Custom BUS-A696 Accounting for Executives in Life Sciences (Indiana University)

by Simko, Kulp

ISBN: 978-1-61853-497-2 | Copyright 2022

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Financial Accounting for Executives & MBAs, 5e (pg. 1.2)
Chapter 1 The Economic Environment of Accounting Information (pg. 1.2)
Financial Accounting and Its Relevance (pg. 1.4)
Why Accounting Information Is Important (pg. 1.5)
Financial Accounting: What Is It? (pg. 1.6)
Review Problem 1.1 (pg. 1.7)
Financial Statements (pg. 1.7)
Review Problem 1.2 (pg. 1.13)
Qualitative Attributes of Accounting Information (pg. 1.13)
Amazon’s Accounting Methods and the Role of the Independent Auditor (pg. 1.14)
Generally Accepted Accounting Principles (pg. 1.16)
Role of Financial Accounting in Investment Decisions: An Overview (pg. 1.19)
Review Problem 1.3 (pg. 1.21)
Changing Economic Landscape (pg. 1.21)
Data Analytics and Technological Enhancements (pg. 1.22)
Seven Accounting Myths (pg. 1.23)
Review Problem 1.4 (pg. 1.24)
Executive Summary (pg. 1.24)
Key Concepts and Terms (pg. 1.25)
Appendix 1A: Agency Costs and the Separation of Management and Capital Providers (pg. 1.25)
Conflicts Between Managers and Shareholders (pg. 1.26)
Conflicts Between Debtholders and Shareholders (pg. 1.27)
Appendix 1B: Generally Accepted Accounting Principles: Purpose, Concepts, and Elements (pg. 1.27)
Questions (pg. 1.28)
Exercises (pg. 1.31)
Problems (pg. 1.32)
Corporate Analysis (pg. 1.36)
Solutions to Review Problems (pg. 1.37)
Chapter 2 From Business Events to Financial Statements (pg. 1.38)
Balance Sheet Equation (pg. 1.40)
Defining Some Accounting Terms (pg. 1.43)
Review Problem 2.1 (pg. 1.43)
Preparing Financial Statements from Business Events (pg. 1.43)
Recording Transactions. (pg. 1.43)
The Russian River Valley Winery (pg. 1.45)
Projected Business Events (pg. 1.47)
Review Problem 2.2 (pg. 1.57)
Preparing the Financial Statements (pg. 1.57)
Articulation of the Financial Statements (pg. 1.61)
Accounting Policy Decisions at Russian River Valley Winery (pg. 1.62)
Review Problem 2.3 (pg. 1.63)
Evaluating Business Performance and Making Financial Decisions (pg. 1.63)
Evaluating Firm Profitability (pg. 1.64)
Return on Equity Analysis (pg. 1.65)
Evaluating Financial Risk (pg. 1.67)
Review Problem 2.4 (pg. 1.67)
Managerial Discretion and Accounting Methods (pg. 1.68)
Operating Revenues at B.J.’s Wholesale Club (pg. 1.68)
Operating Expenses at (pg. 1.69)
Executive Summary (pg. 1.70)
Key Concepts and Terms (pg. 1.71)
Questions (pg. 1.71)
Exercises (pg. 1.72)
Problems (pg. 1.74)
Corporate Analysis (pg. 1.80)
Solutions to Review ProblemS (pg. 1.81)
Chapter 3 Measuring Performance: Cash Flow and Net Income (pg. 1.84)
Analyzing and Computing Cash Flow Information (pg. 1.86)
Statement of Cash Flow (pg. 1.86)
Presenting Cash Flow Information (pg. 1.87)
Review Problem 3.1 (pg. 1.89)
Computing Cash Flow Under the Indirect Method (pg. 1.89)
The following balance sheet and income statement data were tak (pg. 1.96)
Analysis of the Statement of Cash Flow (pg. 1.96)
Cash Flow Ratios (pg. 1.99)
Review Problem 3.3 (pg. 1.100)
Alternative Measures of Cash Flow (pg. 1.100)
Review Problem 3.4 (pg. 1.102)
Identifying and Understanding Sustainable Earnings (pg. 1.103)
Special Items and Extraordinary Items (pg. 1.104)
Discontinued Operations (pg. 1.106)
Earnings per Share (pg. 1.106)
Review Problem 3.5 (pg. 1.108)
Pro Forma Earnings (pg. 1.108)
Executive Summary (pg. 1.110)
Key Concepts and Terms (pg. 1.111)
Appendix 3A: Converting Indirect Method Cash Flows to Direct Method Cash Flows (pg. 1.111)
Review Problem 3.6 (pg. 1.113)
Questions (pg. 1.113)
Exercises (pg. 1.115)
Problems (pg. 1.118)
Corporate Analysis (pg. 1.124)
Case (pg. 1.125)
Solutions to Review Problems (pg. 1.127)
Chapter 4 Using Financial Statements for Investing and Credit Decisions (pg. 1.130)
Analyzing Financial Performance (pg. 1.132)
Fundamentals of Financial Statement Analysis (pg. 1.132)
Percentage Change and Common-Size Financial Statements (pg. 1.136)
Review Problem 4.1 (pg. 1.138)
Financial Ratios (pg. 1.139)
Review Problem 4.2 (pg. 1.143)
Credit Risk Analysis (pg. 1.144)
Benchmarking: Comparisons with Similar Companies (pg. 1.144)
ROE Model Framework (pg. 1.146)
Estimating Sustainable Growth (pg. 1.147)
Review Problem 4.3 (pg. 1.148)
Limitations of Financial Statement Analysis (pg. 1.149)
Executive Summary (pg. 1.150)
Key Concepts and Terms (pg. 1.150)
Appendix 4A: Unlevering Financial Ratios (pg. 1.151)
Review Problem 4.4 (pg. 1.152)
Appendix 4B: Pro Forma Financial Statements (pg. 1.152)
Appendix 4C: Calculating the Cost of Equity Financing (pg. 1.153)
Review Problem 4.5 (pg. 1.154)
Questions (pg. 1.155)
Exercises (pg. 1.156)
Problems (pg. 1.160)
Corporate Analysis (pg. 1.167)
Case (pg. 1.168)
Solutions to Review Problems (pg. 1.175)
Chapter 5 Operating Cycle, Revenue Recognition, and Receivable Valuation (pg. 1.178)
Operating Cycle of a Business (pg. 1.180)
Fundamentals of Revenue Recognition (pg. 1.181)
Revenue Recognition Guidance: ASC 606 (pg. 1.182)
Revenue Recognition by Retail and Service Companies (pg. 1.184)
Review Problem 5.1 (pg. 1.185)
Revenue Recognition by Manufacturing Companies (pg. 1.185)
Review Problem 5.2 (pg. 1.190)
Valuing and Reporting Accounts Receivable (pg. 1.190)
Percentage-of-Credit-Sales Method (pg. 1.191)
Aging Method (pg. 1.193)
Review Problem 5.3 (pg. 1.197)
Managing a Company’s Investment in Receivables (pg. 1.198)
Sales Discounts (pg. 1.198)
Sales Returns (pg. 1.200)
Review Problem 5.4 (pg. 1.200)
Monetizing Accounts Receivable to Manage Operating Cash Flow (pg. 1.200)
Factoring (pg. 1.200)
Pledging (pg. 1.201)
Securitization (pg. 1.201)
Review Problem 5.5 (pg. 1.202)
Analyzing Operating Revenue and Receivables (pg. 1.202)
Revenue Recognition Policy (pg. 1.202)
Receivable Valuation Policy (pg. 1.203)
Review Problem 5.6 (pg. 1.204)
Executive Summary (pg. 1.205)
Key Concepts and Terms (pg. 1.205)
Appendix 5A: Revenue Recognition under ASC 606: Further Discussion (pg. 1.206)
A Five-Step Process (pg. 1.206)
Review Problem 5.7 (pg. 1.207)
Questions (pg. 1.208)
Exercises (pg. 1.209)
Problems (pg. 1.211)
Corporate Analysis (pg. 1.214)
Case (pg. 1.216)
Solutions to Review Problems (pg. 1.218)
Chapter 6 Operating Expenses, Inventory Valuation, and Accounts Payable (pg. 1.222)
Operating Cycle of a manufacturer (pg. 1.224)
Measuring Cost of Goods Sold and Ending Inventory (pg. 1.225)
Case Illustration: How Much is Earnings? (pg. 1.226)
Inventory Management Systems (pg. 1.227)
The Inventory Count (pg. 1.228)
Review Problem 6.1 (pg. 1.229)
Valuing Inventory Using FIFO, LIFO, and Weighted-average-A Closer Look (pg. 1.230)
Choosing an Inventory Method (pg. 1.233)
Review Problem 6.2 (pg. 1.234)
Lower of Cost or Net Realizable Value (pg. 1.235)
Review Problem 6.3 (pg. 1.236)
Inventory Accounting Under International Financial Reporting Standards (pg. 1.236)
LIFO Layers and the LIFO Inventory Reserve (pg. 1.237)
Liquidating LIFO Layers (pg. 1.240)
Review Problem 6.4 (pg. 1.241)
Managing a Company’s Investment in Inventories (pg. 1.242)
Accounts Payable and a company’s Operating Cycle (pg. 1.242)
Review Problem 6.5 (pg. 1.243)
Analyzing Inventory and Cost of Goods Sold (pg. 1.245)
Executive Summary (pg. 1.246)
Key Concepts and Terms (pg. 1.247)
Questions (pg. 1.247)
Exercises (pg. 1.248)
Problems (pg. 1.251)
Corporate Analysis (pg. 1.256)
Case (pg. 1.257)
Solutions to Review Problems (pg. 1.260)
Chapter 7 Long-Lived Fixed Assets, Intangible Assets, and Natural Resources (pg. 1.264)
Acquisition Cost of a Long-Lived Asset (pg. 1.266)
Betterment Versus Maintenance Expenditures (pg. 1.267)
Review Problem 7.1 (pg. 1.268)
Matching: The Allocation of costs to future periods (pg. 1.268)
Straight-Line Method (pg. 1.269)
Accelerated Methods (pg. 1.270)
Units-of-Production Method (pg. 1.272)
Choosing a Depreciation Method (pg. 1.273)
Review Problem 7.2 (pg. 1.275)
Accounting Policy Changes (pg. 1.275)
Revaluing Long-Lived Assets (pg. 1.278)
Sale or Retirement of Long-Lived Assets (pg. 1.278)
Review Problem 7.3 (pg. 1.279)
Distortion Caused by Aging Assets (pg. 1.279)
Intangible Assets (pg. 1.280)
Research and Development Costs, Patents, and Copyrights (pg. 1.280)
Marketing Costs (pg. 1.282)
Review Problem 7.4 (pg. 1.282)
Natural Resources (pg. 1.283)
Review Problem 7.5 (pg. 1.284)
Long-Term Fixed Asset Accounting Under International Financial Reporting Standards (pg. 1.284)
Analyzing Capital Investments (pg. 1.285)
Review Problem 7.6 (pg. 1.286)
Executive Summary (pg. 1.287)
Key Concepts and Terms (pg. 1.287)
Questions (pg. 1.287)
Exercises (pg. 1.289)
Problems (pg. 1.290)
Corporate Analysis (pg. 1.294)
Case (pg. 1.295)
Solutions to Review Problems (pg. 1.298)
Chapter 8 Investing In Other Entities (pg. 1.300)
Investments in Other Entities (pg. 1.302)
Review Problem 8.1 (pg. 1.302)
Overview of Accounting for Debt and Equity Securities (pg. 1.302)
Review Problem 8.2 (pg. 1.305)
Accounting for Debt and Equity Securities-Passive investments (pg. 1.306)
Valuation Adjustments (pg. 1.307)
Recording the Sale of Investment Securities (pg. 1.308)
Review Problem 8.3 (pg. 1.309)
Managerial Discretion: The Choice of Accounting Methods for Debt Security Investments (pg. 1.309)
Equity Method and Consolidation Accounting (pg. 1.311)
Case 1. (pg. 1.312)
Case 2. (pg. 1.314)
Case 3. (pg. 1.317)
Review Problem 8.4 (pg. 1.319)
Deconsolidation (pg. 1.319)
Accounting for Joint Ventures (pg. 1.320)
Accounting for Special Purpose Entities (pg. 1.321)
Review Problem 8.5 (pg. 1.323)
Accounting for Investments in Foreign Entities (pg. 1.323)
Currency Exchange Rate Fluctuations (pg. 1.323)
Illustration of Foreign Currency Translation (pg. 1.324)
Review Problem 8.6 (pg. 1.326)
Analyzing Intercorporate Investments (pg. 1.326)
Executive Summary (pg. 1.327)
Key Concepts and Terms (pg. 1.328)
Questions (pg. 1.328)
Exercises (pg. 1.330)
Problems (pg. 1.332)
Corporate Analysis (pg. 1.338)
Solutions to Review Problems (pg. 1.341)
Chapter 9 Debt Financing: Bonds, Notes, and Leases (pg. 1.344)
Financing Operations and Assets with Debt: Bonds and Notes (pg. 1.346)
Credit Ratings and the Cost of Debt (pg. 1.347)
Review Problem 9.1 (pg. 1.348)
Valuing Bonds and Notes (pg. 1.349)
Interest Expense (pg. 1.351)
Market Rates of Interest and the Book Value of Debt (pg. 1.353)
Review Problem 9.2 (pg. 1.353)
Early Debt Retirement (pg. 1.353)
Zero-Coupon Bonds and Notes (pg. 1.355)
Review Problem 9.3 (pg. 1.357)
Lease Financing (pg. 1.357)
Accounting for Leases (pg. 1.358)
Lease Accounting, Disclosures and Presentation (pg. 1.363)
Contrasting the New Lease Accounting Guidelines with the Old (pg. 1.365)
Review Problem 9.4 (pg. 1.366)
Calculating the Weighted-average Cost of Debt (pg. 1.367)
Review Problem 9.5 (pg. 1.367)
Managing Reported Debt (pg. 1.368)
Analyzing a Company’s Use of Leverage (pg. 1.369)
Review Problem 9.6 (pg. 1.370)
Executive Summary (pg. 1.370)
Key Concepts and Terms (pg. 1.371)
Questions (pg. 1.371)
Exercises (pg. 1.373)
Problems (pg. 1.375)
Corporate Analysis (pg. 1.380)
Case (pg. 1.380)
Solutions to Review Problems (pg. 1.384)
Chapter 10 Commitments and Contingent Liabilities, Deferred Tax Liabilities, and Retirement Obligations (pg. 1.386)
Commitments and Contingent Liabilities (pg. 1.388)
Review Problem 10.1 (pg. 1.390)
Deferred Income Tax Liabilities (pg. 1.391)
Analyzing Deferred Income Taxes (pg. 1.395)
Review Problem 10.2 (pg. 1.398)
Employee Retirement Obligations (pg. 1.399)
Estimating Retirement Obligations and Their Cost (pg. 1.400)
Retirement Benefit Disclosures (pg. 1.400)
Managing Retirement Obligations (pg. 1.403)
Review Problem 10.3 (pg. 1.404)
Analyzing Other Potential Liabilities (pg. 1.404)
Review Problem 10.4 (pg. 1.405)
Executive Summary (pg. 1.405)
Key Concepts and Terms (pg. 1.405)
Appendix 10A: Financial Instruments and Derivatives (pg. 1.406)
Review Problem 10.5 (pg. 1.407)
Questions (pg. 1.407)
Exercises (pg. 1.409)
Problems (pg. 1.411)
Corporate Analysis (pg. 1.415)
Solutions to Review Problems (pg. 1.416)
Chapter 11 Equity Financing and Shareholders’ Equity (pg. 1.418)
Equity Financing (pg. 1.420)
Going Public (pg. 1.420)
Issuances and Repurchases of Equity (pg. 1.420)
Review Problem 11.1 (pg. 1.427)
Dividends (pg. 1.427)
Cash Dividends (pg. 1.427)
Free Share Distributions (pg. 1.430)
Stock Dividends (pg. 1.431)
Review Problem 11.2 (pg. 1.432)
Stock Splits (pg. 1.432)
Review Problem 11.3 (pg. 1.434)
Accumulated Other Comprehensive Income (pg. 1.434)
Employee Stock Options (pg. 1.437)
Review Problem 11.4 (pg. 1.441)
Analyzing Equity Financing and Shareholders’ Equity (pg. 1.442)
Review Problem 11.5 (pg. 1.443)
Executive Summary (pg. 1.443)
Key Concepts and Terms (pg. 1.444)
Questions (pg. 1.444)
Exercises (pg. 1.446)
Problems (pg. 1.449)
Corporate Analysis (pg. 1.454)
Case (pg. 1.455)
Solutions to Review Problems (pg. 1.458)
Chapter 12 Using Accounting Information in Equity Valuation (pg. 1.460)
Pro Forma Financial Statements (pg. 1.462)
Review Problem 12.1 (pg. 1.466)
Introduction to Equity Valuation (pg. 1.467)
Using Cash Flow Data to Value a Company (pg. 1.468)
Developing Cash Flow Data (pg. 1.468)
Valuation using the Discounted Cash Flow Model (pg. 1.471)
The Operating Value of a Firm (pg. 1.471)
Free Cash Flow (pg. 1.472)
Valuing a Firm’s Equity (pg. 1.474)
Valuing the Russian River Valley Winery Shares (pg. 1.475)
Review Problem 12.2 (pg. 1.477)
Valuation using the Residual Income Model (pg. 1.477)
Valuing the Russian River Valley Winery Shares (pg. 1.478)
Review Problem 12.3 (pg. 1.479)
Valuation using Price-Earnings Multiples (pg. 1.480)
Review Problem 12.4 (pg. 1.481)
Executive Summary (pg. 1.482)
Key Concepts and Terms (pg. 1.482)
Exercises (pg. 1.483)
Problems (pg. 1.486)
Corporate Analysis (pg. 1.502)
Solutions to Review Problems (pg. 1.506)
Appendix A The Time Value of Money (pg. 1.508)
Time Value Calculations Using Formulas (pg. 1.509)
Future Value of a Single Amount (pg. 1.509)
Future Value of an Annuity (pg. 1.509)
Present Value of a Single Amount (pg. 1.510)
Present Value of an Annuity (pg. 1.511)
Time Value Calculations using a Financial Calculator or an Electronic Spreadsheet (pg. 1.512)
Future Value of a Single Amount (pg. 1.512)
Future Value of an Annuity (pg. 1.514)
Present Value of a Single Amount (pg. 1.515)
Present Value of an Annuity (pg. 1.516)
Solving More Complex Time Value Problems (pg. 1.516)
Using Tables to Solve Time Value of Money Problems (pg. 1.519)
Exercises (pg. 1.522)
Appendix B Financial Statement Ratios and Metrics (pg. 1.524)
Asset Management and Efficiency (pg. 1.524)
Profitability Ratios (pg. 1.525)
Cash Flow Ratios (pg. 1.525)
Liquidity Ratios (pg. 1.525)
Solvency and Capital Structure Ratios (pg. 1.526)
Miscellaneous Other Ratios (pg. 1.526)
Appendix C IFRS Illustrated: LVMH Moët Hennessey-Louis Vuitton (pg. 1.528)
Appendix D Accounting Mechanics: T-Accounts and Journal Entries (pg. 1.534)
CHAPTER 2: Technical Language of Accounting-The Debit and Credit Paradigm (pg. 1.534)
The Accounting Cycle (pg. 1.535)
CHAPTER 5: Recording Operating Revenue and Receivables Using the Debit and Credit Paradigm (pg. 1.543)
Revenue Recognition Transactions: ProFlight Inc. (pg. 1.543)
Accounting for Receivables: Pan American Enterprises, Inc. (pg. 1.545)
CHAPTER 6: Recording Cost of Goods Sold and Inventory Using the Debit and Credit Paradigm (pg. 1.547)
Arizona Ice Cream Company, Inc.: Recording Inventory Transactions (pg. 1.547)
CHAPTER 7: Recording Investments in, and Sales of, Long-Lived Assets Using the Debit and Credit Par (pg. 1.548)
Illustrative Journal Entries (pg. 1.549)
CHAPTER 8: Recording Investments in Other Corporate Entities using the Debit and Credit Paradigm (pg. 1.549)
Accounting for Marketable Debt and Equity Securities: The New South Wales Trading Company Inc. (pg. 1.549)
Equity Method and Consolidated Accounting: Savanna, Inc. (pg. 1.550)
CHAPTER 9: Recording Debt Financing Transactions Using the Debit and Credit Paradigm (pg. 1.552)
Accounting for Notes (pg. 1.552)
Accounting for Leases (pg. 1.553)
CHAPTER 11: Recording Equity Financing Transactions Using the Debit and Credit Paradigm (pg. 1.554)
Appendix E Working Capital Management (pg. 1.556)
Growth and Working Capital: An Illustration of Risk (pg. 1.556)
Methods to Manage Working Capital Financing Needs (pg. 1.560)
Exercises (pg. 1.561)
Appendix F (pg. 1.562)
Data Analytics (pg. 1.563)
Data Analytics in the Accounting Profession (pg. 1.563)
Blockchain Technology (pg. 1.564)
Executive Summary (pg. 1.566)
Key Concepts and Terms (pg. 1.566)
Questions (pg. 1.566)
Exercises (pg. 1.567)
Problems (pg. 1.568)
Managerial Accounting, 9e (pg. 2.2)
Chapter 1 Managerial Accounting: Tools for Decision Making (pg. 2.2)
Uses of Accounting Information (pg. 2.4)
Financial Accounting (pg. 2.4)
Managerial Accounting (pg. 2.5)
Review 1-1 Comparison of Financial to Managerial Accounting (pg. 2.7)
Strategic Cost Management (pg. 2.7)
Review 1-2 Management Accounting Information Used for Strategy Purposes (pg. 2.7)
Missions, Goals, and Strategies (pg. 2.8)
An Organization’s Mission and Goals (pg. 2.8)
Strategic Position Analysis (pg. 2.9)
Managerial Accounting and Goal Attainment (pg. 2.11)
Planning, Organizing, and Controlling (pg. 2.12)
Review 1-3 Managerial Accounting Supporting Strategic Position (pg. 2.13)
Changing Environment of Business (pg. 2.13)
Global Competition and Its Key Dimensions (pg. 2.13)
Big Data and Analysis (pg. 2.14)
Robotics and Cognitive Technologies (pg. 2.14)
Enterprise Risk Management (ERM) (pg. 2.15)
Review 1-4 Big Data Analysis and Enterprise Risk Management (pg. 2.15)
Ethics in Managerial Accounting (pg. 2.15)
Codes of Ethics (pg. 2.16)
Corporate Governance (pg. 2.17)
Sustainability Accounting and Corporate Social Responsibility (pg. 2.18)
Review 1-5 Corporate Social Responsibility (pg. 2.19)
Cost Drivers (pg. 2.19)
Structural Cost Drivers (pg. 2.19)
Organizational Cost Drivers (pg. 2.20)
Activity Cost Drivers (pg. 2.21)
Review 1-6 Classification of Cost Drivers (pg. 2.22)
Guidance Answers (pg. 2.22)
Key Terms (pg. 2.22)
Multiple Choice (pg. 2.22)
Questions (pg. 2.23)
Mini Exercises (pg. 2.24)
Exercises (pg. 2.26)
Cases and Projects (pg. 2.27)
Solutions to Review Problems (pg. 2.29)
Chapter 2 Cost Behavior, Activity Analysis, and Cost Estimation (pg. 2.32)
Cost Behavior Analysis (pg. 2.34)
Four Basic Cost Behavior Patterns (pg. 2.34)
Factors Affecting Cost Behavior Patterns (pg. 2.36)
Review 2-1 Identifying Cost Behavior (pg. 2.37)
Total Cost Function for an Organization or Segment (pg. 2.37)
Relevant Range (pg. 2.38)
Additional Cost Behavior Patterns (pg. 2.40)
Committed and Discretionary Fixed Costs (pg. 2.42)
Review 2-2 Estimating Costs Using a Linear Total Cost Estimating Equation (pg. 2.42)
Cost Estimation (pg. 2.42)
High-Low Cost Estimation (pg. 2.43)
Scatter Diagrams (pg. 2.44)
Least-Squares Regression (pg. 2.45)
Review 2-3 Using the High-Low Method to Estimate Costs (pg. 2.48)
Additional Issues in Cost Estimation (pg. 2.48)
Changes in Technology and Prices (pg. 2.48)
Matching Activity and Costs (pg. 2.49)
Identifying Activity Cost Drivers (pg. 2.49)
Review 2-4 Identifying Appropriate Cost Drivers (pg. 2.49)
Alternative Cost Driver Classifications (pg. 2.49)
Manufacturing Cost Hierarchy (pg. 2.50)
Customer Cost Hierarchy (pg. 2.51)
Review 2-5 Classifying Costs Using a Customer Cost Hierarchy (pg. 2.52)
Guidance Answers (pg. 2.53)
Key Ratios (pg. 2.53)
Key Terms (pg. 2.54)
Multiple Choice (pg. 2.54)
Questions (pg. 2.55)
Mini Exercises (pg. 2.56)
Exercises (pg. 2.58)
Problems (pg. 2.61)
Cases and Projects (pg. 2.63)
Solutions to Review Problems (pg. 2.66)
Chapter 3 Cost-Volume-Profit Analysis and Planning (pg. 2.68)
Cost-Volume-Profit Analysis (pg. 2.70)
Key Assumptions (pg. 2.71)
Profit Formula (pg. 2.72)
Review 3-1 Determining the Profit Equation (pg. 2.74)
Contribution and Functional Income Statements (pg. 2.74)
Functional Income Statement (pg. 2.74)
Contribution Income Statement (pg. 2.74)
Analysis Using Contribution Margin Ratio (pg. 2.75)
Review 3-2 Preparing a Contribution Income Statement (pg. 2.76)
Break-Even Point and Profit Planning (pg. 2.76)
Determining Break-Even Point in Units (pg. 2.76)
Profit Planning (pg. 2.78)
Cost-Volume-Profit Graph (pg. 2.79)
Profit-Volume Graph (pg. 2.79)
Impact of Income Taxes (pg. 2.81)
Review 3-3 Applying Cost-Volume-Profit Analysis (pg. 2.82)
Multiple-Product Cost-Volume-Profit Analysis (pg. 2.82)
Determining Break-Even and Target Profit Sales Dollars (pg. 2.82)
Sales Mix Analysis (pg. 2.84)
Review 3-4 Analyzing Profitability of a Multi-Product Firm (pg. 2.86)
Review 3-5 Applying Operating Leverage Ratio (pg. 2.88)
Appendix 3A: Profitability Analysis with Unit and Nonunit Cost Drivers (pg. 2.88)
Multi-Level Contribution Income Statement (pg. 2.88)
Variations in Multi-Level Contribution Income Statement (pg. 2.90)
Review 3-6 Performing a Customer-Level Profitability Analysis (pg. 2.91)
Guidance Answers (pg. 2.91)
Key Ratios (pg. 2.92)
Key Terms (pg. 2.92)
Multiple Choice (pg. 2.92)
Questions (pg. 2.94)
Mini Exercises (pg. 2.94)
Exercises (pg. 2.96)
Problems (pg. 2.100)
Cases and Projects (pg. 2.105)
Solutions to Review Problems (pg. 2.106)
Chapter 4 Relevant Costs and Benefits for Decision Making (pg. 2.110)
Identifying Relevant Costs (pg. 2.112)
Relevance of Future Revenues (pg. 2.113)
Relevance of Outlay Costs (pg. 2.113)
Irrelevance of Sunk Costs (pg. 2.114)
Sunk Costs Can Cause Ethical Dilemmas (pg. 2.114)
Relevance of Disposal and Salvage Values (pg. 2.115)
Relevance of Opportunity Costs (pg. 2.115)
Review 4-1 Identifying Relevant and Irrelevant Costs (pg. 2.116)
Differential Analysis of Relevant Costs (pg. 2.116)
Review 4-2 Preparing a Differential Analysis of Relevant Costs (pg. 2.117)
Applying Differential Analysis (pg. 2.117)
Multiple Changes in Profit Plans (pg. 2.117)
Review 4-3 Applying Differential Analysis to Alternative Profit Scenarios (pg. 2.119)
Special Orders (pg. 2.119)
Review 4-4 Estimating the Profitability of Special Orders (pg. 2.122)
Outsourcing Decisions (Make or Buy) (pg. 2.122)
Review 4-5 Evaluating an Outsourcing Decision (pg. 2.125)
Sell or Process Further (pg. 2.126)
Evaluating Whether to Sell or Process Further LO6 Review 4-6 (pg. 2.127)
Use of Limited Resources (pg. 2.128)
Single Constraint (pg. 2.128)
Multiple Constraints (pg. 2.129)
Theory of Constraints (pg. 2.129)
Limitations of Decision Analysis Models (pg. 2.130)
Review 4-7 Analyzing Profitability Considering a Scarce Resource (pg. 2.131)
Guidance Answers (pg. 2.131)
Key Terms (pg. 2.131)
Multiple Choice (pg. 2.132)
Questions (pg. 2.133)
Mini Exercises (pg. 2.133)
Exercises (pg. 2.136)
Problems (pg. 2.140)
Cases and Projects (pg. 2.144)
Solutions to Review Problems (pg. 2.147)
Chapter 5 Product Costing: Job and Process Operations (pg. 2.152)
Inventory Costs in Various Organizations (pg. 2.154)
Review 5-1 Classifying Inventory Costs (pg. 2.156)
Inventory Costs for Financial Reporting (pg. 2.156)
Product Costs and Period Costs (pg. 2.156)
Three Components of Product Costs (pg. 2.156)
A Closer Look at Manufacturing Overhead (pg. 2.158)
Review 5-2 Applying a Predetermined Overhead Rate (pg. 2.160)
The Production Environment (pg. 2.160)
Production Files and Records (pg. 2.161)
Review 5-3 Defining Terms in a Production Environment (pg. 2.162)
Job Costing for Products and Services (pg. 2.162)
Job Costing Illustrated (pg. 2.163)
Statement of Cost of Goods Manufactured (pg. 2.168)
Overapplied and Underapplied Overhead (pg. 2.169)
Job Costing in Service Organizations (pg. 2.170)
Review 5-4 Accounting for Costs of Jobs in a Job Costing System (pg. 2.171)
Process Costing (pg. 2.172)
Cost of Production Report (pg. 2.173)
Weighted Average and First-In, First-Out Process Costing (pg. 2.176)
Process Costing in Service Organizations (pg. 2.176)
Review 5-5 Accounting for Costs in a Process Costing System (pg. 2.177)
Appendix 5A: Absorption and Variable Costing (pg. 2.178)
Basic Concepts (pg. 2.178)
Income Under Absorption and Variable Costing (pg. 2.179)
Production Equals Sales (pg. 2.179)
Production Exceeds Sales (pg. 2.179)
Sales Exceed Production (pg. 2.181)
Evaluating Alternatives to Inventory Valuation (pg. 2.182)
Review 5-6 Computing Inventory Costs Under Absorption and Variable Costing (pg. 2.183)
Guidance Answers (pg. 2.183)
Key Ratios (pg. 2.183)
Key Terms (pg. 2.184)
Multiple Choice (pg. 2.184)
Questions (pg. 2.185)
Mini Exercises (pg. 2.186)
Exercises (pg. 2.188)
Problems (pg. 2.192)
Cases and Projects (pg. 2.198)
Solutions to Review Problems (pg. 2.200)
Chapter 6 Activity-Based Costing, Customer Profitability, and Activity-Based Management (pg. 2.206)
Activity-Based Costing (ABC) (pg. 2.208)
Changing Cost Environment (pg. 2.208)
Review 6-1 Identifying Environment Changes that Impact Cost Structures (pg. 2.209)
Activity-Based Costing Concepts (pg. 2.209)
ABC Product Costing Model (pg. 2.210)
Review 6-2 Identifying Relevant Cost Drivers (pg. 2.211)
Traditional Product Costing and ABC Compared (pg. 2.212)
Applying Overhead with a Plantwide Rate (pg. 2.212)
Applying Overhead with Department Rates (pg. 2.212)
Applying Overhead with Activity-Based Costing (pg. 2.214)
Review 6-3 Determining Product Costs Using Traditional and Activity-Based Costing (pg. 2.217)
Implementation of ABC (pg. 2.218)
Limitations of ABC Illustration (pg. 2.218)
Comparing Traditional and Activity-Based Costing (pg. 2.218)
ABC Implementation Issues (pg. 2.219)
Review 6-4 Comparing Product Costs Using Traditional and Activity-Based Costing (pg. 2.220)
ABC and Customer Profitability Analysis (pg. 2.221)
Customer Profitability Profile (pg. 2.221)
ABC Customer Profitability Analysis Illustrated (pg. 2.221)
Review 6-5 Analyzing Customer Profitability (pg. 2.224)
Activity-Based Management (pg. 2.224)
The Difference Between ABC and Activity-Based Management (pg. 2.224)
Review 6-6 Explaining Activity-Based Management (pg. 2.225)
Guidance Answers (pg. 2.225)
Key Terms (pg. 2.226)
Multiple Choice (pg. 2.226)
Questions (pg. 2.227)
Exercises (pg. 2.231)
Problems (pg. 2.234)
Cases and Projects (pg. 2.239)
Solutions to Review Problems (pg. 2.243)
Chapter 7 Additional Topics in Product Costing (pg. 2.246)
Production and Service Department Costs (pg. 2.248)
Review 7-1 Discussing Policies for Allocating Service Costs (pg. 2.249)
Service Department Cost Allocation (pg. 2.249)
Direct Method (pg. 2.250)
Step Method (pg. 2.251)
Linear Algebra (Reciprocal) Method (pg. 2.253)
Dual Rates (pg. 2.254)
Review 7-2 Allocating Service Department Costs Using the Direct and Step Methods (pg. 2.255)
Lean Production and Just-in-Time Inventory Management (pg. 2.255)
Reducing Incoming Materials Inventory (pg. 2.256)
Reducing Work-in-Process Inventory (pg. 2.256)
Reducing Finished Goods Inventory (pg. 2.258)
Review 7-3 Distinguishing Lean Production from a Traditional Inventory Model (pg. 2.258)
Performance Evaluation and Recordkeeping with Lean Production and JIT (pg. 2.258)
Performance Evaluation (pg. 2.258)
Simplified Recordkeeping (pg. 2.260)
Review 7-4 Analyzing Performance in Lean Manufacturing (pg. 2.261)
Increased Focus on Data-Driven Decision Making (pg. 2.261)
Review 7-5 Discussing Risks and Concerns of Access to Big Data (pg. 2.262)
Guidance Answers (pg. 2.262)
Key Ratios (pg. 2.263)
Key Terms (pg. 2.263)
Multiple Choice (pg. 2.263)
Questions (pg. 2.264)
Mini Exercises (pg. 2.265)
Exercises (pg. 2.267)
Problems (pg. 2.269)
Cases and Projects (pg. 2.273)
Solutions to Review Problems (pg. 2.274)
Chapter 8 Pricing and Other Product Management Decisions (pg. 2.278)
Understanding the Value Chain (pg. 2.280)
Usefulness of a Value Chain Perspective (pg. 2.282)
Value-Added and Value Chain Perspectives (pg. 2.284)
Review 8-1 Classifying Activities Using a Generic Internal Value Chain (pg. 2.284)
The Pricing Decision (pg. 2.284)
Economic Approaches to Pricing (pg. 2.284)
Cost-Based Approaches to Pricing (pg. 2.285)
Review 8-2 Applying Cost-Based Approaches to Pricing (pg. 2.288)
Target Costing (pg. 2.289)
Target Costing Is Proactive for Cost Management (pg. 2.289)
Target Costing Encourages Design for Production (pg. 2.290)
Target Costing Reduces Time to Introduce Products (pg. 2.291)
Target Costing Requires Cost Information (pg. 2.291)
Target Costing Requires Coordination (pg. 2.291)
Target Costing Is Key for Products with Short Life Cycles (pg. 2.292)
Target Costing Helps Manage Life-Cycle Costs (pg. 2.293)
Review 8-3 Applying Target Costing (pg. 2.294)
Continuous Improvement Costing (pg. 2.294)
Review 8-4 Analyzing the Impact of Continuous Improvement Initiatives (pg. 2.295)
Benchmarking (pg. 2.296)
Review 8-5 Distinguishing Between Benchmarking and Competitor Research (pg. 2.297)
Guidance Answers (pg. 2.297)
Key Ratios (pg. 2.297)
Key Terms (pg. 2.297)
Multiple Choice (pg. 2.297)
Questions (pg. 2.298)
Mini Exercises (pg. 2.299)
Exercises (pg. 2.300)
Problems (pg. 2.302)
Cases and Projects (pg. 2.304)
Solutions to Review Problems (pg. 2.305)
Chapter 9 Operational Budgeting and Profit Planning (pg. 2.308)
Reasons for Budgeting (pg. 2.310)
Compel Planning (pg. 2.310)
Promote Communication and Coordination (pg. 2.310)
Provide a Guide to Action and Basis of Evaluation (pg. 2.311)
Aid in Risk Management (pg. 2.311)
Review 9-1 Discussing the Benefits of Budgeting (pg. 2.312)
General Approaches to Budgeting (pg. 2.312)
Output/Input Approach (pg. 2.312)
Activity-Based Approach (pg. 2.312)
Incremental Approach (pg. 2.312)
Minimum Level Approach (pg. 2.313)
Review 9-2 Applying the Output/Input Approach and Activity-Based Approach to Budgeting (pg. 2.314)
Master Budget (pg. 2.314)
Sales Budget (pg. 2.316)
Purchases Budget (pg. 2.317)
Selling Expense Budget (pg. 2.318)
General and Administrative Expense Budget (pg. 2.318)
Cash Budget (pg. 2.319)
Budgeted Financial Statements (pg. 2.321)
Finalizing the Budget (pg. 2.322)
Review 9-3 Preparing a Budget for a Merchandising Organization (pg. 2.323)
Budget Development in Manufacturing Organizations (pg. 2.323)
Production Budget (pg. 2.324)
Manufacturing Cost Budget (pg. 2.324)
Review 9-4 Preparing a Budget for a Manufacturer (pg. 2.327)
Budget Development and Manager Behavior (pg. 2.327)
Employee Participation (pg. 2.328)
Budgeting Periods (pg. 2.328)
Forecasts (pg. 2.329)
Ethics (pg. 2.329)
Open Book Management (pg. 2.329)
Review 9-5 Identifying Manager Behaviors Related to Operational Budgeting (pg. 2.330)
Guidance Answers (pg. 2.331)
Key Terms (pg. 2.331)
Multiple Choice (pg. 2.331)
Questions (pg. 2.332)
Mini Exercises (pg. 2.333)
Exercises (pg. 2.335)
Problems (pg. 2.339)
Cases and Projects (pg. 2.344)
Solutions to Review Problems (pg. 2.346)
Chapter 10 Standard Costs and Performance Reports (pg. 2.352)
Responsibility Accounting (pg. 2.354)
Performance Reporting and Organization Structures (pg. 2.355)
Types of Responsibility Centers (pg. 2.355)
Financial and Nonfinancial Performance Measures (pg. 2.357)
Review 10-1 Identifying Responsibility Centers (pg. 2.357)
Performance Reporting for Cost Centers (pg. 2.357)
Development of Flexible Budgets (pg. 2.358)
Flexible Budgets Emphasize Performance (pg. 2.358)
Standard Costs and Performance Reports (pg. 2.359)
Review 10-2 Preparing a Flexible Budget for Performance Reporting (pg. 2.360)
Variance Analysis for Costs (pg. 2.360)
Components of Standard Cost Analysis (pg. 2.360)
Establishing and Using Standards for Direct Materials (pg. 2.362)
Review 10-3 Calculating Standard Cost Variances for Direct Materials (pg. 2.364)
Establishing and Using Standards for Direct Labor (pg. 2.364)
Performance Reports for Revenue Centers (pg. 2.369)
Inclusion of Controllable Costs (pg. 2.371)
Revenue Centers as Profit Centers (pg. 2.371)
Review 10-6 Calculating Revenue Variances (pg. 2.372)
Appendix 10A: Fixed Overhead Variances (pg. 2.373)
Review 10-7 Calculating Fixed Overhead Budget Variance (pg. 2.374)
Appendix 10B: Reconciling Budgeted and Actual Income (pg. 2.374)
Review 10-8 Reconciling Budgeted and Actual Contribution Margin (pg. 2.376)
Guidance Answers (pg. 2.376)
Key Ratios (pg. 2.376)
Key Terms (pg. 2.377)
Multiple Choice (pg. 2.377)
Questions (pg. 2.378)
Mini Exercises (pg. 2.378)
Exercises (pg. 2.380)
Problems (pg. 2.382)
Cases and Projects (pg. 2.388)
Solutions to Review Problems (pg. 2.391)
Chapter 11 Segment Reporting, Transfer Pricing, and Balanced Scorecard (pg. 2.394)
Strategic Business Segments and Segment Reporting (pg. 2.396)
Multilevel Segment Income Statements (pg. 2.398)
Interpreting Segment Reports (pg. 2.398)
Review 11-1 Reporting by Segment (pg. 2.400)
Transfer Pricing (pg. 2.401)
Management Considerations (pg. 2.401)
Determining Transfer Prices (pg. 2.403)
Review 11-2 Analyzing Purchase Decisions with Transfer Pricing (pg. 2.406)
Investment Center Evaluation Measures (pg. 2.406)
Return on Investment (pg. 2.406)
Investment Center Income (pg. 2.409)
Investment Center Asset Base (pg. 2.409)
Other Valuation Issues (pg. 2.410)
Residual Income (pg. 2.410)
Economic Value Added (pg. 2.410)
Which Measure Is Best? (pg. 2.411)
Review 11-3 Computing Return on Investment and Residual Income (pg. 2.413)
Balanced Scorecard (pg. 2.413)
Balanced Scorecard Framework (pg. 2.413)
Balanced Scorecard and Strategy (pg. 2.415)
Review 11-4 Assigning Metrics to the Balanced Scorecard Categories (pg. 2.417)
Guidance Answers (pg. 2.417)
Key Ratios (pg. 2.417)
Key Terms (pg. 2.417)
Multiple Choice (pg. 2.418)
Questions (pg. 2.419)
Mini Exercises (pg. 2.419)
Exercises (pg. 2.423)
Problems (pg. 2.425)
Cases and Projects (pg. 2.431)
Solutions to Review Problems (pg. 2.433)
Chapter 12 Capital Budgeting Decisions (pg. 2.436)
Long-Range Planning and Capital Budgeting (pg. 2.439)
Review 12-1 Explaining Terms Relevant to Capital Budgeting Decisions (pg. 2.441)
Capital Budgeting Models That Consider Time Value of Money (pg. 2.442)
Expected Cash Flows (pg. 2.442)
Manager Behavior and Expected Cash Flows (pg. 2.443)
Net Present Value (pg. 2.443)
Internal Rate of Return (pg. 2.445)
Cost of Capital (pg. 2.446)
Review 12-2 Calculating Net Present Value and Internal Rate of Return (pg. 2.446)
Capital Budgeting Models That Do Not Consider Time Value of Money (pg. 2.447)
Payback Period (pg. 2.447)
Accounting Rate of Return (pg. 2.448)
Review 12-3 Computing the Payback Period and the Accounting Rate of Return (pg. 2.449)
Evaluation of Capital Budgeting Models (pg. 2.449)
Review 12-4 Evaluating Investment Proposals (pg. 2.451)
Additional Aspects of Capital Budgeting (pg. 2.452)
Using Multiple Investment Criteria (pg. 2.452)
Evaluating Risk (pg. 2.452)
Differential Analysis of Project Cash Flows (pg. 2.453)
Predicting Differential Costs and Revenues for High-Tech Investments (pg. 2.454)
Taxes in Capital Budgeting Decisions (pg. 2.456)
Depreciation Tax Shield (pg. 2.456)
Review 12-6 Calculating Net Present Value with the Consideration of Income Taxes (pg. 2.459)
Appendix 12A: Time Value of Money (pg. 2.459)
Future Value (pg. 2.459)
Present Value (pg. 2.460)
Annuities (pg. 2.461)
Unequal Cash Flows (pg. 2.463)
Deferred Returns (pg. 2.463)
Review 12-7 Performing Present Value Calculations Using the Table Approach (pg. 2.464)
Appendix 12B: Table Approach to Determining Internal Rate of Return (pg. 2.464)
Equal Cash Inflows (pg. 2.464)
Unequal Cash Inflows (pg. 2.465)
Review 12-8 Determining the Internal Rate of Return Using the Table Approach (pg. 2.466)
Guidance Answers (pg. 2.466)
Key Ratios (pg. 2.466)
Key Terms (pg. 2.467)
Multiple Choice (pg. 2.467)
Questions (pg. 2.468)
Mini Exercises (pg. 2.469)
Exercises (pg. 2.470)
Problems (pg. 2.473)
Cases and Projects (pg. 2.475)
Solutions to Review Problems (pg. 2.480)
Appendix A Managerial Analysis of Financial Statements (pg. 2.486)
Financial Statement Analysis for Managers (pg. 2.488)
Review Appendix A-1 Explaining the Importance of Financial Statement Analysis by Internal Managers (pg. 2.489)
Factors Impacting Financial Statement Analysis (pg. 2.489)
Review Appendix A-2 Identifying Factors that Influence Financial Statement Analysis (pg. 2.490)
Application of Financial Statement Analysis (pg. 2.490)
Evaluative Standards and Benchmarks (pg. 2.490)
Comparative and Common Size Statements (pg. 2.491)
Review Appendix A-3 Performing Vertical and Horizontal Analyses (pg. 2.493)
Solvency Analysis (pg. 2.495)
Review Appendix A-4 Performing a Ratio Analysis to Evaluate Solvency (pg. 2.498)
Performance Analysis (pg. 2.498)
Horizontal Analysis of Solvency and Performance (pg. 2.502)
Industry Benchmarking of Analysis Measures (pg. 2.503)
Review Appendix A-5 Performing a Ratio Analysis to Evaluate Performance and Profitability (pg. 2.505)
Key Terms (pg. 2.505)
Questions (pg. 2.505)
Mini Exercises (pg. 2.506)
Exercises (pg. 2.508)
Problems (pg. 2.509)
Cases and Projects (pg. 2.511)
Solutions to Review Problems (pg. 2.513)
Paul J. Simko

Paul J. Simko

Paul J. Simko is Associate Dean of the MBA for Executives Program and Associate Professor of Business at the University of Virginia's Darden School.

He received Bachelor of Science and Master in Accountancy degrees from the University of Florida, and a Ph.D. from the University of Texas at Austin. Professor Simko was previously on the faculty at Emory University, and has served as a Visiting Professor at Indiana, INSEAD, the Helsinki School of Economics, and the Indian School of Business. He was a Senior Analyst with Citicorp and is a Certified Public Accountant, and he remains a frequent consultant to government agencies and public and private corporations. Professor Simko has received numerous recognitions for his research and teaching. His research has appeared in such journals as The Accounting Review, Journal of Accounting Research, Financial Analysts Journal, and the Stanford Journal of Law, Business and Finance.

Susan Kulp

Susan Kulp

Susan L. Kulp is Professor of Accountancy at the George Washington University School of Business. She received her Ph.D. at Stanford University. Before joining the George Washington University faculty, Professor Kulp was a faculty member at Harvard Business School.

Professor Kulp’s research focuses on performance measurement, incentive, and internal decision-making issues in inter-organizational relationships. The settings that she examines include supply chain relationships, private partnerships, and government entities. Her research highlights the conflicts between inter-organizational contracts and the control systems in place within the partnering firms. She has published research studies in both accounting and operations management journals, including the Journal of Accounting Research, The Accounting Review, Management Science, Production and Operations Research, and Review of Accounting Studies. Professor Kulp currently services as a Department Editor at Decision Sciences. In addition to her published research studies, Professor Kulp has published several Harvard Business School cases focused on management control.

Professor Kulp has taught managerial accounting to undergraduate, MBA, online MBA, and executive MBA
students. Additionally, she teaches financial accounting to online MBA students. Professor Kulp has won several teaching awards.

Financial Accounting for Executives & MBAs, 5e (Simko, Wallace, Comprix)
Last Updated: Sep 8 2021

Corrections to identified errors in the text

Check Figures
Last Updated: Oct 27 2020

Check Figures for noted end-of-chapter Exercises and Problems.

Data Analytics Files
Last Updated: Oct 30 2020

Data Analytics files, including inventory list of DA questions. Related videos will be available soon!

Practice Quizzes w/Solutions
Last Updated: Oct 27 2020

Brief practice quizzes containing multiple choice questions for each chapter. Includes solutions.

Managerial Accounting, 9e (Kulp, Dragoo, Hartgraves, Morse)
Last Updated: Mar 30 2022

Corrections to identified errors in the text.

Data Analytics Files
Last Updated: Jul 30 2021

Data sets for students. To accompany Appendix B: Data Analytics.

Data Analytics Errata
Last Updated: Sep 8 2021

Corrections to identified errors in Appendix B: Data Analytics

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