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Principles of
Accounting
ELEVENTH EDITION
Belverd E. Needles, Jr., Ph.D., C.P.A., C.M.A.
DePaul University
Marian Powers, Ph.D.
Northwestern University
Susan V. Crosson, M.S. Accounting, C.P.A
Santa Fe College
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or ... |
26 Standard Costing and Variance Analysis 1136
27 Short-Run Decision Analysis 1184
28 Capital Investment Analysis 1224
APPENDIX A Accounting for investments 1262
APPENDIX B Present Value Tables 1276
CONTENTS
Preface xvii
About the Authors xxxvii
CHAPTER 1 Uses of Accounting Information and the Financial Statements 2
DE... |
Using the Work Sheet 157
Step 1: Closing the Credit Balances 147 (cid:2) WESTWOOD MOVERS: REVIEW PROBLEM 158
Step 2: Closing the Debit Balances 147
STOP & REVIEW 160
Step 3: Closing the Income Summary Account
CHAPTER ASSIGNMENTS 162
Balance 147
Step 4: Closing the Withdrawals Account
Balance 147
vii
Contents
CHAPTER 5 ... |
CHAPTER ASSIGNMENTS 378
CHAPTER 9 Cash and Receivables 390
DECISION POINT (cid:2) A USER’S FOCUS PENTE COMPUTER Financing Receivables 396
COMPANY 391 Ethics and Estimates in Accounting for
Management Issues Related to Cash Receivables 398
and Receivables 392 Cash Equivalents and Cash Control 399
Cash Management 392 Cas... |
Characteristics of Bonds 574
Sale of Bonds Between Interest Dates 592
Accounting for the Issuance of Bonds 575 Year-End Accrual of Bond Interest Expense 593
Bonds Issued at Face Value 575 (cid:2) WILSON MANUFACTURING COMPANY:
Bonds Issued at a Discount 576 REVIEW PROBLEM 596
Bonds Issued at a Premium 577 STOP & REVIEW ... |
Management Accounting and Financial Accounting: Using Performance Measures in the Management
A Comparison 796 Process 811
Management Accounting and the Management The Balanced Scorecard 812
Process 797
Benchmarking 814
Value Chain Analysis 803
Standards of Ethical Conduct 814
Primary Processes and Support Services 803
... |
Activity-Based Costing 964 STOP & REVIEW 980
The Cost Hierarchy and the Bill of CHAPTER ASSIGNMENTS 982
Activities 965 Cookie Company (Continuing Case) 997
Cost Behavior Analysis 998
CHAPTER 23
DECISION POINT (cid:2) A MANAGER’S FOCUS MY MEDIA Cost-Volume-Profit Analysis 1010
PLACE 999 Breakeven Analysis 1012
Cost Beha... |
BANK 1185 Incremental Analysis for Outsourcing
Short-Run Decision Analysis and the Decisions 1189
Management Process 1186
xvi
Contents
Incremental Analysis for Special Order Incremental Analysis for Sell or Process-
Decisions 1191 Further Decisions 1199
Incremental Analysis for Segment (cid:2) HOME STATE BANK: REVIEW P... |
text. To make room for this, the investments chapter is now located in Appendix A
with ample assignment material to provide greater flexibility of coverage.
xvii
xviii
Preface
Also based on user desires, we have inserted a supplement on special-purpose
journals with assignment material after Chapter 6.
Strong Pedagogic... |
IFRS: The Arrival of International Financial Reporting Standards in the United States
Over the next few years, international financial and Exchange Commission (SEC) recently voted to
reporting standards (IFRS) will become much more allow foreign registrants in the United States. This
important in the United States and ... |
companies owned by CVS are combined. Consolidated Statements of Operations closest to December 31.
Fiscal Year Ended
Dec. 31, 2008 Dec. 29, 2007 Dec. 30, 2006
(In millions, except per share amounts) (52 weeks) (52 weeks) (53 weeks)
Net revenues $87,471.9 $76,329.5 $43,821.4
Cost of revenues 69,181.5 60,221.8 32,079.2
G... |
• Coverage of qualitative characteristics simplified and shortened
• New Focus on Business Practice box on convergence of U.S. GAAP and IFRS
and their effect on accounting standards
• New Focus on Business Practice box on how convergence of U.S. GAAP and
IFRS can make financial analysis more difficult
• New Focus on Bu... |
• Updated Focus on Business Practice box on how to blow the whistle on fraud
Chapter 19: Cost Concepts and Cost Allocation
• Discussions of costs in LO2 in previous edition incorporated in LO1
• Section on document and cost flows through the inventory accounts in new
LO3 revised
• Introduction to methods of product cos... |
Teaching Tools (cid:2) Instructor’s Resource CD-ROM: Included on this CD set are the key sup-
for Instructors plements designed to aid instructors, including the Solutions Manual, Exam-
View Test Bank, Word Test Bank, and Lecture PowerPoint slides.
(cid:2) Solutions Manual: The Solutions Manual contains answers to all ... |
ics, interactive games and exercises, and more.
Visit www..cengage.com/webtutor for more information.
Klooster & Allen’s General Ledger Software: This best-selling, educational,
general ledger software package introduces you to the world of computerized
accounting through a more intuitive, user-friendly system than the... |
Eileen Eichler, Farmingdale State College
Mary Ewanechko, Monroe Community College
Cliff Frederickson, Grays Harbor College
John Gabelman, Columbus State Community College
Lucille Genduso, Kaplan University
Nashwa George, Berkeley
Rom Gilbert, Santa Fe College
Janet Grange, Chicago State University
Tom Grant, Kutztown
... |
Award. Active in many academic and professional organizations, he has served as
the U.S. representative on several international accounting committees, includ-
ing the Education Committee of the International Federation of Accountants
(IFAC). He is currently vice president of education of the American Accounting
Associ... |
Needles and Marian Powers. Susan holds a BBA in Economics and Account-
ing from Southern Methodist University and a MS in Accounting from
Texas Tech University.
Principles of
Accounting
ELEVENTH EDITION
C H A P T E R
Uses of Accounting
1
Information and the
Financial Statements
Today, more people than ever before recog... |
informed decisions, identify entity. Accountants provide a vital service by supplying the information decision mak-
business goals and activities, and ers need to make “reasoned choices among alternative uses of scarce resources in the
explain the importance of ethics conduct of business and economic activities.”2 As s... |
ment grade credit rating, and we maintain a commercial
INVESTING:
paper program currently backed by $4 billion in committed
Invests Funds in
bank facilities.” — Furniture, Fixtures
and Equipment
— Improvements
Profitability: “CVS Caremark generated record revenue and earn- to Buildings
ings, achieved industry-leading s... |
incurred, and it needs a budget for each outlet that projects the sales and costs
for the next year.
Financial accounting generates reports and communicates them to exter-
nal decision makers so they can evaluate how well the business has achieved its
goals. These reports are called financial statements. CVS, whose sto... |
sequences, as the accounting scandals that erupted at Enron Corporation and
WorldCom attest. Unethical financial reporting and accounting practices at those
two major corporations caused thousands of people to lose their jobs, their invest-
ment incomes, and their pensions. They also resulted in prison sentences and
fi... |
_____ 4. Investing activities d. Major function of accounting
_____ 5. Operating activities
_____ 6. Financing activities
_____ 7. Profitability
_____ 8. Fraudulent financial reporting
SOLUTION
1. d; 2. b; 3. d; 4. c; 5. c; 6. c; 7. b; 8. a
Decision Makers:
As shown in Figure 1-3, the people who use accounting informat... |
for strategic planning, mergers and acquisitions, and tasks they’re saddled with the responsibility of making big calls.”9
12 CHAPTER 1 Uses of Accounting Information and the Financial Statements
Investors Those such as Lilian Jackson, owner of the Keep-Fit Center, and
Study Note
CCVS’s stockholders who may invest in a... |
funds from investors (including owners), creditors, taxpayers, and donors and
deploying scarce resources. They must also plan how to pay for operations and to
repay creditors on a timely basis. In addition, they have an obligation to report
their financial performance to legislators, boards, and donors, as well as to d... |
The common unit of
measurement used in the the pound. In international transactions, exchange rates must be used to translate
United States for financial from one currency to another. An exchange rate is the value of one currency in
reporting purposes is the dollar. terms of another. For example, a British person purch... |
corporation or, in some states,
by forming what is known as
*Accounting for a sole proprietorship is simpler than accounting for a partnership or corpora-
a limited liability partnership
tion. For that reason, we focus on the sole proprietorship in the early part of this book. At
(LLP).
critical points, however, we cal... |
equities are called liabilities. So the equation can be written like this:
Assets (cid:2) Liabilities (cid:3) Owner’s Equity
This equation is known as the accounting equation. The two sides of the equa-
tion must always be equal, or “in balance,” as shown in Figure 1-5. To evalu-
ate the financial effects of business a... |
was invested in the business, and withdrawals of $24,000 were made. What amount of net income
did the company earn during the year?
Beginning of the year
Assets (cid:2) Liabilities (cid:3) Owner’s Equity
$140,000 (cid:2) $60,000 (cid:3) $ 80,000
During year
Investment (cid:3) 20,000
Withdrawals (cid:4) 24,000
?
Net inc... |
balance of owner’s equity of $206,000. Notice that the amount of the owner’s
Capital account on the balance sheet comes from the ending balance on the state-
ment of owner’s equity.
EXHIBIT 1-2
Weiss Consultancy
Statement of Owner’s Equity
for Weiss Consultancy Statement of Owner’s Equity
For the Month Ended December 3... |
Adjustments to reconcile net income to net cash flows from
operating activities
(Increase) in accounts receivable ($ 4,000)
(Increase) in supplies (2,000)
Increase in accounts payable 2,400) (3,600)
Net cash flows from operating activities $ 4,800
Cash flows from investing activities
Purchase of land ($ 40,000)
Purchas... |
accepted accounting principles unchangeable laws of nature in chemistry or physics. They evolve to meet the
(GAAP) and international finan- needs of decision makers, and they change as circumstances change or as bet-
cial reporting standards (IFRS) ter methods are developed.
relate to financial statements In this book,... |
Standards Board (FASB) and similar boards in other U.S. standards. This change affects approximately 10
nations to achieve identical or nearly identical stan- percent of all public U.S. companies. In addition, the
dards worldwide. IFRS are now required in many SEC may in the near future allow U.S. companies to
parts of... |
Accountants (and adopted, with variations, by each state) governs the conduct
of CPAs. Fundamental to this code is responsibility to clients, creditors, investors
(owners), and anyone else who relies on the work of a CPA. The code requires
CPAs to act with integrity, objectivity, and independence.
(cid:2) Integrity mea... |
to measure progress toward the company’s goals?
• In deciding whether to make a loan to Keep-Fit Center, what financial knowledge
would a bank need to evaluate the company’s financial performance?
As you’ve learned in this chapter, managers and others with an interest in a business
measure its profitability in financia... |
its owners. A sole proprietorship is a business owned by one person. A partnership
is like a sole proprietorship in most ways, but it has two or more owners. A corpora-
tion, on the other hand, is a business unit chartered by the state and legally separate
from its owners (the stockholders).
LO5 Defi ne fi nancial posi... |
Due care 27 (LO7) Securities and Exchange Commis-
International financial reporting
Ethics 8 (LO1) standards (IFRS) sion (SEC) 12, 26 (LO2 and LO7)
Exchange rate 14 (LO3) 26 (LO7) Separate entity 15 (LO3)
Expenses 18 (LO5) Investing activities 5 (LO1) Sole proprietorship 15 (LO4)
Financial accounting 7 (LO1) Liabilitie... |
beginning of the year, and assets of $400,000 and liabilities of $140,000 at the
end of the year. During the year, the owner invested an additional $40,000 in
the business, and the company made withdrawals of $48,000. What amount of
net income did the company earn during the year?
LO6 Preparation and Completion of a Ba... |
poration. Describe the various groups that will have an interest in the financial
statements of Gottlieb. What is the difference between a partnership and a corpo-
ration? What advantages does the corporate form have over the partnership form
of business organization?
LO3 Business Transactions
E 5. Velu owns and operat... |
38 CHAPTER 1 Uses of Accounting Information and the Financial Statements
as follows: Cash, $3,100; Accounts Receivable, $1,500; Supplies, $200; Land,
$2,000; Accounts Payable, $900; Investment by Owner, $2,480; and begin-
ning capital balance of $2,000.
In proper format, prepare the income statement, statement of owner... |
Accounts Receivable 4,500
Cash 71,700
Commission Sales Revenue 400,000
Commissions Expense 225,000
Commissions Payable 22,700
40 CHAPTER 1 Uses of Accounting Information and the Financial Statements
Equipment $59,900
Marketing Expense 20,100
Office Rent Expense 36,000
Owner’s Capital, December 31, 2010 64,300
Supplies ... |
LO6 Integration of Financial Statements
P 6. Below are three independent sets of financial statements with several amounts
missing.
Chapter Assignments 43
Income Statement Set A Set B Set C
Revenues $ 1,200 $ g $ 240
Expenses a 5,000 m
Net income $ b $ h $ 148
Statement of Owner’s Equity
Beginning balance $ 2,900 $24,4... |
cient funds to support expenses? Why would it be useful?
ENHANCING Your Knowledge, Skills, and Critical Thinking
LO1 LO2 Business Activities and Management Functions
C 1. Costco Wholesale Corporation is America’s largest membership retail company.
According to its letter to stockholders:
Our mission is to bring quality... |
Therefore, the complexity of CVS’s financial statements and the terminology in
them will differ somewhat from the financial statements in the text.
1. What titles does CVS give to its four basic financial statements? (Note that
the word consolidated in the titles of the financial statements means that these
statements ... |
monthly basis for one year. The fee for the service was to be $500
transaction takes place?
per visit, or $6,000 for the year. Confident that his agreement with
(cid:2) What is the difference between
Quarter Horse Stables will work out, Larry is thinking of including the
an asset and an expense?
$6,000 in his financial... |
points of title transfer. The predetermined time at which a transaction should be
recorded is the recognition point.
Although purchase requisitions and purchase orders (events 1 and 2) are eco-
nomic events, they do not affect a company’s financial position, and they are not
recognized in the accounting records. Even t... |
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