plant Assets Other Income Income Statement Credit

    Goodwill Intangible Asset Balance Sheet Debit


    Income Summary Temporary account closed Not Applicable (1)to Retained Earnings

    Income Tax Expense Income Tax Expense Income Statement Debit

    Income Taxes Payable Current Liability Balance Sheet Credit

    Insurance Expense Operating Expense Income Statement Debit

    Interest Expense Other Expense Income Statement Debit

    Interest Payable Current Liability Balance Sheet Credit

    Interest Receivable Current Asset Balance Sheet Debit

    Interest Revenue Other Income Income Statement Credit

    Inventory Current Asset Balance Sheet (2) Debit

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    NormalAccount Title Classification Financial Statement Balance


    Land Plant Asset Balance Sheet Debit

    Loss on Disposal of Plant Assets Other Expense Income Statement Debit

    MMaintenance and Repairs Expense Operating Expense Income Statement Debit

    Mortgage Payable Long-Term Liability Balance Sheet Credit


    Notes Payable Current Liability/ Balance Sheet CreditLong-Term Liability


    Patents Intangible Asset Balance Sheet Debit

    Paid-in Capital in Excess of Par Stockholders Equity Balance Sheet CreditCommon Stock

    Paid-in Capital in Excess of Par Stockholders Equity Balance Sheet CreditPreferred Stock

    Preferred Stock Stockholders Equity Balance Sheet Credit

    Premium on Bonds Payable Long-Term LiabilityAdjunct Balance Sheet Credit

    Prepaid Insurance Current Asset Balance Sheet Debit


    Rent Expense Operating Expense Income Statement Debit

    Retained Earnings Stockholders Equity Balance Sheet and Retained CreditEarnings Statement


    Salaries and Wages Expense Operating Expense Income Statement Debit

    Salaries and Wages Payable Current Liability Balance Sheet Credit

    Sales Discounts RevenueContra Income Statement Debit

    Sales Returns and Allowances RevenueContra Income Statement Debit

    Sales Revenue Revenue Income Statement Credit

    Selling Expenses Operating Expense Income Statement Debit

    Service Revenue Revenue Income Statement Credit

    Short-Term Investments Current Asset Balance Sheet Debit

    Stock Investments Current Asset/Long-Term Balance Sheet DebitInvestment

    Supplies Current Asset Balance Sheet Debit

    Supplies Expense Operating Expense Income Statement Debit


    Treasury Stock Stockholders Equity Balance Sheet Debit


    Unearned Service Revenue Current Liability Balance Sheet Credit

    Utilities Expense Operating Expense Income Statement Debit

    (1) The normal balance for Income Summary will be credit when there is a net income, debit when there is a net loss. TheIncome Summary account does not appear on any financial statement.

    (2) If a periodic system is used, Inventory also appears on the income statement in the calculation of cost of goods sold.

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    The following is a sample chart of accounts. It does not represent a comprehensive chart of all the accounts used inthis textbook but rather those accounts that are commonly used. This sample chart of accounts is for a company thatgenerates both service revenue as well as sales revenue. It uses the perpetual approach to inventory. If a periodicsystem was used, the following temporary accounts would be needed to record inventory purchases: Purchases;Freight-In; Purchase Returns and Allowances; and Purchase Discounts.



    Bad Debt Expense

    Cost of Goods Sold



    Income TaxExpense

    Insurance Expense

    Interest Expense

    Loss on Disposal ofPlant Assets

    Maintenance andRepairs Expense

    Rent Expense

    Salaries and WagesExpense

    Selling Expenses

    Supplies Expense

    Utilities Expense

    Service Revenue

    Sales Revenue

    Sales Discounts

    Sales Returns andAllowances

    Interest Revenue

    Gain on Disposalof Plant Assets

    Common Stock

    Paid-in Capital inExcess of ParCommon Stock

    Preferred Stock

    Paid-in Capital inExcess of Par

    Preferred Stock

    Treasury Stock

    Retained Earnings


    Income Summary

    Notes Payable

    Accounts Payable

    Unearned ServiceRevenue

    Salaries andWages Payable

    Interest Payable

    Dividends Payable

    Income TaxesPayable

    Bonds Payable

    Discount on BondsPayable

    Premium on BondsPayable

    Mortgage Payable

    CHART OF ACCOUNTSStockholders

    Assets Liabilities Equity Revenues Expenses



    Allowance forDoubtfulAccounts





    Prepaid Insurance










    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Jerry J. Weygandt PhD, CPAUniversity of WisconsinMadison

    Madison, Wisconsin

    Paul D. Kimmel PhD, CPAUniversity of WisconsinMilwaukee

    Milwaukee, Wisconsin

    Donald E. Kieso PhD, CPANorthern Illinois University

    DeKalb, Illinois

    John Wiley & Sons, Inc.


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Dedicated to

    the Wiley sales representatives

    who sell our books and service

    our adopters in a professional

    and ethical manner, and to

    Enid, Merlynn, and Donna

    Vice President & Executive Publisher George HoffmanAssociate Publisher Christopher DeJohnOperations Manager Yana MermelSenior Content Editor Ed BrislinDevelopment Editor Terry Ann TatroDevelopment Editor Margaret ThompsonContent Manager Dorothy SinclairSenior Production Editor Valerie VargasAssociate Director of Marketing Amy ScholzMarketing Manager Karolina Zarychta Honsa

    Lead Product Designer Allison MorrisProduct Designer Greg ChaputMedia Specialist Daniela DiMaggioDesign Director Harry NolanSenior Designer Maureen EideCover & Interior Designer Kristine CarneyProduction Management Services Ingrao AssociatesSenior Illustration Editor Anna MelhornSenior Photo Editor Mary Ann PriceSenior Editorial Assistant Jacqueline KeppingSenior Marketing Assistant Courtney LuzziCover Design Kristine CarneyCover Photo Bill Stevenson/Aurora Photos,Inc.

    This book was set in New Aster by Aptara, Inc. and printed and bound by Courier-Kendallville.The cover was printed by Courier-Kendallville.

    Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years,helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles thatinclude responsibility to the communities we serve and where we live and work. In 2008, we launched a Corporate CitizenshipInitiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business. Among theissues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among ourvendors, and community and charitable support. For more information, please visit our website: www.wiley.com/go/citizenship.

    Copyright 2012, 2010, 2008, 2005, 2003, 1998, 1995, John Wiley & Sons, Inc. All rights reserved. No part of this publication may bereproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording,scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either theprior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance

    Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission shouldbe addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011,fax (201)748-6008, website http://www.wiley.com/go/permissions.

    Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during thenext academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the reviewperiod, please return the evaluation copy to Wiley. Return instructions and a free of charge return shipping label are available atwww.wiley.com/go/returnlabel. Outside of the United States, please contact your local representative.

    ISBN-13 978-0-470-92938-4

    Printed in the United States of America

    10 9 8 7 6 5 4 3 2 1

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    From the


    Dear Student,

    Why This Course?Remember your biology course in high school? Did you haveone of those invisible man models (or maybe something more high-tech than that)that gave you the opportunity to look inside the human body? This accountingcourse offers something similar: To understand a business, you have to understandthe financial insides of a business organization. An accounting course will help youunderstand the essential financial components of businesses. Whether you arelooking at a large multinational company like MicrosoftorStarbucks or a single-owner

    software consulting business or coffee shop, knowing the fundamentals of accountingwill help you understand what is happening. As an employee, a manager, an investor,a business owner, or a director of your own personalfinancesany of which roles you will have at some pointin your lifeyou will make better decisions for havingtaken this course.

    Why This Book?Hundreds of thousands of studentshave used this textbook. Your instructor has chosen it for

    you because of its trusted reputation. The authors haveworked hard to keep the book fresh, timely, and accurate.

    This textbook contains features to help you learn best, whatever your learning style.To understand what your learning style is, spend about 10 minutes to take the learningstyle quiz at the books companion website. Then, look at page xiii for how you canapply an understanding of your learning style to this course. When you know more about

    your own learning style, browse through pages xivxvi. These pages describe the mainfeatures you will find in this textbook and explain their purpose.

    How To Succeed?Weve asked many students and many instructors whether thereis a secret for success in this course. The nearly unanimous answer turns out to be notmuch of a secret: Do the homework. This is one course where doing is learning.The more time you spend on the homework assignmentsusing the various toolsthat this textbook providesthe more likely you are to learn the essential concepts,

    techniques, and methods of accounting. Besides the textbook itself, the bookscompanion website also offers various support resources.

    Good luck in this course. We hope you enjoy the experience and that you put to gooduse throughout a lifetime of success the knowledge you obtain in this course. We are

    sure you will not be disappointed.

    Jerry J. WeygandtPaul D. KimmelDonald E. Kieso

    Whether you are looking at a largemultinational company like MicrosoftStarbucks or a single-owner softwareconsulting business or coffee shop,knowing the fundamentals of accounwill help you understand what ishappening.

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Your Team for Success in Accountin

    Wiley Accounting is your partner in accountingeducation. We want to be the first publisher youthink of when it comes to quality content, reliabletechnology, innovative resources, professionaltraining, and unparalleled support for youraccounting classroom.

    Your Wiley Accounting Team for Success iscomprised of three distinctive advantages thatyou wont find with any other publisher:

    Author Commitment

    Wiley Faculty Network WileyPLUS

    Author Commitment:

    A Proven Author Teamof Inspired Teachers

    The Team for Success authors bringyears of industry and academicexperience to the developmentof each textbook that relatesaccounting concepts to real-world

    experiences. This cohesive team brings continuity ofwriting style, pedagogy, and problem material to

    each course from Principles to Intermediate so youand your students can seamlessly progress fromintroductory through advanced coursesin accounting.

    The authors understand the mindset and timelimitations of todays students. They demonstratean intangible ability to effectively deliver complexinformation so it is clear and understandable whilestaying one step ahead of emerging global trendsin business.

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Wiley Faculty Network:A Team of Educators Dedicatedto Your Professional Development

    The Wiley Faculty Network (WFN)is a global group of seasonedaccounting professionals whoshare best practices in teachingwith their peers. Our Virtual Guest

    Lecture Series provides the opportunity you need forprofessional development in an online environment

    that is relevant, convenient, and collaborative. Thequality of these seminars and workshops meets thestrictest standards, so we are proud to be able tooffer valuable CPE credits to attendees.

    With 24 faculty mentors in accounting, its easyto find help with your most challenging curriculumquestionsjust ask our experts!

    WileyPLUS:An Experienced Teamof Support Professionals

    The WileyPLUSAccountManagers understand thetime constraints of busy

    instructors who want to provide the best resourcesavailable to their students with minimal headachesand planning time. They know how intimidatingnew software can be, so they are sure to make

    the transition easy and painless.

    Account Managers act as your personal contactand expert resource for training, course set-up, andshortcuts throughout the WileyPLUSexperience.

    Your success as an educator directly correlates tostudent success, and thats our goal. The WileyAccounting Team for Success truly strives forYOUR success! Partner with us today!

    www.wileyteamforsuccess.comCopyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Author CommitmentCollaboration. Innovation. Experience.

    After decades of success as authors of textbooks like this one,Jerry Weygandt, Paul Kimmel, and Don Kieso understand thatteaching accounting goes beyond simply presenting data. Theauthors are truly effective because they know that teaching isabout telling compelling stories in ways that make each

    concept come to life.

    Teacher / Author / ProfessionalThrough their textbooks, supplements, online learning tools,and classrooms, these authors have developed a comprehensivepedagogy that engages students in learning and faculty

    with teaching.

    These authors collaborate throughout the entire process. Theend result is a true collaboration where each author brings hisindividual experience and talent to the development of everyparagraph, page, and chapter, thus creating a truly well-rounded,

    thorough view on any given accounting topic.

    Many Ways in One DirectionOur Team for Success has developed a teaching system thataddresses every learning style. Each year brings new insights,feedback, ideas, and improvements on how to deliver the materialto every student with a passion for the subject in a format thatgives them the best chance to succeed.

    The key to the teams approach is in understanding that, just asthere are many different ways to learn, there are also many

    different ways to teach.

    In Their Own WordsVisit the Wiley Team for Success website to hear from the authorsfirst-hand as they discuss their teaching styles, collaboration, andthe future of accounting.


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter



    Jerry J. Weygandt, PhD, CPA, is ArthurAndersen Alumni Emeritus Professor ofAccounting at the University of WisconsinMadison. He holds a Ph.D. in accountingfrom the University of Illinois. Articles byProfessor Weygandt have appeared in the

    Accounting Review,Journal of AccountingResearch,Accounting Horizons,Journal of

    Accountancy, and other academic andprofessional journals. These articles haveexamined such financial reporting issuesas accounting for price-level adjustments,pensions, convertible securities, stock optioncontracts, and interim reports. ProfessorWeygandt is author of other accounting andfinancial reporting books and is a memberof the American Accounting Association,

    the American Institute of Certified PublicAccountants, and the Wisconsin Society ofCertified Public Accountants. He has servedon numerous committees of the AmericanAccounting Association and as a memberof the editorial board of the AccountingReview; he also has served as Presidentand Secretary-Treasurer of the AmericanAccounting Association. In addition, he hasbeen actively involved with the AmericanInstitute of Certified Public Accountantsand has been a member of the AccountingStandards Executive Committee (AcSEC) ofthat organization. He has served on the FASBtask force that examined the reporting issuesrelated to accounting for income taxes

    and served as a trustee of the FinancialAccounting Foundation. Professor Weygandthas received the Chancellors Award forExcellence in Teaching and the Beta GammaSigma Deans Teaching Award. He is on theboard of directors of M & I Bank of SouthernWisconsin. He is the recipient of theWisconsin Institute of CPAs OutstandingEducators Award and the LifetimeAchievement Award. In 2001 he receivedthe American Accounting AssociationsOutstanding Educator Award.

    Paul KimmelPaul D. Kimmel, PhD, CPA, received hisbachelors degree from the University ofMinnesota and his doctorate in accountingfrom the University of Wisconsin. He is anAssociate Professor at the University ofWisconsinMilwaukee, and haspublic accounting experience with Deloitte& Touche (Minneapolis). He was the recipientof the UWM School of Business AdvisoryCouncil Teaching Award, the ReggieTaite Excellence in Teaching Award and athree-time winner of the OutstandingTeaching Assistant Award at the Universityof Wisconsin. He is also a recipient of theElijah Watts Sells Award for HonoraryDistinction for his results on the CPA exam.He is a member of the American AccountingAssociation and the Institute of ManagementAccountants and has published articles in

    Accounting Review,Accounting Horizons,Advances in Management Accounting,Managerial Finance, Issues in AccountingEducation,Journal of Accounting Education,as well as other journals. His researchinterests include accounting for financial

    instruments and innovation in accountingeducation. He has published papers andgiven numerous talks on incorporatingcritical thinking into accounting education,and helped prepare a catalog of criticalthinking resources for the Federated Schoolsof Accountancy.

    Don KiesoDonald E. Kieso, PhD, CPA, received hisbachelors degree from Aurora Universityand his doctorate in accounting from theUniversity of Illinois. He has served aschairman of the Department of Accountancyand is currently the KPMG Emeritus Professoof Accountancy at Northern Illinois UniversityHe has public accounting experience withPrice Waterhouse & Co. (San Francisco andChicago) and Arthur Andersen & Co.(Chicago) and research experience with theResearch Division of the American Institute oCertified Public Accountants (New York). Hehas done post doctorate work as a VisitingScholar at the University of California atBerkeley and is a recipient of NIUs Teaching

    Excellence Award and four Golden AppleTeaching Awards. Professor Kieso is theauthor of other accounting and businessbooks and is a member of the AmericanAccounting Association, the AmericanInstitute of Certified Public Accountants, andthe Illinois CPA Society. He has served as amember of the Board of Directors of theIllinois CPA Society, then AACSBs AccountinAccreditation Committees, the State ofIllinois Comptrollers Commission, asSecretary-Treasurer of the Federationof Schools of Accountancy, and asSecretary-Treasurer of the AmericanAccounting Association. Professor Kieso iscurrently serving on the Board of Trusteesand Executive Committee of AuroraUniversity, as a member of the Board ofDirectors of Kishwaukee CommunityHospital, and as Treasurer and Director ofValley West Community Hospital. From 1989to 1993 he served as a charter member ofthe national Accounting Education ChangeCommission. He is the recipient of theOutstanding Accounting Educator Awardfrom the Illinois CPA Society, the FSAs JosepA. Silvoso Award of Merit, the NIUFoundations Humanitarian Award for Serviceto Higher Education, a Distinguished ServiceAward from the Illinois CPA Society, andin 2003 an honorary doctorate fromAurora University.



    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter



    The Wiley Accounting Team for Success is ready when youare to help prepare you and your students for the integration of IFRS into your courses.

    No matter where you are in this transition, Wiley Accounting is here to provide the tools youneed to fully incorporate IFRS into your accounting courses. We offer the most extensiveProducts, Content, Services, Support, and Training available todayleading the wayto prepare you and your students for success!

    Innovative ProductsNew IFRS Editions of Kieso, Intermediate Accountingand Weygandt, Financial Accounting are the most current and only textbooks available based

    fully on International Financial Reporting Standards. Wiley Accounting also offers numerous IFRS

    resources that can serve to supplement your course.

    Exclusive Content Our accounting publications feature more quality andcurrent coverage of IFRS topics than any other textbook available today! The Wiley Accounting

    Team for Success authors integrate IFRS content within each chapter through features like

    A Look at IFRS, which demonstrates how international standards apply to each U.S. GAAP

    topic, as well as provides an opportunity for practical application. International Insights

    also provide an international perspective of the accounting topic discussed in the text.

    Support & ServicesWiley Accounting features a dedicated IFRS website(at www.wileyifrs.com) and an Accounting Weekly Updates website (at www.

    wileyaccountingupdates.com) to make sure you have the most current resources available.

    Timely Training Wiley Accounting and the Wiley Faculty Network provides free IFRSvirtual training workshops, IFRS Guest Lectures, and IFRS Boot Camps featuring authors Paul

    Kimmel and Terry Warfield. You can also earn CPE credit for attending these sessions.

    To learn more about how the Wiley Accounting Team for Success can help your students succeed,visit www.wileyteamforsuccess.com or contact your Wiley sales representative today.

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    IFRS Review and Assessment Content

    Integrated Content The Eighth Editionprovides many new IFRS review and assessment toolsthat both instructors and students can easily incorpo-

    rate into an introduction to financial accounting

    course. In the margin of the textbook narrative,

    International Notes highlight key differences between

    U.S. and international accounting standards as well as

    important IFRS updates.

    A Look at IFRS: Review andPractice Each chapter also closes with an IFRSmodule that includes:

    Key Points that provide visual and textual high-

    lights of IFRS topics that relate to concepts in a

    particular chapter. Students are presented with

    IFRS transactions, illustrations, and representations

    of IFRS financial statements.

    Looking to the Future discussions of upcomingIFRS challenges and issues.

    IFRS Practice that includes both multiple-choice

    self-test questions and exercises.

    International Financial Reporting Problems that address Zetar plcs (a U.K.

    manufacturer of confectionary and natural snacks) financial statements, which

    are found in Appendix C.

    Comprehensive Teaching Materials IFRS review and assessmentcontent is also incorporated into instructor resources such as the test bank, computerized test

    bank, PowerPoint lecture slides, and instructors manual.

    Countries that require

    or permit IFRS or havefixed dates for adoption

    Countries seeking conver-

    gence with the IASB or

    pursuing adoption of IFRS

    Source: http://www.pwc.com/us/en/issues/ifrs-reporting/country-adoption/index.jhtml.

    Property, Plant, and Equipment

    Property, plant, and equipment are assets with relatively long useful lives thaa company is currently using in operating the business. This categor(sometimes calledfixed assets) includes land, buildings, machinery andequipment, delivery equipment, and furniture. In Illustration 4-18 , Franklin Corporation reported property, plant, and equipment of $29,000.

    Depreciation is the practice of allocating the cost of assets to number of years. Companies do this by systematically assigning aportion of an assets cost as an expense each year (rather than expensingthe full purchase price in the year of purchase). The assets that thecompany depreciates are reported on the balance sheet at cost lesaccumulated depreciation. The accumulated depreciation accounshows the total amount of depreciation that the company has expensedthus far in the assets life. In Illustration 4-18, Franklin Corporationreported accumulated depreciation of $5,000.

    Illustration 4-21 presents the property, plant, and equipment oCooper Tire & Rubber Company.

    Recently, China adopted

    International Financial Reporting

    Standards (IFRS). This was done

    in an effort to reduce fraud and

    increase investor confidence in

    financial reports. Under these

    standards, many items, such as

    property, plant, and equipment,

    may be reported at current fair

    values, rather than historical cost.



    c04CompletingtheAccountingCycle.indd Page 182 03/10/11 7:50 PM user-F391 /User

    IFRS4-5 The following information is available for Rego Bowling Alley at December 31, 2014.

    Buildings $128,000 Share Capital $90,000

    Accounts Receivable 7,540 Retained Earnings 22,000Prepaid Insurance 4,680 Accumulated DepreciationBuildings 42,600Cash 18,040 Accounts Payable 12,300Equipment 62,400 Notes Payable 95,000Land 67,000 Accumulated DepreciationEquipment 18,720Insurance Expense 780 Interest Payable 2,600Depreciation Expense 7,360 Service Revenues 15,180Interest Expense 2,600

    Prepare a classified statement of financial position; assume that $13,900 of the notes payable willbe paid in 2015.

    c04CompletingtheAccountingCycle.indd Page 217 03/10/11 7:52 PM user-F391 /Users/user-F391/Desktop

    Walter CompanyStatement of Comprehensive Income

    For the Year Ended December 31, 2014

    Net income $600,000Other comprehensive income

    Unrealized gain on trading securities 75,000


    c04CompletingtheAccountingCycle.indd Page 167 03/10/11 8:40 PM user-F391

    Cash 1,000,000

    Bonds Payable 850,000Share PremiumConversion Equity 150,000

    c07FraudInternalControlAndCash.indd Page 341 03/10/11 8:42 PM user-F391 /Users/user-F39

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    WileyPLUS.Beyond Books.

    Can homework grade itself?Where do textbooks end and classrooms begin?Do we need a classroom at all?

    The answers to these questions used to be so obvious. Today, WileyPLUSdelivers a whole new method of learning.

    And this is not too good to be true. This is about an actual solutionwith the flexibility to create one exam or to plan an entire semester.A tool that enables faculty to plan, teach, test, and grade an entirecourse... completely online. A solution that frees up so much classroomtime for "advanced" work that faculty report feeling more energizedabout their teaching than they have in years. Students know exactlywhere they stand on any given day in regards to homework, anupcoming test, or what they missed in class last week.

    It also virtually eliminates all excuses for late homework.

    WileyPLUS is an online suite of resourcesincludingthe complete textthat will help your students:

    Come to class better prepared for your lectures Get immediate feedback and context-sensitive help

    on assignments and quizzes Track progress throughout the course

    New features of WileyPLUS include: Blackboard integrationNow you can seamlessly integrate all

    of the rich content and resources available in WileyPLUSwith thepower and convenience of Blackboard.

    Spreadsheet-like presentation of assignmentsThe look andfeel of questions now replicate what students will encounter inpractice.

    Type-ahead functionalityStudents will no longer need tochoose from a dropdown menu of account names.

    *Based on a recent survey of 519accounting student users of WileyPLUS

    87%of studentssurveyed said itimproved their

    understandingof the material.*

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Prepare and PresentCreate outstanding class presentations usinga wealth of resources, such as PowerPoint slides,interactive simulations, and more. Plus you can easilyupload any materials you have created into yourcourse and combine them with the resources

    contained in WileyPLUS.

    Track Your ProgressKeep track of your students' progress via aninstructor's gradebook, which allows you to analyzeindividual and overall class results. This gives you anaccurate and realistic assessment of your students

    progress and level of understanding.

    Create AssignmentsAutomate the assigning and grading of homeworkor quizzes by using the provided question banksor by writing your own. Student results will beautomatically graded and recorded in yourgradebook. WileyPLUSalso links homeworkproblems to relevant sections of the online text,hints, or solutionscontext-sensitive help where

    students need it most!


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    The Place WhereFaculty Connect ...The Wiley Faculty Network is a global communityof faculty connected by a passion for teachingand a drive to learn and share. Connect withthe Wiley Faculty Network to collaborate withyour colleagues, find a mentor, attend virtualand live events, and view a wealth of resourcesall designed to help you grow as an educator.

    Embrace the art of teachinggreat thingshappen where faculty connect!

    Discover innovative ideas andgain knowledge you can use.

    Training Virtual Guest Lectures Live Events

    Explore your resources anddevelopment opportunities.

    Teaching Resources Archived Guest Lectures Recorded Presentations Professional Development Modules

    Connect with colleaguesyour greatest resource.

    Find a Mentor Interest Groups Blog

    Find out more at


    The Wiley Faculty


    Virtual Guest LecturesConnect with recognized leaders across disciplines

    and collaborate with your peers on timely topics

    and discipline-specific issues, many of which offer

    CPE credit.

    Live and Virtual Events

    These invitation-only, discipline-specific events areorganized through a close partnership between the

    WFN,Wiley, and the academic community near th

    event location.

    Technology TrainingDiscover a wealth of topic- and technology-specific

    training presented by subject matter experts,

    authors, and faculty where and when you need it.

    Teaching ResourcesPropel your teaching and student learning to thenext level with quality peer-reviewed case studies,

    testimonials, classroom tools, and checklists.

    Connect with ColleaguesAchieve goals and tackle challenges more easily by

    enlisting the help of your peers. Connecting with

    colleagues through the WFN can help you improve

    your teaching experience.

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    What TYPEof learner are you?Understanding each of these basic learning styles enables the authors to engage students minds and

    motivate them to do their best work, ultimately improving the experience for both students and faculty.










    Pay close attention to charts,

    drawings, and handoutsyour instructors use. Underline. Use different colors. Use symbols, flow charts,

    graphs, differentarrangements on the page,white spaces.

    Convert your lecture notes into

    page pictures.To do this: Use the Intake strategies. Reconstruct images in

    different ways. Redraw pages from memory. Replace words with symbols

    and initials. Look at your pages.

    The Navigator/Feature

    Story/PreviewInfographics/IllustrationsAccounting equation analysesHighlighted wordsComprehensive DO IT!

    Problem/Action PlanQuestions/Exercises/ProblemsFinancial Reporting ProblemComparative Analysis ProblemReal-World Focus

    Recall your page pict

    Draw diagrams whereappropriate. Practice turning your v

    back into words.

    Attend lectures and tutorials. Discuss topics with students

    and instructors. Explain new ideas to

    other people. Use a tape recorder. Leave spaces in your lecture

    notes for later recall. Describe overheads, pictures,

    and visuals to somebodywho was not in class.

    You may take poor notesbecause you prefer to listen.Therefore: Expand your notes by talking

    with others and withinformation fromyour textbook.

    Tape-record summarizednotes and listen.

    Read summarized notesout loud.

    Explain your notes toanother aural person.

    PreviewInsight BoxesDO IT! Action PlanSummary of Learning ObjectivesGlossaryComprehensive DO IT!

    Problem/Action PlanSelf-Test QuestionsQuestions/Exercises/ProblemsFinancial Reporting ProblemComparative Analysis ProblemReal-World FocusDecision-Making Across the

    OrganizationCommunication ActivityEthics Case

    Talk with the instructo Spend time in quiet p

    recalling the ideas. Practice writing answe

    to old exam questions Say your answers out l

    Use lists and headings. Use dictionaries, glossaries,

    and definitions.

    Read handouts, textbooks,and supplementarylibrary readings.

    Use lecture notes.

    Write out words againand again.

    Reread notes silently.

    Rewrite ideas and principlesinto other words.

    Turn charts, diagrams,and other illustrationsinto statements.

    The Navigator/FeatureStory/Study


    DO IT! Action PlanSummary of Learning

    ObjectivesGlossary/Self-Test QuestionsQuestions/Exercises/ProblemsWriting ProblemsFinancial Reporting ProblemComparative Analysis ProblemReal-World FocusDecision-Making Across

    the OrganizationCommunication ActivityAll About You

    Write exam answers. Practice with multiple-


    Write paragraphs, begand endings.

    Write your lists inoutline form.

    Arrange your words inhierarchies and points

    Use all your senses.

    Go to labs, take field trips. Listen to real-life examples. Pay attention to applications. Use hands-on approaches. Use trial-and-error methods.

    You may take poor notes

    because topics do not seemconcrete or relevant.Therefore: Put examples in

    your summaries. Use case studies and

    applications to help withprinciples and abstractconcepts.

    Talk about your notes withanother kinesthetic person.

    Use pictures andphotographs thatillustrate an idea.

    The Navigator/Feature

    Story/PreviewInfographics/IllustrationsDO IT! Action PlanSummary of Learning ObjectivesComprehensive DO IT!

    Problem/Action PlanSelf-Test QuestionsQuestions/Exercises/ProblemsFinancial Reporting ProblemComparative Analysis ProblemReal-World FocusDecision-Making Across

    the OrganizationCommunication ActivityAll About You

    Write practice answers

    Role-play the exam sit

    Intake:To take in the information To make a study package

    Text features that mayhelp you the most

    Output:To do well on exams


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    International Financial Reporting Standards

    As we continue to strive to reflect the constant changes inthe accounting environment, we have added new materialon International Financial Reporting Standards (IFRS). Wehave added a comprehensive new section at the end ofeach chapter, A Look at IFRS, which includes an overviewsection, addresses differences between GAAP and IFRS

    (Key Points), describes convergence efforts (Looking tothe Future), and provides students with the opportunity totest their understanding through self-test questions andexercises (IFRS Practice). An international financial reportingproblem is also included, based on Zetar plcs (a U.K.candy company) financial statements, provided in a newAppendix C of the textbook.

    International Insights (and InternationalNotes in the margin) also provide aglobal perspective of the accountingtopics discussed in the textbook.

    People, Planet, and Profit

    Todays companies are evaluating not justtheir profitability but also their corporatesocial responsibility. In this edition, we haveprofiled some of these companies, such asPepsiCo, to highlight their sustainable busi-

    ness practices.

    Whats New?

    What is meant by monetize environmental sustainability for shareholders? (See

    page 267.)?


    Selling Green

    Here is a question an executive of PepsiCo was asked: Should PepsiCo market green? The execu-

    tive indicated that the company should, as he believes it's the No. 1 thing consumers all over the

    world care about. Here are some thoughts on this issue:

    If you are going to market green, what are some things we've learned? I'll share with you

    one thing we've learned at PepsiCo.

    Sun Chips are part of the food business I run. It's a "healthy snack." We decided that Sun Chips,

    if it's a healthy snack, should be made in facilities that have a net-zero footprint. In other words, I

    want off the electric grid everywhere we make Sun Chips. We did that. Sun Chips should be made

    in a facility that puts back more water than it uses. It does that. And we partnered with our suppli-

    ers and came out with the world's first compostable chip package.

    Now, there was an issue with this package: It was louder than the New York subway, louder than

    jet engines taking off. What would a company that's committed to green do: walk away or stay com-

    mitted? If your people are passionate, they're going to fix it for you as long as you stay committed. Six

    months later, the compostable bag has half the noise of our current package.

    So the view today is: we should market green, we should be proud to do it . . . it has to be

    a 360 process, both internal and external. And if you do that, you can monetize environmental

    sustainability for the shareholders.

    Source: Four Problemsand Solutions, Wall Street Journal(March 7, 2011), p. R2.

    c05AccountingforMerchandisingOperations.indd Page 231 16/08/11 3:22 PM user-F391 /Users/user-F391/Desktop

    Features of the Eighth Edition

    The Eighth Edition expands our emphasis on student learning and improves upon ateaching and learning package that instructors and students have rated the highest incustomer satisfaction.


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    The Accounting Cycle

    For many students, success in an introduc-tory accounting course hinges on develop-ing a sound conceptual understanding ofthe accounting cycle. In the past, we havereceived positive feedback regarding theframework that we have employed to intro-duce the recording process in Chapter 2. Inthis edition, we have expanded our use ofthis framework to cover the entire account-ing cycle in Chapters 14.

    Accounting Principles

    For many students, learning about the conceptual framework can be somewhattedious. Yet, at the same time, we believe that students need a good understanding ofthe accounting assumptions, principles, and constraints that accountants use as a basis

    for recording and reporting financial information. As a result, we decided to integrateour discussion of accounting principles throughout the textbook as they relate to thetopic at hand. However, we also realize that students might find it helpful to have a sum-mary of all the concepts, which we provide in a new Chapter 3 Appendix, Concepts inAction.

    Chart of Accounts

    It is important to always try to eliminate unnecessary barriers to student understanding.Sometimes, the accounting course can seem unnecessarily complicated to studentsbecause so many account titles are used. In order to reduce possible confusion and tokeep students focused on those concepts that really matter, we undertook to stream-

    line the number of accounts used in the textbook, supplements, and WileyPLUS. Seeinside the front cover of the textbook for a sample chart of accounts, which representthe majority of the account titles used.

    Anatomy of a Fraud

    Many users of our textbook have responded favor-ably to our Anatomy of a Fraudfeature, previouslyonly included in Chapter 7 (Fraud, Internal Control,and Cash). They have requested that we expand itthroughout the textbook to demonstrate the

    importance of internal controls to all assets and lia-bilities. Accordingly, in this edition, we haveexpanded the Anatomy of a Fraud feature to allappropriate chapters.


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter



    This edition was subject to an overall, comprehensive revision to ensure that it is techni-cally accurate, relevant, and up-to-date. We have continued and enhanced many of thefeatures of the Seventh Edition ofFinancial Accounting, including the following:

    Real-World EmphasisOne of the goals of the financial accounting course is to orient students to the applica-tion of accounting principles and techniques in practice. Accordingly, we have contin-

    ued our practice of using numerousexamples from real companiesthroughout the textbook. The namesof these real companies are high-lighted in red.

    Also, throughout the chapters,Insight and Accounting Across theOrganization boxes show how peo-ple, often in non-accounting func-

    tions, in actual companies makedecisions using accounting infor-mation. These high-interest boxesfocus on various themesethics,international, investor, and corpo-rate social responsibility concerns.

    Guideline Answers to the critical thinking questions are provided near the end of eachchapter.


    Brief exercises ask students to apply their newly acquired knowledge. Theexercises include an Action Plan, which reviews the necessary steps to complete

    the exercise, as well as a Solution so students can have immediate feedback. AComprehensive problem at the end of each chapter allows students a finalcheck of their understanding before they do their homework. Review problemsare part of the end-of-chapter homework material.

    Accounting Equation Analyses

    We include accounting equation analyses in the mar-gin next to key journal entries. They will help studentsunderstand the impact of an accounting transaction

    on the components of the accounting equation, on thestockholders equity accounts, and on the companyscash flows.

    DO IT!

    DO IT!

    DO IT!

    DO IT!

    DO IT!

    Hallmark Features of the Eighth Edition

    Why has Mark Zuckerberg, the CEO and founder of Facebook, delayed taking his

    companys shares public through an initial public offering (IPO)? (See page 596.)?

    Wall Street No Friend of Facebook

    In the 1990s, it was the dream of every young technology entrepreneur to start a company and

    do an initial public offering (IPO), that is, list company shares on a stock exchange. It seemed

    like there was a never-ending supply of 20-something-year-old technology entrepreneurs that

    made millions doing IPOs of companies that never made a profit and eventually failed. In sharp

    contrast to this is Mark Zuckerberg, the 27-year-old founder and CEO of Facebook. If Facebook

    did an IPO, he would make billions of dollars. But, he is in no hurry to go public. Because his

    company doesnt need to invest in factories, distribution systems, or even marketing, it doesnt

    need to raise a lot of cash. Also, by not going public, Zuckerberg has more control over the

    direction of the company. Right now, he and the other founders dont have to answer to out-

    side shareholders, who might be more concerned about short-term investment horizons rather

    than long-term goals. In addition, publicly traded companies face many more financial report-

    ing disclosure requirements.

    Source: Jessica E. Vascellaro, Facebook CEO in No Rush to Friend Wall Street,Wall Street Journal Online

    (March 4, 2010).


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Financial Statements

    Students will be more willing to commit time andenergy to a topic when they believe it is relevant totheir future careers. There is no better way todemonstrate relevance than to ground discussionsin the real world. To that end, we include financialstatements from actual companies regularlythroughout the textbook.

    Marginal Notes

    Helpful Hints in the margin further clarify concepts being discussed. Ethics Notes pointout ethical points related to the nearby text discussion. Alternative Terminology lets stu-dents know about interchangeable words and phrases. International Notes provide aglobal perspective of the accounting topics being discussed.

    Comprehensive Homework Material

    Each chapter concludes with revised Self-Test Questions, Questions, Brief Exercises,Review, Exercises, and Problems. An icon identifies Exercises and Problems that

    can be solved using Excel templates at the books companion website. The ContinuingCookie Chronicle uses the business activities of a fictional company to help studentsapply accounting topics to a realistic entrepreneurial situation.

    Broadening Your Perspective Section

    We have revised and updated the Broadening Your Perspective section at the end of

    each chapter. Elements in this section include the following: Financial Reporting Problem: PepsiCo, Inc. Communication Activity Comparative Analysis Problem: PepsiCo, Ethics Case

    Inc. vs. The Coca-Cola Company All About You Real-World Focus FASB Codification Activity Decision-Making Across the Organization

    These assignments are designed to help develop students decision-making and critical-thinking skills.

    DO IT!


    Kellogg CompanyBalance Sheet (partial)

    ($ in millions)

    Stockholders equityCommon stock, $0.25 par value, 1,000,000,000 shares authorized




    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Chapter 1 Accounting in Action New format of transaction analyses, so students

    see Basic Analysis and Equation Analysistogether, for a better understanding of thedual effect on the accounting equation.

    New Accounting Across the Organization box,about how Rhino Foods uses accounting torecruit new employees.

    Updated Ethics Insight, to include recent reliefefforts in Haiti.

    New International Insight, about why SouthKorean companies must comply with interna-tional accounting standards.

    New People, Planet, and Profit Insight, about

    whether corporations should take into accountenvironmental and social performance as partof their financial results.

    New International Note, about the formatdifferences that exist between GAAP and IFRSfinancial statements.

    Chapter 2 The Recording Process Rewrote Debits and Credit section, to provide

    additional instruction/explanation to students. New Investor Insights, about Chicago Cubs

    major revenue and expense accounts and whySOX is important.

    Chapter 3 Adjusting the Accounts Updated revenue recognition discussion to

    reflect the proposed new accounting standard,whereby revenue should be recognized in theaccounting period in which services are per-formed (formerly when revenue was earned).

    New Ethics Insight, about real-world companiesabuse of the revenue recognition principle.

    New International Insight, about the Chinesegovernments inconsistent use of cash accounting.

    New People, Planet and Profit Insight, abouthow companies disposal of waste materialsmight lead to accounting issues.

    Updated discussion of The Basics of AdjustingEntries section, including new transactionanalysis format (Basic Analysis, Equation

    Analysis, Debit-Credit Analysis, Journal Entry,and Posting) for adjusting entries examples,providing continuity from Chapters 1 and 2.

    New Appendix 3B, Concepts in Action, aboutthe accounting assumptions, principles, andconstraints that accountants use as a basis forrecording and reporting financial information.

    Chapter 4 Completing the Accounting Cycle New People, Planet, and Profit Insight, about the

    dimensions that influence a companys reputationand consumer behavior.

    New Accounting Across the Organization box,about managing working capital efficiently.

    Chapter 5 Accounting for MerchandisingOperations

    Updated Feature Story, to include more recentWal-Mart sales information.

    Added additional explanation to Sales Returnsand Allowances section, to increase studentunderstanding.

    New Anatomy of a Fraud, about cashier-relatedfraud.

    Revised Accounting Across the Organization box,to reflect recent information on Costco.

    Added new illustration in Sales Discounts section,

    so students could better visualize how net salesare composed of sales revenue, sales returns andallowances, and sales discounts.

    New People, Planet, and Profit Insight, about howcompanies can market their green efforts.

    New Ethics Insight, about disclosing other gainsand losses in a separate line item.

    Rewrote Appendix 5A, Determining Cost ofGoods Sold Under a Periodic System, to improvestudent understanding.

    Chapter 6 Inventories

    New Accounting Across the Organization boxes,about JIT risks and rewards and Wal-Marts experi-ence with using RFID to improve inventory control.

    New Ethics Insight, about manipulating inventoryrecords.

    Content Changes by Chapter

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    New Anatomy of a Fraud, about alteringinventory figures.

    Expanded discussion in Cost Flow Assumptionssection, to ensure student understanding ofaccounting requirements for cost flowassumption chosen.

    Chapter 7 Fraud, Internal Control, and Cash New People, Planet, and Profit Insight, about

    the need for internal controls for sustainabilityaccounting.

    New Ethics Insight boxes, Big Theft at SmallCompanies and How Employees Steal.

    New Helpful Hint about how petty cash receiptssatisfy internal control procedures.

    New Investor Insight, about Madoffs Ponzischeme.

    Chapter 8 Accounting for Receivables

    Rewrote Types of Receivables section, to includemore general discussion of receivables. New Anatomy of a Fraud, about an accounts

    receivable clerk who committed fraud at a largenot-for-profit foundation.

    Added new material on recent home foreclo-sures in section on Valuing Accounts Receivable.

    New International Insight, about the IASBs pushfor fair value and the FASBs response to it.

    Expanded discussion of Disposing of NotesReceivable section, to include a timeline illustra-tion to increase student understanding.

    New Accounting Across the Organization box,

    about Countrywides Fast and Easy loanprogram.

    Chapter 9 Plant Assets, Natural Resources, andIntangible Assets

    New DO IT! on revised depreciation. New Anatomy of a Fraud, about WorldCom. New People, Planet, and Profit Insight, about

    BHP Billitons sustainability report and howit measures the success or failure of its environ-mental policies.

    New International Insight, about Japans Internetcompany Softbank Corp.

    Chapter 10 Liabilities New Accounting Across the Organization boxes,

    about the amount of payroll deductions and

    taxes, and the trend of companies to borrowmore from bond investors than banks.

    New Anatomy of a Fraud, about using fakeemployees to collect paychecks.

    In Accounting for Bond Issues section, addedmore general discussion to ensure studentunderstanding.

    Chapter 11 Corporations: Organization, StockTransactions, Dividends, and RetainedEarnings

    Added more real-company detail to Charac-teristics of a Corporation section, to increasestudent engagement/interest.

    New Accounting Across the Organization boxes,about Facebooks status as a privately heldcompany.

    New People, Planet, and Profit Insight, about howmost investors believe environmental and socialfactors impact shareholder value.

    New Anatomy of a Fraud, about SafeNetsemployees abusing company stock optionplan.

    New Investor Insight, about Warren Buffettscompany Berkshire Hathaway.

    Chapter 12 Investments Updated Categories of Securities section, to

    reflect proposed new FASB classifications fordebt and stock investments.

    Chapter 13 Statement of Cash Flows

    New Anatomy of a Fraud, about Parmalatsmultiple frauds.

    New Appendix 13C, Statement of Cash FlowsT-Account Approach.

    Chapter 14 Financial Statement Analysis New Anatomy of a Fraud, about using Benfords

    Law (statistics) to detect fraud. New Investor Insight, about the limitations of the

    current ratio in financial statement analysis.


    New Appendix C, financial statements ofZetar plc(U.K. candy company).

    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    For InstructorsIn addition to the support instructors receive from WileyPLUSand the Wiley Faculty Network, we offer the following useful


    Books Companion Website. On this website,www.wiley.com/college/weygandt, instructors will findthe Solutions Manual, Test Bank, Instructors Manual,Computerized Test Bank, and other resources.

    Instructors Resource CD. The Instructors ResourceCD (IRCD) contains all the instructor supplements. TheIRCD gives instructors the flexibility to access and prepareinstructional materials based on their individual needs.

    Solutions Manual. The Solutions Manual containsdetailed solutions to all questions, brief exercises, exercises,and problems in the textbook, as well as suggested

    answers to the questions and cases. The estimated timeto complete exercises, problems, and cases is provided.

    Solution Transparencies. The solution transparenciesfeature detailed solutions to brief exercises, exercises,problems, and Broadening Your Perspective activities.Transparencies can be easily ordered from the bookscompanion website.

    Instructors Manual. Included in each chapter arelecture outlines with teaching tips, chapter reviews, illustrations,and review quizzes.

    Teaching Transparencies. The teaching transparenciesare 4-color acetate images of the illustrations found in the

    Instructors Manual. Transparencies can be easily ordered fromthe books companion website.

    Test Bank and Computerized Test Bank. The testbank and computerized test bank allow instructors to tailorexaminations according to study objectives and learning out-comes, including AACSB, AICPA, and IMA professional stan-dards. Achievement tests, comprehensive examinations, and afinal exam are included.

    PowerPoint. The PowerPoint presentations containa combination of key concepts, images, and problems fromthe textbook.

    Blackboard. Blackboard offers an integrated set ofcourse management tools that enable instructors toeasily design, develop, and manage Web-based andWeb-enhanced courses.

    For StudentsBooks Companion Website. On this website,students will find:

    Exercises: Set B and Challenge Exercises

    Problems: Set C

    Self-Tests and Additional Self-Tests

    Student Study Guide. Each chapter of the StudyGuide contains a chapter review, chapter outline, and aglossary of key terms. Demonstration problems, multiplechoice, true/false, matching, and other exercises arealso included.

    Working Papers. The working papers are printedtemplates that can help students correctly format theirtextbook accounting solutions. Working paper template

    are available for all end-of-chapter brief exercises, exerciseproblems, and cases.

    Excel Working Papers. The Excel Working Papersare Excel templates that students can use to correctlyformat their textbook accounting solutions.

    Excel Primer: Using Excel in Accounting. Theonline Excel primer and accompanying Excel templatesallow students to complete select end-of-chapter exerciseand problems identified by a spreadsheet icon in themargin of the textbook.

    Problem-Solving Survival Guide. This tutorialis designed to improve students success rates in solving

    homework assignments and exam questions. Eachchapter includes an overview of key topics; a purposestatement and link to study objectives for each homewoassignment; numerous review tips to alert students tocommon pitfalls and misconceptions; and reminders toconcepts and principles. Multiple-choice exercises andcases similar to common homework assignments or examquestions enhance students problem-solving proficiencSolutions not only explain answers but also discuss anapproach to similar types of accounting problems.

    Mobile Applications. Quizzing and reviewing conteis available for download on iTunes.

    Teaching and Learning Supplementary Material


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter



    Financial Accounting has benefited greatly from the input of focus group participants, manuscriptreviewers, those who have sent comments by letter or e-mail, ancillary authors, and proofers. Wegreatly appreciate the constructive suggestions and innovative ideas of reviewers and the creativityand accuracy of the ancillary authors and checkers.

    Eighth Edition

    Dawn AddingtonCentral New Mexico CommunityCollege

    Audrey AgnelloNiagara County Community College

    Matt AndersonMichigan State University

    Joe AnthonyMichigan State University

    Art BajaOhlone College

    Felicia BaldwinCity College of ChicagoRichardJ. Daley

    John BlahnikLorain County Community College

    Brian BrattenUniversity of KentuckyLexington

    Jerry BraunDaytona State College

    Erin BurrellUniversity of Central Florida

    Lisa Capozzoli

    College of DuPageBruce CasselSUNY Dutchess Community College

    Milton Chavez-AriasOhlone College

    Kung ChenUniversity of NebraskaLincoln

    Suzanne CounteSt. Louis Community CollegeMeramec

    Robin DAgatiPalm Beach State College

    Karl Dahlberg

    Rutgers UniversityNewarkDori DankoGrand Valley State University

    Alan DavisCommunity College of Philadelphia

    Andrew DeJosephCollege of Mount Saint Vincent

    Naman DesaiUniversity of Central Florida

    Martin EpsteinCentral New Mexico Community College

    Ann EsarcoMcHenry County College

    Caroline FalconettiNassau Community College

    Roger GeeSan Diego Mesa College

    Severin GrabskiMichigan State University

    Hassan HefziCalifornia State PolytechnicUniversityPomona

    Janice HolmesLouisiana State UniversityBaton Rouge

    John HoskinsUniversity of AlabamaHuntsville

    Leslie HubbardSolano Community College

    Daniel HuntIvy Tech Community College

    John IlligState College of Florida

    Nancy KellyMiddlesex Community College

    Ridgway Knight

    Santa Monica CollegeLinda MarquisNorthern Kentucky University

    Maureen McBethCollege of DuPage

    Jeanette MiliusIowa Western Community College

    Mary Beth NelsonNorth Shore Community College

    Oluwakemi OnwuchekwaUniversity of Central Florida

    Hong PakCalifornia State Polytechnic UniversityPomona

    Richard PettitMountain View College

    Raymond ReisigPace UniversityPleasantville

    Chuck SmithIowa Western Community College

    Ashley SolizDelta State University

    Jalal SorooshLoyola University Maryland

    Grace Stuart-TugglePalm Beach State College

    Richard Van NessSchenectady County CommunityCollege

    Cynthia VanoosterumIvy Tech Community College

    Robert WalshUniversity of Dallas

    Barbara WarschawskiSchenectady County Community

    CollegeBob WillisRogers State University

    Jeffrey WongBellevue College

    Marj YuschakRutgers UniversityNew Brunswick

    Prior Edition

    John AhmadNorthern Virginia CommunityCollegeAnnandale

    Colin BattleBroward College

    Beverly BeattyAnne Arundel Community College

    Jaswinder BhangalChabot College

    Leroy BuggerEdison State College

    Anne CardozoBroward College

    Kimberly CharlandKansas State University

    Lisa ColeJohnson County State College

    Kathy Crusto-WayTarrant County College

    Robin DAgatiPalm Beach State College

    Karl E. DahlbergRutgers University

    Tony DellarteLuzerne County Community College

    Pam DonahueNorthern Essex Community College


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Kathy DunneRider University

    Dora EstesVolunteer State Community College

    Mary FalkeyPrince Georges Community College

    Lori Grady

    Bucks County Community CollegeJoyce GriffinKansas City Kansas Community College

    Lester HallDanville Community College

    Becky HancockEl Paso Community College

    Audrey HunterBroward College

    Donna Johnston-BlairSanta Clara University

    Naomi KarolinskiMonroe Community College

    Kenneth KoerberBucks County Community College

    Sandra LangMcKendree University

    Cathy Xanthaky LarsonMiddlesex Community College

    David LaurelSouth Texas College

    Michael LawrencePortland Community College

    Pamela LegnerCollege of DuPage

    Suneel MaheshwariMarshall University

    Lori MajorLuzerne County CommunityCollege

    Jim MartinUniversity of Montevallo

    Evelyn McDowellRider University

    Glenn PatePalm Beach State College

    Yvonne PhangBorough of Manhattan CommunityCollege

    Mike ProcktonFinger Lakes CommunityCollege

    Jessica RakowLouisiana State University

    Richard SarkisianCamden County College

    Mark SavitskieWayne State University

    Beth SecrestWalsh University

    William SerafinCommunity College of AlleghenyCounty

    Walter SilvaMassachusetts Bay CommunityCollege

    Lois Slutsky

    Broward CollegeFrank StangotaRutgers University

    Dennis StovallGrand Valley State University

    Shafi UllahBroward College

    WileyPLUS Developersand Reviewers

    Carole Brandt-FinkLaura McNally

    Melanie Yon

    Ancillary Authors,Contributors, Proofers,and Accuracy Checkers

    LuAnn BeanFlorida Institute of Technology

    Jack BorkeUniversity of WisconsinPlatteville

    Sandra CohenColumbia College Chicago

    Larry FalcettoEmporia State University

    Mark Gleason

    Metropolitan State UniversityCoby HarmonUniversity of CaliforniaSanta Barbara

    Douglas KiesoAurora University

    Kirk LynchSandhills Community College

    Kevin McNelisNew Mexico State University

    Jill MisuracaCentral Connecticut StateUniversity

    Barbara Muller

    Arizona State UniversityYvonne PhangBorough of Manhattan CommunityCollege

    John PlouffeCalifornia State UniversityLos Angeles

    Rex SchildhouseSan Diego Community CollegeMiramar

    Lynn StallworthAppalachian State University

    Diane TannerUniversity of North Florida

    Dick WassonSan Diego State University

    Andrea WeickgenanntXavier University

    Bernie WeinrichLindenwood University

    We appreciate the exemplary support and commitment givento us by associate publisher Chris DeJohn, marketing managerKarolina Zarychta Honsa, operations manager Yana Mermel,

    senior content editor Ed Brislin, development editors TerryAnn Tatro and Margaret Thompson, lead product designerAllie Morris, product designer Greg Chaput, vice president ofhigher education production and manufacturing Ann Berlin,designers Maureen Eide and Kristine Carney, illustration editorAnna Melhorn, photo editor Mary Ann Price, project editorSuzanne Ingrao of Ingrao Associates, indexer Steve Ingle,Denise Showers at Aptara, Cyndy Taylor, and project managerAngel Chavez at Integra. All of these professionals providedinnumerable services that helped the textbook take shape.

    Finally, our thanks to Amy Scholz, Susan Elbe, GeorgeHoffman, Tim Stookesberry, Joe Heider, and Steve Smithfor their support and leadership in Wileys College Division.

    We will appreciate suggestions and comments fromusersinstructors and students alike. You can send yourthoughts and ideas about the textbook to us via email at:[email protected].

    Jerry J. Weygandt Paul D. Kimmel Donald E. KiesoMadison, Wisconsin Milwaukee, Wisconsin DeKalb, Illinois


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Brief Contents1 Accounting in Action 22 The Recording Process 52

    3 Adjusting the Accounts 1004 Completing the Accounting Cycle 1625 Accounting for Merchandising Operations 2186 Inventories 2707 Fraud, Internal Control, and Cash 3248 Accounting for Receivables 3789 Plant Assets, Natural Resources,

    and Intangible Assets 42210 Liabilities 47411 Corporations: Organization, Stock Transactions,

    Dividends, and Retained Earnings 53612 Investments 60013 Statement of Cash Flows 64414 Financial Statement Analysis 710


    A Specimen Financial Statements:PepsiCo, Inc. A-1

    B Specimen Financial Statements:The Coca-Cola Company B-1

    CSpecimen Financial Statements:Zetar plc C-1

    D Time Value of Money D-1E Payroll Accounting E-1F Subsidiary Ledgers and Special Journals F-1G Other Significant Liabilities G-1


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    ContentsChapter 1

    Accounting in Action 2Knowing the Numbers 2

    What Is Accounting? 4Three Activities 4Who Uses Accounting Data 5

    The Building Blocks of Accounting 7Ethics in Financial Reporting 7Generally Accepted Accounting Principles 8Measurement Principles 9Assumptions 10

    The Basic Accounting Equation 12Assets 13Liabilities 13Stockholders Equity 13

    Using the Accounting Equation 15Transaction Analysis 15Summary of Transactions 20

    Financial Statements 22Income Statement 22Retained Earnings Statement 22Balance Sheet 24Statement of Cash Flows 24

    APPENDIX 1A: Accounting Career Opportunities 29Public Accounting 30Private Accounting 30Opportunities in Government 30Forensic Accounting 30

    Show Me the Money 31A Look at IFRS 49

    Chapter 2

    The Recording Process 52Accidents Happen 52The Account 54

    Debits and Credits 54Stockholders Equity Relationships 58Summary of Debit/Credit Rules 58

    Steps in the Recording Process 59The Journal 60

    The Ledger 62Posting 64

    The Recording Process Illustrated 66Summary Illustration of Journalizing and Posting 72

    The Trial Balance 73Limitations of a Trial Balance 74Locating Errors 74Use of Dollar Signs 75

    A Look at IFRS 97

    Chapter 3

    Adjusting the Accounts 100What Was Your Profit? 100

    Timing Issues 102Fiscal and Calendar Years 102Accrual- versus Cash-Basis Accounting 102Recognizing Revenues and Expenses 103

    The Basics of Adjusting Entries 104Types of Adjusting Entries 105Adjusting Entries for Deferrals 106Adjusting Entries for Accruals 113Summary of Basic Relationships 119

    The Adjusted Trial Balance andFinancial Statements 121

    Preparing the Adjusted Trial Balance 121Preparing Financial Statements 122

    APPENDIX 3A: Alternative Treatment of PrepaidExpenses and Unearned Revenues 126

    Prepaid Expenses 127Unearned Revenues 128Summary of Additional Adjustment

    Relationships 129APPENDIX 3B: Concepts in Action 130

    Qualities of Useful Information 130Assumptions in Financial Reporting 130Principles in Financial Reporting 131Constraints in Financial Reporting 132

    A Look at IFRS 159

    Chapter 4

    Completing the Accounting Cycle 162Everyone Likes to Win 162Using a Worksheet 164

    Steps in Preparing a Worksheet 165Preparing Financial Statements from a

    Worksheet 167Preparing Adjusting Entries from a Worksheet 1

    Closing the Books 170Preparing Closing Entries 170Posting Closing Entries 172

    Preparing a Post-Closing Trial Balance 174Summary of the Accounting Cycle 176

    Reversing EntriesAn Optional Step 177Correcting EntriesAn Avoidable Step 177

    The Classified Balance Sheet 179Current Assets 181Long-Term Investments 181Property, Plant, and Equipment 182Intangible Assets 182


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Current Liabilities 184Long-Term Liabilities 185Stockholders (Owners) Equity 185

    APPENDIX 4A: Reversing Entries 190Reversing Entries Example 190

    A Look at IFRS 214

    Chapter 5

    Accounting for MerchandisingOperations 218Who Doesnt Shop at Wal-Mart? 218Merchandising Operations 220

    Operating Cycles 220Flow of Costs 220

    Recording Purchases of Merchandise 223Freight Costs 223Purchase Returns and Allowances 225Purchase Discounts 226Summary of Purchasing Transactions 227

    Recording Sales of Merchandise 227

    Sales Returns and Allowances 229Sales Discounts 230

    Completing the Accounting Cycle 232Adjusting Entries 232Closing Entries 232Summary of Merchandising Entries 233

    Forms of Financial Statements 234Multiple-Step Income Statement 234Income Statement Presentation of Sales 234Single-Step Income Statement 237Classified Balance Sheet 238

    APPENDIX 5A: Periodic Inventory System 242Determining Cost of Goods Sold Under

    a Periodic System 242Recording Merchandise Transactions 243Recording Purchases of Merchandise 243Recording Sales of Merchandise 244

    APPENDIX 5B: Worksheet for a MerchandisingCompany 245

    Using a Worksheet 245A Look at IFRS 268

    Chapter 6

    Inventories 270

    Where Is That Spare Bulldozer Blade? 270Classifying Inventory 272Determining Inventory Quantities 273

    Taking a Physical Inventory 273Determining Ownership of Goods 274

    Inventory Costing 276Specific Identification 277Cost Flow Assumptions 277Financial Statement and Tax Effects of

    Cost Flow Methods 282

    Using Inventory Cost FlowMethods Consistently 284

    Lower-of-Cost-or-Market 285Inventory Errors 286

    Income Statement Effects 286Balance Sheet Effects 287

    Statement Presentation and Analysis 288Presentation 288Analysis 289

    APPENDIX 6A: Inventory Cost Flow Methodsin Perpetual Inventory Systems 292

    First-In, First-Out (FIFO) 293Last-In, First-Out (LIFO) 293Average-Cost 294

    APPENDIX 6B: Estimating Inventories 296Gross Profit Method 297Retail Inventory Method 298

    A Look at IFRS 321

    Chapter 7

    Fraud, Internal Control, and Cash324Minding the Money in Moose Jaw 324

    Fraud and Internal Control 326Fraud 326The Sarbanes-Oxley Act 326Internal Control 327Principles of Internal Control Activities 328Limitations of Internal Control 335

    Cash Controls 336Cash Receipts Controls 336Cash Disbursements Controls 339

    Control Features: Use of a Bank 344Making Bank Deposits 344

    Writing Checks 344Bank Statements 345Reconciling the Bank Account 347Electronic Funds Transfer (EFT) System 350

    Reporting Cash 352Cash Equivalents 352Restricted Cash 352

    A Look at IFRS 375

    Chapter 8

    Accounting for Receivables 378A Dose of Careful Management KeepsReceivables Healthy 378Types of Receivables 380Accounts Receivable 380

    Recognizing Accounts Receivable 381Valuing Accounts Receivable 382Disposing of Accounts Receivable 388

    Notes Receivable 391Determining the Maturity Date 392Computing Interest 393


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Recognizing Notes Receivable 394Valuing Notes Receivable 394Disposing of Notes Receivable 394

    Statement Presentation and Analysis 397Presentation 397Analysis 397

    A Look at IFRS 419

    Chapter 9

    Plant Assets, Natural Resources,and Intangible Assets 422How Much for a Ride to the Beach? 422Plant Assets 424

    Determining the Cost of Plant Assets 424Depreciation 427Expenditures During Useful Life 435Plant Asset Disposals 436

    Natural Resources 439Intangible Assets 441

    Accounting for Intangible Assets 441

    Research and Development Costs 443Statement Presentation and Analysis 444

    Presentation 444Analysis 445

    APPENDIX 9A: Exchange of Plant Assets 449Loss Treatment 449Gain Treatment 450

    A Look at IFRS 470

    Chapter 10

    Liabilities 474Financing His Dreams 474Current Liabilities 476

    Notes Payable 476Sales Taxes Payable 477Payroll and Payroll Taxes Payable 477Unearned Revenues 480Current Maturities of Long-Term Debt 480Statement Presentation and Analysis 481

    Long-Term Liabilities 483Bond Basics 483Accounting for Bond Issues 488Accounting for Bond Retirements 492Accounting for Long-Term Notes Payable 494

    Statement Presentation and Analysis 496APPENDIX 10A: Present Value Concepts Relatedto Bond Pricing 501

    Present Value of Face Value 501Present Value of Interest Payments

    (Annuities) 503Time Periods and Discounting 504Computing the Market Price of a Bond 504

    APPENDIX 10B: Effective-Interest Methodof Bond Amortization 506

    Amortizing Bond Discount 506Amortizing Bond Premium 508

    APPENDIX 10C: Straight-Line Amortization 510Amortizing Bond Discount 510Amortizing Bond Premium 511

    A Look at IFRS 533

    Chapter 11

    Corporations: Organization, StockTransactions, Dividends,and Retained Earnings 536Whats Cooking? 536The Corporate Form of Organization 538

    Characteristics of a Corporation 538Forming a Corporation 541Ownership Rights of Stockholders 542Stock Issue Considerations 542

    Corporate Capital 545Accounting for Stock Transactions 548Accounting for Common Stock Issues 548Accounting for Treasury Stock 551Accounting for Preferred Stock 554

    Dividends 556Cash Dividends 556Stock Dividends 560Stock Splits 562

    Retained Earnings 564Retained Earnings Restrictions 565Prior Period Adjustments 566Retained Earnings Statement 567

    Statement Presentation and Analysis 568Presentation 568Analysis 569

    APPENDIX 11A: Stockholders EquityStatement 573APPENDIX 11B: Book ValueAnother Per ShareAmount 574

    Book Value per Share 574Book Value versus Market Value 575

    A Look at IFRS 597

    Chapter 12

    Investments 600Is There Anything Else We Can Buy? 600Why Corporations Invest 602Accounting for Debt Investments 603

    Recording Acquisition of Bonds 603Recording Bond Interest 604Recording Sale of Bonds 604


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Accounting for Stock Investments 605Holdings of Less than 20% 606Holdings Between 20% and 50% 606Holdings of More than 50% 608

    Valuing and Reporting Investments 610Categories of Securities 610Balance Sheet Presentation 614Presentation of Realized and Unrealized

    Gain or Loss 614Classified Balance Sheet 615

    APPENDIX 12A: Preparing Consolidated FinancialStatements 619

    Consolidated Balance Sheet 619Consolidated Income Statement 623

    A Look at IFRS 641

    Chapter 13

    Statement of Cash Flows 644Got Cash? 644Statement of Cash Flows: Usefulness

    and Format 646Usefulness of the Statement of Cash Flows 646Classification of Cash Flows 646Significant Noncash Activities 648Format of the Statement of Cash Flows 648Preparing the Statement of Cash Flows 650Indirect and Direct Methods 650

    Preparing the Statement of Cash FlowsIndirect Method 651

    Step 1: Operating Activities 652Summary of Conversion to Net Cash Provided

    by Operating ActivitiesIndirect Method 656Step 2: Investing and Financing Activities 658

    Step 3: Net Change in Cash 659Using Cash Flows to Evaluate a Company 662

    Free Cash Flow 662APPENDIX 13A: Using a Worksheet to Preparethe Statement of Cash FlowsIndirect Method 666

    Preparing the Worksheet 667APPENDIX 13B: Statement of Cash FlowsDirect Method 672

    Step 1: Operating Activities 673Step 2: Investing and Financing Activities 677Step 3: Net Change in Cash 679

    APPENDIX 13C: Statement of CashFlowsT-Account Approach 681

    A Look at IFRS 706

    Chapter 14

    Financial Statement Analysis 710It Pays to Be Patient 710Basics of Financial Statement Analysis 712

    Need for Comparative Analysis 712Tools of Analysis 712

    Horizontal Analysis 713Balance Sheet 714Income Statement 714Retained Earnings Statement 715

    Vertical Analysis 716Balance Sheet 716Income Statement 716

    Ratio Analysis 718Liquidity Ratios 719Profitability Ratios 723Solvency Ratios 727Summary of Ratios 728

    Earning Power and Irregular Items 730Discontinued Operations 731Extraordinary Items 731Changes in Accounting Principle 733Comprehensive Income 734

    Quality of Earnings 735Alternative Accounting Methods 735Pro Forma Income 735Improper Recognition 736

    A Look at IFRS 760

    Appendix A

    Specimen Financial Statements:PepsiCo, Inc. A-1

    Appendix B

    Specimen Financial Statements: TheCoca-Cola Company B-1

    Appendix C

    Specimen Financial Statements:Zetar plc C-1

    Appendix D

    Time Value of Money D-1Nature of Interest D-1

    SimpIe Interest D-1Compound Interest D-2

    Future Value Concepts D-2Future Value of a Single Amount D-2Future Value of an Annuity D-4

    Present Value Concepts D-7Present Value Variables D-7Present Value of a Single Amount D-7Present Value of an Annuity D-9Time Periods and Discounting D-11Computing the Present Value of a

    Long-Term Note or Bond D-11


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter


    Computing the Present Values in a CapitalBudgeting Decision D-14

    Using Financial Calculators D-16Present Value of a Single Sum D-16Present Value of an Annuity D-17Useful Applications of the Financial

    Calculator D-18

    Appendix E

    Payroll Accounting E-1Accounting for Payroll E-1

    Determining the Payroll E-1Recording the Payroll E-5

    Employer Payroll Taxes E-8FICA Taxes E-9Federal Unemployment Taxes E-9State Unemployment Taxes E-9Recording Employer Payroll Taxes E-9Filing and Remitting Payroll Taxes E-10

    Internal Control for Payroll E-12

    Appendix F

    Subsidiary Ledgers andSpecial Journals F-1Expanding the LedgerSubsidiaryLedgers F-1

    Subsidiary Ledger Example F-2Advantages of Subsidiary Ledgers F-3

    Expanding the JournalSpecialJournals F-4

    Sales Journal F-4Cash Receipts Journal F-7Purchases Journal F-11Cash Payments Journal F-13Effects of Special Journals on the

    General Journal F-16

    Appendix G

    Other Significant Liabilities G-1Contingent Liabilities G-1

    Recording a Contingent Liability G-1Disclosure of Contingent Liabilities G-2

    Lease Liabilities G-3Operating Leases G-3Capital Leases G-4

    Additional Liabilities for EmployeeFringe Benefits G-5

    Paid Absences G-6Postretirement Benefits G-7

    Photo Credits PC-1Company Index I-1Subject Index I-3


    Copyright 2012 John Wiley & Sons, Inc.

  • 7/23/2019 Wiley - Front Matter