Accounting: Tools for Business Decision Making 7th Revised edition [Loose-leaf]

1 Introduction to Financial Statements 1-1 Knowing the Numbers: Columbia Sportswear Company 1-1 Business Organization and Accounting Information Uses 1-2 The Three Types of Business Activity 1-7 The Four Financial Statements 1-9 A Look at IFRS 1-42 2 A Further Look at Financial Statements 2-1 Just Fooling Around?: The Motley Fool 2-2 The Classified Balance Sheet 2-3 Analyzing the Financial Statements Using Ratios 2-8 Financial Reporting Concepts 2-15 A Look at IFRS 2-45 3 The Accounting Information System 3-1 Accidents Happen: MF Global Holdings Ltd 3-1 Using the Accounting Equation to Analyze Transactions 3-3 Accounts, Debits, and Credits 3-11 Using a Journal 3-17 The Ledger and Posting 3-20 The Trial Balance 3-30 A Look at IFRS 3-61 4 Accrual Accounting Concepts 4-1 Keeping Track of Groupons: Groupon 4-1 Accrual-Basis Accounting and Adjusting Entries 4-2 Adjusting Entries for Deferrals 4-7 Adjusting Entries for Accruals 4-14 The Adjusted Trial Balance and Closing Entries 4-21 Appendix 4A: Using a Worksheet 4-33 A Look at IFRS 4-65 5 Merchandising Operations and the Multiple-Step Income Statement 5-1 Buy Now, Vote Later: REI 5-1 Merchandising Operations and Inventory Systems 5-3 Recording Purchases under a Perpetual System 5-6 Recording Sales under a Perpetual System 5-11 Multiple-Step and Comprehensive Income Statements 5-15 Cost of Goods Sold Under a Periodic System 5-21 Gross Profit Rate and Profit Margin 5-22 Appendix 5A: Periodic Inventory System 5-26 Appendix 5B: Adjusting Entries for Credit Sales with Returns and Allowances 5-29 A Look at IFRS 5-54 6 Reporting and Analyzing Inventory 6-1 "Where Is That Spare Bulldozer Blade?": Caterpillar 6-1 Classifying and Determining Inventory 6-2 Inventory Methods and Financial Effects 6-6 Inventory Presentation and Analysis 6-15 Appendix 6A: Inventory Cost Flow Methods in Perpetual Inventory Systems 6-21 Appendix 6B: Effects of Inventory Errors 6-23 7 Fraud, Internal Control, and Cash 7-1 Minding the Money in Madison: Barriques 7-1 Fraud and Internal Control 7-3 Cash Controls 7-12 Control Features of a Bank Account 7-17 Reporting Cash and Cash Management 7-24 Appendix 7A: Operation of a Petty Cash Fund 7-30 A Look at IFRS 7-56 8 Reporting and Analyzing Receivables 8-1 What's cooking? Nike 8-1 Recognition of Accounts Receivable 8-3 Valuation and Disposition of Accounts Receivable 8-5 Notes Receivable 8-14 Receivables Presentation and Management 8-18 A Look at IFRS 8-47 9 Reporting and Analyzing Long-Lived Assets 9-1 A Tale of Two Airlines: American Airlines 9-1 Plant Asset Expenditures 9-3 Depreciation Methods 9-9 Plant Asset Disposals 9-15 Intangible Assets 9-18 Statement Presentation and Analysis 9-21 Appendix 9A: Other Depreciation Methods 9-27 A Look at IFRS 9-54 10 Reporting and Analyzing Liabilities 10-1 And Then There Were Two: Maxwell Car Company 10-1 Accounting for Current Liabilities 10-3 Major Characteristics of Bonds 10-8 Accounting for Bond Transactions 10-12 Presentation and Analysis 10-18 Appendix 10A: Straight-Line Amortization 10-24 Appendix 10B: Effective-Interest Amortization 10-27 Appendix 10C: Accounting for Long-Term Notes Payable 10-30 A Look at IFRS 10-58 11 Reporting and Analyzing Stockholders' Equity 11-1 Oh Well, I Guess I'll Get Rich: Facebook 11-1 Corporate Form of Organization 11-3 Accounting for Common, Preferred, and Treasury Stock 11-11 Cash Dividends, Stock Dividends, and Stock Splits 11-15 Presentation and Analysis 11-22 Appendix 11A: Entries for Stock Dividends 11-30 A Look at IFRS 11-54 12 Statement of Cash Flows 12-1 Got Cash?: Microsoft 12-1 Usefulness and Format of the Statement of Cash Flows 12-3 Preparing the Statement of Cash Flows-Indirect Method 12-6 Analyzing the Statement of Cash Flows 12-17 Appendix 12A: Statement of Cash Flows-Direct Method 12-22 Appendix 12B: Worksheet for the Indirect Method 12-29 Appendix 12C: Statement of Cash Flows-T-Account Approach 12-34 A Look at IFRS 12-61 13 Financial Analysis: The Big Picture 13-1 It Pays to Be Patient: Warren Buffett 13-2 Sustainable Income and Quality of Earnings 13-3 Horizontal Analysis and Vertical Analysis 13-9 Ratio Analysis 13-14 A Look at IFRS 13-54 14 Managerial Accounting 14-1 Just Add Water ... and Paddle: Current Designs 14-1 Managerial Accounting Basics 14-3 Managerial Cost Concepts 14-7 Manufacturing Costs in Financial Statements 14-10 Managerial Accounting Today 14-14 15 Job Order Costing 15-1 Profiting from the Silver Screen: Disney 15-1 Cost Accounting Systems 15-3 Assigning Manufacturing Costs 15-7 Predetermined Overhead Rates 15-12 Entries for Jobs Completed and Sold 15-15 Applied Manufacturing Overhead 15-20 16 Process Costing 16-1 The Little Guy Who Could: Jones Soda 16-1 Overview of Process Cost Systems 16-3 Process Cost Flow and Assigning Costs 16-6 Equivalent Units 16-9 The Production Cost Report 16-12 Appendix 16A: FIFO Method for Equivalent Units 16-19 17 Activity-Based Costing 17-1 Precor Is on Your SiTH: Precor 17-1 Traditional vs. Activity-Based Costing 17-3 ABC and Manufacturers 17-7 ABC Benefits and Limitations 17-12 ABC and Service Industries 17-17 Appendix 17A: Just-in-Time Processing 17-22 18 Cost-Volume-Profit 18-1 Don't Worry-Just Get Big: Amazon.com 18-1 Cost Behavior Analysis 18-2 Mixed Costs Analysis 18-7 Cost-Volume-Profit Analysis 18-10 Break-Even Analysis 18-14 Target Net Income and Margin of Safety 18-18 Appendix 18A: Regression Analysis 18-22 19 Cost-Volume-Profit Analysis: Additional Issues 19-1 Not Even a Flood Could Stop It: Whole Foods Market 19-1 Basic CVP Concepts 19-3 Sales Mix and Break-Even Sales 19-8 Sales Mix with Limited Resources 19-12 Operating Leverage and Profitability 19-14 Appendix 19A: Absorption Costing vs. Variable Costing 19-19 20 Incremental Analysis 20-1 Keeping It Clean: Method Products 20-1 Decision-Making and Incremental Analysis 20-3 Special Orders 20-6 Make or Buy 20-8 Sell or Process Further 20-10 Repair, Retain, or Replace Equipment 20-14 Eliminate Unprofitable Segment or Product 20-15 21 Pricing 21-1 They've Got Your Size-and Color: Zappos.com 21-1 Target Costing 21-3 Cost-Plus and Variable-Cost Pricing 21-5 Time-and-Material Pricing 21-10 Transfer Prices 21-13 Appendix 21A: Absorption-Cost and Variable-Cost Pricing 21-21 Appendix 21B: Transfers between Divisions in Different Countries 21-24 22 Budgetary Planning 22-1 What's in Your Cupcake?: Baby Cakes NYC 22-1 Effective Budgeting and the Master Budget 22-3 Sales, Production, and Direct Materials Budgets 22-8 Direct Labor, Manufacturing Overhead, and S&A Expense Budgets 22-13 Cash Budget and Budgeted Balance Sheet 22-17 Budgeting in Nonmanufacturing Companies 22-22 23 Budgetary Control and Responsibility Accounting 23-1 Pumpkin Madeleines and a Movie: Tribeca Grand 23-1 Budgetary Control and Static Budget Reports 23-3 Flexible Budget Reports 23-6 Responsibility Accounting and Responsibility Centers 23-13 Investment Centers 23-22 Appendix 23A: ROI vs. Residual Income 23-28 24 Standard Costs and Balanced Scorecard 24-1 80,000 Different Caffeinated Combinations: Starbucks 24-2 Overview of Standard Costs 24-3 Direct Materials Variances 24-7 Direct Labor and Manufacturing Overhead Variances 24-11 Variance Reports and Balanced Scorecards 24-16 Appendix 24A: Standard Cost Accounting System 24-21 Appendix 24B: Overhead Controllable and Volume Variances 24-24 25 Planning for Capital Investments 25-1 Floating Hotels: Holland America Line 25-2 Capital Budgeting and Cash Payback 25-3 Net Present Value Method 25-6 Capital Budgeting Challenges and Refinements 25-11 Internal Rate of Return 25-16 Annual Rate of Return 25-18 APPENDIX A Specimen Financial Statements: Apple Inc. A-1 APPENDIX B Specimen Financial Statements: Columbia Sportswear Company B-1 APPENDIX C Specimen Financial Statements: VF Corporation C-1 APPENDIX D Specimen Financial Statements: Amazon.com, Inc. D-1 APPENDIX E Specimen Financial Statements: Wal-Mart Stores, Inc. E-1 APPENDIX F Specimen Financial Statements: Louis Vuitton F-1 APPENDIX G Time Value of Money G-1 Interest and Future Values G-1 Nature of Interest G-1 Future Value of a Single Amount G-3 Future Value of an Annuity G-5 Present Values G-7 Present Value Variables G-7 Present Value of a Single Amount G-7 Present Value of an Annuity G-9 Time Periods and Discounting G-11 Present Value of a Long-Term Note or Bond G-11 Capital Budgeting Situations G-14 Using Financial Calculators G-15 Present Value of a Single Sum G-16 Present Value of an Annuity G-17 Future Value of a Single Sum G-17 Future Value of an Annuity G-17 Internal Rate of Return G-18 Useful Applications of the Financial Calculator G-18 APPENDIX H Reporting and Analyzing Investments H-1 Accounting for Debt Investments H-1 Why Corporations Invest H-1 Accounting for Debt Investments H-3 Accounting for Stock Investments H-4 Holdings of Less Than 20% H-4 Holdings Between 20% and 50% H-5 Holdings of More Than 50% H-6 Reporting Investments in Financial Statements H-7 Debt Securities H-7 Equity Securities H-10 Balance Sheet Presentation H-11 Presentation of Realized and Unrealized Gain or Loss H-12 APPENDIX I Payroll Accounting I-1 Recording the Payroll I-1 Determining the Payroll I-2 Recording the Payroll I-5 Employer Payroll Taxes I-8 FICA Taxes I-8 Federal Unemployment Taxes I-8 State Unemployment Taxes I-8 Recording Employer Payroll Taxes I-9 Filing and Remitting Payroll Taxes I-9 Internal Control for Payroll I-10 APPENDIX J Subsidiary Ledgers and Special Journals J-1 Subsidiary Ledgers J-1 Subsidiary Ledger Example J-2 Advantages of Subsidiary Ledgers J-3 Special Journals J-4 Sales Journal J-4 Cash Receipts Journal J-7 Purchases Journal J-11 Cash Payments Journal J-13 Effects of Special Journals on the General Journal J-16 Cybersecurity: A Final Comment J-17 APPENDIX K Accounting for Partnerships K-1 Forming a Partnership K-1 Characteristics of Partnerships K-1 Organizations with Partnerships Characteristics K-2 Advantages and Disadvantages of Partnerships K-3 The Partnership Agreement K-4 Accounting for a Partnership Formation K-5 Accounting for Partnership Net Income or Net Loss K-6 Dividing Net Income or Net Loss K-6 Partnership Financial Statements K-9 Accounting for Partnership Liquidation K-10 No Capital Deficiency K-11 Capital Deficiency K-12 Admission and Withdrawal of Partners K-14 Admission of a Partner K-14 Withdrawal of a Partner K-18 APPENDIX L Accounting for Sole Proprietorships L-1 Corporation versus Sole Proprietorship Equity Accounts L-1 Accounts that Change Owner's Equity L-2 Owner's Equity in a Sole Proprietorship L-2 Recording Transactions of a Proprietorship L-3 Retained Earnings Statement versus Owner's Equity Statement L-3 Closing the Books for a Sole Proprietorship L-4 Preparing a Post-Closing Trail Balance for a Proprietorship L-7 Company Index I-1 Subject Index I-3