Table of Contents COPYRIGHTED MATERIAL. 1 Accounting in Action 2. 3 Adjusting the Accounts The Recording Process 48

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1 Table of Contents 1 Accounting in Action 2 Knowing the Numbers: Clif Bar 2 LO 1: Identify the activities and users associated with accounting. 4 Three Activities 4 Who Uses Accounting Data? 5 LO 2: Explain the building blocks of accounting: ethics, principles, and assumptions. 7 Ethics in Financial Reporting 7 Generally Accepted Accounting Principles 9 Measurement Principles 9 Assumptions 9 LO 3: State the accounting equation, and define its components. 12 Assets 12 Liabilities 12 Stockholders Equity 12 LO 4: Analyze the effects of business transactions on the accounting equation. 14 Transaction Analysis 15 Summary of Transactions 19 LO 5: Describe the four financial statements and how they are prepared. 21 Income Statement 21 Retained Earnings Statement 21 Balance Sheet 23 Statement of Cash Flows 23 LO *6: APPENDIX 1A: Explain the career opportunities in accounting. 25 Public Accounting 25 Private Accounting 25 Governmental Accounting 25 Forensic Accounting 26 Show Me the Money 26 A Look at IFRS 46 2 The Recording Process 48 Accidents Happen: MF Global Holdings 48 LO 1: Describe how accounts, debits, and credits are used to record business transactions. 50 Debits and Credits 50 Stockholders Equity Relationships 54 Summary of Debit/Credit Rules 54 LO 2: Indicate how a journal is used in the recording process. 55 Steps in the Recording Process 55 The Journal 56 LO 3: Explain how a ledger and posting help in the recording process. 58 The Ledger 58 Posting 60 The Recording Process Illustrated 62 Summary Illustration of Journalizing and Posting 67 LO 4: Prepare a trial balance. 69 Limitations of a Trial Balance 69 Locating Errors 70 Dollar Signs and Underlining 70 A Look at IFRS 92 COPYRIGHTED MATERIAL 3 Adjusting the Accounts 94 Keeping Track of Groupons: Groupon 94 LO 1: Explain the accrual basis of accounting and the reasons for adjusting entries. 96 Fiscal and Calendar Years 96 Accrual- versus Cash-Basis Accounting 96 Recognizing Revenues and Expenses 97 The Need for Adjusting Entries 98 Types of Adjusting Entries 98 LO 2: Prepare adjusting entries for deferrals. 100 Prepaid Expenses 100 Unearned Revenues 104 LO 3: Prepare adjusting entries for accruals. 106 Accrued Revenues 106 Accrued Expenses 108 Summary of Basic Relationships 111 LO 4: Describe the nature and purpose of an adjusted trial balance. 113 Preparing the Adjusted Trial Balance 113 Preparing Financial Statements 114 LO *5: APPENDIX 3A: Prepare adjusting entries for the alternative treatment of deferrals. 117 Prepaid Expenses 118 Unearned Revenues 119 Summary of Additional Adjustment Relationships 120 LO *6: APPENDIX 3B: Discuss financial reporting concepts. 120 Qualities of Useful Information 120 Assumptions in Financial Reporting 121 Principles in Financial Reporting 122 Cost Constraint 122 A Look at IFRS 148 ix

2 4 Completing the Accounting Cycle 150 Everyone Likes to Win: Rhino Foods 150 LO 1: Prepare a worksheet. 152 Steps in Preparing a Worksheet 153 Preparing Financial Statements from a Worksheet 155 Preparing Adjusting Entries from a Worksheet 157 LO 2: Prepare closing entries and a post-closing trial balance. 157 Preparing Closing Entries 158 Posting Closing Entries 160 Preparing a Post-Closing Trial Balance 162 LO 3: Explain the steps in the accounting cycle and how to prepare correcting entries. 165 Summary of the Accounting Cycle 165 Reversing Entries An Optional Step 165 Correcting Entries An Avoidable Step 166 LO 4: Identify the sections of a classified balance sheet. 168 Current Assets 168 Long-Term Investments 170 Property, Plant, and Equipment 170 Intangible Assets 170 Current Liabilities 171 Long-Term Liabilities 172 Stockholders (Owners ) Equity 172 LO *5: APPENDIX 4A: Prepare reversing entries. 174 Reversing Entries Example 174 A Look at IFRS Accounting for Merchandising Operations 204 Buy Now, Vote Later: REI 204 LO 1: Describe merchandising operations and inventory systems. 206 Operating Cycles 206 Flow of Costs 207 LO 2: Record purchases under a perpetual inventory system. 209 Freight Costs 210 Purchase Returns and Allowances 212 Purchase Discounts 212 Summary of Purchasing Transactions 213 LO 3: Record sales under a perpetual inventory system. 214 Sales Returns and Allowances 215 Sales Discounts 216 LO 4: Apply the steps in the accounting cycle to a merchandising company. 218 Adjusting Entries 218 Closing Entries 218 Summary of Merchandising Entries 219 LO 5: Compare a multiple-step with a single-step income statement. 220 Multiple-Step Income Statement 220 Single-Step Income Statement 223 Classified Balance Sheet 224 LO *6: APPENDIX 5A: Prepare a worksheet for a merchandising company. 225 Using a Worksheet 225 LO *7: APPENDIX 5B: Record purchases and sales under a periodic inventory system. 227 Determining Cost of Goods Sold Under a Periodic System 227 Recording Merchandise Transactions 228 Recording Purchases of Merchandise 228 Recording Sales of Merchandise 229 Journalizing and Posting Closing Entries 229 Using a Worksheet 231 A Look at IFRS Inventories 258 Where Is That Spare Bulldozer Blade? : Caterpillar 258 LO 1: Discuss how to classify and determine inventory. 260 Classifying Inventory 260 Determining Inventory Quantities 261 LO 2: Apply inventory cost flow methods and discuss their financial effects. 264 Specific Identification 264 Cost Flow Assumptions 265 Financial Statement and Tax Effects of Cost Flow Methods 269 Using Inventory Cost Flow Methods Consistently 271 LO 3: Indicate the effects of inventory errors on the financial statements. 272 Income Statement Effects 272 Balance Sheet Effects 273 LO 4: Explain the statement presentation and analysis of inventory. 274 Presentation 274 Lower-of-Cost-or-Market 274 Analysis 275 LO *5: APPENDIX 6A: Apply the inventory cost flow methods to perpetual inventory records. 277 First-In, First-Out (FIFO) 278 Last-In, First-Out (LIFO) 278 Average-Cost 279 LO *6: APPENDIX 6B: Describe the two methods of estimating inventories. 280 Gross Profit Method 280 Retail Inventory Method 281 A Look at IFRS 304 x

3 7 Fraud, Internal Control, and Cash 306 Minding the Money in Madison: Barriques 306 LO 1: Discuss fraud and the principles of internal control. 308 Fraud 308 The Sarbanes-Oxley Act 308 Internal Control 309 Principles of Internal Control Activities 309 Limitations of Internal Control 316 LO 2: Apply internal control principles to cash. 317 Cash Receipts Controls 318 Cash Disbursements Controls 320 Petty Cash Fund 322 LO 3: Identify the control features of a bank account. 325 Making Bank Deposits 325 Writing Checks 326 Bank Statements 327 Reconciling the Bank Account 328 Electronic Funds Transfer (EFT) System 332 LO 4: Explain the reporting of cash. 333 Cash Equivalents 333 Restricted Cash 333 A Look at IFRS Accounting for Receivables 356 A Dose of Careful Management Keeps Receivables Healthy: Whitehall-Robins 356 LO 1: Explain how companies recognize accounts receivable. 358 Types of Receivables 358 Recognizing Accounts Receivable 358 LO 2: Describe how companies value accounts receivable and record their disposition. 360 Valuing Accounts Receivable 360 Disposing of Accounts Receivable 366 LO 3: Explain how companies recognize notes receivable. 369 Determining the Maturity Date 369 Computing Interest 370 Recognizing Notes Receivable 371 LO 4: Describe how companies value notes receivable, record their disposition, and present and analyze receivables. 371 Valuing Notes Receivable 371 Disposing of Notes Receivable 372 Statement Presentation and Analysis 373 A Look at IFRS Plant Assets, Natural Resources, and Intangible Assets 396 How Much for a Ride to the Beach?: Rent-A-Wreck 396 LO 1: Explain the accounting for plant asset expenditures. 398 Determining the Cost of Plant Assets 398 Expenditures During Useful Life 400 LO 2: Apply depreciation methods to plant assets. 402 Factors in Computing Depreciation 403 Depreciation Methods 403 Depreciation and Income Taxes 408 Revising Periodic Depreciation 408 LO 3: Explain how to account for the disposal of plant assets. 409 Retirement of Plant Assets 410 Sale of Plant Assets 410 LO 4: Describe how to account for natural resources and intangible assets. 412 Natural Resources 412 Depletion 412 Intangible Assets 414 Accounting for Intangible Assets 414 Research and Development Costs 416 LO 5: Discuss how plant assets, natural resources, and intangible assets are reported and analyzed. 417 Presentation 417 Analysis 418 LO *6: APPENDIX 9A: Explain how to account for the exchange of plant assets. 419 Loss Treatment 419 Gain Treatment 420 A Look at IFRS Liabilities 444 Financing His Dreams: Wilbert Murdock 444 LO 1: Explain how to account for current liabilities. 446 What Is a Current Liability? 446 Notes Payable 446 Sales Taxes Payable 447 Payroll and Payroll Taxes Payable 448 Unearned Revenues 450 Current Maturities of Long-Term Debt 451 LO 2: Describe the major characteristics of bonds. 452 Types of Bonds 452 Issuing Procedures 452 xi

4 Bond Trading 453 Determining the Market Price of a Bond 454 LO 3: Explain how to account for bond transactions. 456 Issuing Bonds at Face Value 456 Discount or Premium on Bonds 456 Issuing Bonds at a Discount 457 Issuing Bonds at a Premium 459 Redeeming and Converting Bonds 460 LO 4: Explain how to account for long-term notes payable. 462 LO 5: Discuss how liabilities are reported and analyzed. 464 Presentation 464 Use of Ratios 465 Debt and Equity Financing 466 LO *6: APPENDIX 10A: Apply the straight-line method of amortizing bond discount and bond premium. 468 Amortizing Bond Discount 468 Amortizing Bond Premium 469 LO *7: APPENDIX 10B: Apply the effective-interest method of amortizing bond discount and bond premium. 470 Amortizing Bond Discount 471 Amortizing Bond Premium 473 A Look at IFRS Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings 498 What s Cooking?: Nike 498 LO 1: Discuss the major characteristics of a corporation. 500 Characteristics of a Corporation 500 Forming a Corporation 502 Stockholder Rights 504 Stock Issue Considerations 504 Corporate Capital 507 LO 2: Explain how to account for the issuance of common and preferred stock. 509 Accounting for Common Stock 509 Accounting for Preferred Stock 511 LO 3: Explain how to account for treasury stock. 512 Purchase of Treasury Stock 512 Disposal of Treasury Stock 513 LO 4: Explain how to account for cash dividends. 515 Cash Dividends 515 Dividend Preferences 517 LO 5: Explain how to account for stock dividends and splits. 520 Stock Dividends 520 Stock Splits 522 LO 6: Discuss how stockholders equity is reported and analyzed. 524 Retained Earnings 524 Statement Presentation and Analysis 528 LO *7: APPENDIX 11A: Describe the use and content of the stockholders equity statement. 531 LO *8: APPENDIX 11B: Compute book value per share. 531 Book Value per Share 531 Book Value versus Market Price 532 A Look at IFRS Investments 558 Is There Anything Else We Can Buy? : Time Warner 558 LO 1: Explain how to account for debt investments. 560 Why Corporations Invest 560 Accounting for Debt Investments 561 LO 2: Explain how to account for stock investments. 563 Holdings of Less than 20% 563 Holdings Between 20% and 50% 564 Holdings of More than 50% 566 LO 3: Discuss how debt and stock investments are reported in financial statements. 568 Categories of Securities 568 Balance Sheet Presentation 571 Presentation of Realized and Unrealized Gain or Loss 572 Classified Balance Sheet 573 LO *4: APPENDIX 12A: Describe the form and content of consolidated financial statements as well as how to prepare them. 575 Consolidated Balance Sheet 575 Consolidated Income Statement 578 A Look at IFRS Statement of Cash Flows 598 Got Cash?: Microsoft 598 LO 1: Discuss the usefulness and format of the statement of cash flows. 600 Usefulness of the Statement of Cash Flows 600 Classification of Cash Flows 600 Significant Noncash Activities 601 Format of the Statement of Cash Flows 602 LO 2: Prepare a statement of cash flows using the indirect method. 603 Indirect and Direct Methods 604 Indirect Method Computer Services Company 604 Step 1: Operating Activities 606 xii

5 Summary of Conversion to Net Cash Provided by Operating Activities Indirect Method 609 Step 2: Investing and Financing Activities 610 Step 3: Net Change in Cash 611 LO 3: Analyze the statement of cash flows. 614 Free Cash Flow 614 LO *4: APPENDIX 13A: Prepare a statement of cash flows using the direct method. 616 Step 1: Operating Activities 616 Step 2: Investing and Financing Activities 622 Step 3: Net Change in Cash 623 LO *5: APPENDIX 13B: Use a worksheet to prepare the statement of cash flows using the indirect method. 623 Preparing the Worksheet 624 LO *6: APPENDIX 13C: Use the T-account approach to prepare a statement of cash flows. 629 A Look at IFRS Financial Statement Analysis 658 It Pays to Be Patient: Warren Buffett 658 LO 1: Apply horizontal and vertical analysis to financial statements. 660 Need for Comparative Analysis 660 Tools of Analysis 660 Horizontal Analysis 661 Vertical Analysis 664 LO 2: Analyze a company s performance using ratio analysis. 666 Liquidity Ratios 667 Profitability Ratios 670 Solvency Ratios 674 Summary of Ratios 676 LO 3: Apply the concept of sustainable income. 678 Discontinued Operations 679 Other Comprehensive Income 679 A Look at IFRS Managerial Accounting 710 Just Add Water... and Paddle: Current Designs 710 LO 1: Identify the features of managerial accounting and the functions of management. 712 Comparing Managerial and Financial Accounting 712 Management Functions 712 Organizational Structure 714 LO 2: Describe the classes of manufacturing costs and the differences between product and period costs. 716 Manufacturing Costs 716 Product Versus Period Costs 718 Illustration of Cost Concepts 718 LO 3: Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer. 720 Income Statement 720 Cost of Goods Manufactured 721 Cost of Goods Manufactured Schedule 722 Balance Sheet 722 LO 4: Discuss trends in managerial accounting. 724 Service Industries 724 Focus on the Value Chain 725 Balanced Scorecard 726 Business Ethics 727 Corporate Social Responsibility Job Order Costing 752 Profiting from the Silver Screen: Disney 752 LO 1: Describe cost systems and the flow of costs in a job order system. 754 Process Cost System 754 Job Order Cost System 754 Job Order Cost Flow 755 Accumulating Manufacturing Costs 756 LO 2: Use a job cost sheet to assign costs to work in process. 758 Raw Materials Costs 759 Factory Labor Costs 761 LO 3 : Demonstrate how to determine and use the predetermined overhead rate. 763 LO 4 : Prepare entries for manufacturing and service jobs completed and sold. 766 Assigning Costs to Finished Goods 766 Assigning Costs to Cost of Goods Sold 767 Summary of Job Order Cost Flows 767 Job Order Costing for Service Companies 769 Advantages and Disadvantages of Job Order Costing 770 LO 5: Distinguish between under- and overapplied manufacturing overhead. 771 Under- or Overapplied Manufacturing Overhead Process Costing 794 The Little Guy Who Could: Jones Soda Co. 794 LO 1: Discuss the uses of a process cost system and how it compares to a job order system. 796 Uses of Process Cost Systems 796 Process Costing for Service Companies 797 Similarities and Differences Between Job Order Cost and Process Cost Systems 797 xiii

6 LO 2: Explain the flow of costs in a process cost system and the journal entries to assign manufacturing costs. 799 Process Cost Flow 799 Assigning Manufacturing Costs Journal Entries 799 LO 3: Compute equivalent units. 802 Weighted-Average Method 802 Refinements on the Weighted-Average Method 803 LO 4: Complete the four steps to prepare a production cost report. 805 Compute the Physical Unit Flow (Step 1) 806 Compute the Equivalent Units of Production (Step 2) 806 Compute Unit Production Costs (Step 3) 807 Prepare a Cost Reconciliation Schedule (Step 4) 808 Preparing the Production Cost Report 808 Costing Systems Final Comments 809 LO *5: APPENDIX 17A: Compute equivalent units using the FIFO method. 810 Equivalent Units Under FIFO 810 Comprehensive Example 811 FIFO and Weighted-Average Activity-Based Costing 838 Precor Is on Your Side 838 LO 1: Discuss the difference between traditional costing and activity-based costing. 840 Traditional Costing Systems 840 Illustration of a Traditional Costing System 840 The Need for a New Approach 841 Activity-Based Costing 841 LO 2: Apply activity-based costing to a manufacturer. 844 Identify and Classify Activities and Assign Overhead to Cost Pools (Step 1) 844 Identify Cost Drivers (Step 2) 844 Compute Activity-Based Overhead Rates (Step 3) 845 Allocate Overhead Costs to Products (Step 4) 845 Comparing Unit Costs 846 LO 3: Explain the benefits and limitations of activity-based costing. 849 The Advantage of Multiple Cost Pools 849 The Advantage of Enhanced Cost Control 850 The Advantage of Better Management Decisions 852 Some Limitations and Knowing When to Use ABC 853 LO 4: Apply activity-based costing to service industries. 854 Traditional Costing Example 855 Activity-Based Costing Example 856 LO *5: APPENDIX 18A: Explain just-in-time (JIT) processing. 858 Objective of JIT Processing 859 Elements of JIT Processing 859 Benefits of JIT Processing Cost-Volume-Profit 884 Don t Worry Just Get Big: Amazon.com 884 LO 1: Explain variable, fixed, and mixed costs and the relevant range. 886 Variable Costs 886 Fixed Costs 887 Relevant Range 888 Mixed Costs 889 LO 2: Apply the high-low method to determine the components of mixed costs. 890 High-Low Method 891 Importance of Identifying Variable and Fixed Costs 893 LO 3: Prepare a CVP income statement to determine contribution margin. 894 Basic Components 894 CVP Income Statement 894 LO 4: Compute the break-even point using three approaches. 898 Mathematical Equation 898 Contribution Margin Technique 899 Graphic Presentation 900 LO 5: Determine the sales required to earn target net income and determine margin of safety. 901 Target Net Income 901 Margin of Safety Cost-Volume-Profit Analysis: Additional Issues 922 Not Even a Flood Could Stop It: Whole Foods Market 922 LO 1: Apply basic CVP concepts. 924 Basic Concepts 924 Basic Computations 925 CVP and Changes in the Business Environment 926 LO 2: Explain the term sales mix and its effects on break-even sales. 929 Break-Even Sales in Units 929 Break-Even Sales in Dollars 931 xiv

7 LO 3: Determine sales mix when a company has limited resources. 933 LO 4: Indicate how operating leverage affects profitability. 935 Effect on Contribution Margin Ratio 936 Effect on Break-Even Point 936 Effect on Margin of Safety Ratio 937 Operating Leverage 937 LO *5: APPENDIX 20A: Explain the differences between absorption costing and variable costing. 939 Example Comparing Absorption Costing with Variable Costing 939 Net Income Effects 941 Decision-Making Concerns 945 Potential Advantages of Variable Costing Incremental Analysis 972 Keeping It Clean: Method Products 972 LO 1: Describe management s decision-making process and incremental analysis. 974 Incremental Analysis Approach 974 How Incremental Analysis Works 975 Qualitative Factors 976 Relationship of Incremental Analysis and Activity- Based Costing 976 Types of Incremental Analysis 977 LO 2: Analyze the relevant costs in accepting an order at a special price. 977 LO 3: Analyze the relevant costs in a make-or-buy decision. 979 Opportunity Cost 980 LO 4: Analyze the relevant costs in determining whether to sell or process materials further. 981 Single-Product Case 982 Multiple-Product Case 982 LO 5: Analyze the relevant costs to be considered in repairing, retaining, or replacing equipment. 985 LO 6: Analyze the relevant costs in deciding whether to eliminate an unprofitable segment or product Pricing 1012 They ve Got Your Size and Color: Zappos.com 1012 LO 1: Compute a target cost when the market determines a product price Target Costing 1015 LO 2: Compute a target selling price using cost-plus pricing Cost-Plus Pricing 1016 Variable-Cost Pricing 1019 LO 3: Use time-and-material pricing to determine the cost of services provided LO 4: Determine a transfer price using the negotiated, cost-based, and market-based approaches Negotiated Transfer Prices 1024 Cost-Based Transfer Prices 1027 Market-Based Transfer Prices 1028 Effect of Outsourcing on Transfer Pricing 1029 Transfers Between Divisions in Different Countries 1029 LO *5: APPENDIX 22A: Determine prices using absorption-cost pricing and variable-cost pricing Absorption-Cost Pricing 1030 Variable-Cost Pricing 1032 LO *6: APPENDIX 22B: Explain issues involved in transferring goods between divisions in different countries Budgetary Planning 1056 What s in Your Cupcake?: BabyCakes NYC 1056 LO 1: State the essentials of effective budgeting and the components of the master budget Budgeting and Accounting 1058 The Benefits of Budgeting 1058 Essentials of Effective Budgeting 1058 The Master Budget 1061 LO 2: Prepare budgets for sales, production, and direct materials Sales Budget 1063 Production Budget 1064 Direct Materials Budget 1065 LO 3: Prepare budgets for direct labor, manufacturing overhead, and selling and administrative expenses, and a budgeted income statement Direct Labor Budget 1068 Manufacturing Overhead Budget 1069 Selling and Administrative Expense Budget 1070 Budgeted Income Statement 1070 LO 4: Prepare a cash budget and a budgeted balance sheet Cash Budget 1072 Budgeted Balance Sheet 1075 LO 5: Apply budgeting principles to nonmanufacturing companies Merchandisers 1077 Service Companies 1078 Not-for-Profit Organizations 1079 xv

8 24 Budgetary Control and Responsibility Accounting 1106 Pumpkin Madeleines and a Movie: Tribeca Grand Hotel 1106 LO 1: Describe budgetary control and static budget reports Budgetary Control 1108 Static Budget Reports 1109 LO 2: Prepare flexible budget reports Why Flexible Budgets? 1111 Developing the Flexible Budget 1114 Flexible Budget A Case Study 1114 Flexible Budget Reports 1116 LO 3: Apply responsibility accounting to cost and profit centers Controllable versus Noncontrollable Revenues and Costs 1120 Principles of Performance Evaluation 1120 Responsibility Reporting System 1122 Types of Responsibility Centers 1124 LO 4: Evaluate performance in investment centers Return on Investment (ROI) 1127 Responsibility Report 1128 Judgmental Factors in ROI 1129 Improving ROI 1129 LO *5: APPENDIX 24A: Explain the difference between ROI and residual income Residual Income Compared to ROI 1132 Residual Income Weakness Standard Costs and Balanced Scorecard ,000 Different Caffeinated Combinations: Starbucks 1158 LO 1: Describe standard costs Distinguishing Between Standards and Budgets 1161 Setting Standard Costs 1161 LO 2: Determine direct materials variances Analyzing and Reporting Variances 1165 Direct Materials Variances 1166 LO 3: Determine direct labor and total manufacturing overhead variances Direct Labor Variances 1169 Manufacturing Overhead Variances 1171 LO 4: Prepare variance reports and balanced scorecards Reporting Variances 1173 Income Statement Presentation of Variances 1174 Balanced Scorecard 1175 LO *5: APPENDIX 25A: Identify the features of a standard cost accounting system Journal Entries 1178 Ledger Accounts 1180 LO *6: APPENDIX 25B: Compute overhead controllable and volume variances Overhead Controllable Variance 1181 Overhead Volume Variance Planning for Capital Investments 1204 Floating Hotels: Holland America Line 1204 LO 1: Describe capital budgeting inputs and apply the cash payback technique Cash Flow Information 1206 Illustrative Data 1207 Cash Payback 1207 LO 2: Use the net present value method Equal Annual Cash Flows 1210 Unequal Annual Cash Flows 1211 Choosing a Discount Rate 1212 Simplifying Assumptions 1213 Comprehensive Example 1213 LO 3: Identify capital budgeting challenges and refinements Intangible Benefits 1214 Profitability Index for Mutually Exclusive Projects 1216 Risk Analysis 1218 Post-Audit of Investment Projects 1218 LO 4: Use the internal rate of return m ethod Comparing Discounted Cash Flow Methods 1221 LO 5: Use the annual rate of return method A B C Statements: Apple Inc. A-1 Statements: PepsiCo, Inc. B-1 Statements: The Coca-Cola Company C-1 xvi

9 D E F Statements: Amazon.com, Inc. Statements: Wal-Mart Stores, Inc. D-1 E-1 Statements: Louis Vuitton F-1 G Time Value of Money G-1 LO 1: Compute 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-4 LO 2: Compute 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 LO 3: Compute the present value in capital budgeting situations. G-14 LO 4: Use a financial calculator to solve time value of money problems. G-15 Present Value of a Single Sum G-16 Present Value of an Annuity G-17 Useful Applications of the Financial Calculator G-17 H Payroll Accounting* H-1 LO 1: Record the payroll for a pay period. H-1 Determining the Payroll H-1 Recording the Payroll H-5 LO 2: Record employer payroll taxes. H-7 FICA Taxes H-7 Federal Unemployment Taxes H-8 State Unemployment Taxes H-8 Recording Employer Payroll Taxes H-9 Filing and Remitting Payroll Taxes H-9 LO 3: Discuss the objectives of internal control for payroll. H-10 I Subsidiary Ledgers and Special Journals* I-1 LO 1: Describe the nature and purpose of a subsidiary ledger. I-1 Subsidiary Ledger Example I-2 Advantages of Subsidiary Ledgers I-2 LO 2: Record transactions in special journals. I-4 Sales Journal I-4 Cash Receipts Journal I-7 Purchases Journal I-11 Cash Payments Journal I-13 Effects of Special Journals on the General Journal I-16 Cyber Security: A Final Comment I-17 J Other Significant Liabilities* J-1 LO 1: Describe the accounting and disclosure requirements for contingent liabilities. J-1 Recording a Contingent Liability J-2 Disclosure of Contingent Liabilities J-3 LO 2: Discuss the accounting for lease liabilities and off-balance-sheet financing. J-3 Operating Leases J-3 Capital Leases J-4 LO 3: Discuss additional fringe benefits associated with employee compensation. J-5 Paid Absences J-5 Postretirement Benefits J-6 K Standards of Ethical Conduct for Management Accountants* IMA Statement of Ethical Professional Practice K-1 Principles K-1 Standards K-1 Resolution of Ethical Conflict K-2 Cases for Managerial Decision-Making* Company Index I-1 Subject Index I-5 K-1 *Available online at xvii