Financial & Managerial Accounting for Undergraduates, 3e

by Wallace, Nelson, Christensen, Hobson, Matthews

| ISBN: 978-1-61853-5-627 | Copyright 2024

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Road Map
LO Learning Objective Page eLecture Guided Example Assignments
LO3.1

Explain the accrual basis of accounting.

3-3

SS4, SS7, SE2, E6A, E7A, E6B, E7B

LO3.2

Describe the adjusting process.

3-7

SS6, SE3

LO3.3

Illustrate deferral adjustments.

3-8

SS1, SE4, SE5, SE6, SE7, E2A, E3A, E9A, E10A, E2B, E3B, E9B, E10B, P1A, P2A, P3A, P4A, P5A, P6A, P7A, P12A, P13A, P1B, P2B, P3B, P4B, P5B, P6B, P7B, P12B, P13B

LO3.4

Illustrate accrual adjustments.

3-11

SS2, SE6, SE7, E1A, E2A, E3A, E9A, E10A, E1B, E2B, E3B, E9B, E10B, P1A, P2A, P3A, P4A, P5A, P6A, P7A, P12A, P13A, P1B, P2B, P3B, P4B, P5B, P6B, P7B, P12B, P13B

LO3.5

Explain the adjusted trial balance and use it to prepare financial statements.

3-15

SE8, SE10, E4A, E4B, P8A, P10A, P11A, P12A, P13A, P14A, P15A, P16A, P17A, P18A, P8B, P10B, P11B, P12B, P13B, P14B, P15B, P16B, P17B, P18B

LO3.6

Describe the closing process and summarize the accounting cycle.

3-19

SS3, SS1, SE9, E5A, E8A, E11A, E5B, E8B, E11B, P8A, P9A, P13A, P8B, P9B, P12A, P12B

LO3.7

Appendix 3A: Describe the process of closing to the Income Summary account and summarize the accounting cycle.

3-26

SE11, E12A, E13A, E15A, E12B, E13B, E15B, P18A, P19A, P18B, P19B

LO3.8

Appendix 3B: Explain how to use a worksheet in the adjusting and closing process.

3-30

SE12, E14A, E16A, E14B, E16B, P20A, P20B

Data Analytics & Excel Skill Development for Career Readiness

The basics of accounting haven’t changed much in hundreds of years, but businesses have experienced significant change in the last decade due to the increased use of new technologies ranging from data analytics and Blockchain to machine learning and artificial intelligence. Technology is rapidly altering how accounting is performed and what can be done with the data once they are collected. In response to the changing demands of the business world, the AACSB has incorporated data analytics requirements within its educational framework. More recently, the AICPA and NASBA have underscored the importance of data analytics by making it a significant element in the CPA Evolution Model Curriculum. The consensus suggests that today’s business students need an understanding and working knowledge of data analytics and data visualization to compete for the best jobs.

In addition to data analytics skills, employers expect prospective employees to be proficient with Excel. In recognition of the increasing importance of data analytics and the need for Excel proficiency, the third edition includes several new features to enhance students’ career readiness.

  • We include Data Analytics boxes throughout the text to expose students to techniques that are used by businesses in areas related to the topic being discussed. The following box is an example.


  • Each chapter includes assignments that require students to use Excel or Tableau to hone data analysis and data visualization skills.


  • New Appendix F, at the end of the book, provides an overview of data analytics, data visualization, and best practices for the effective display of data.


  • MBC now contains a series of short videos that demonstrate the basic functions of Excel. The videos can be accessed within MBC as part of your MBC course.




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myBusinessCourse is a complete, secure, web-based training and e-Learning solution. There is nothing to download or install; it is accessible through any modern web browser and most mobile devices.

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Guided Example Videos

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  • Students will be prompted to install LockDown Browser prior to accessing the exam

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Welcome to the Third Edition of Financial & Managerial Accounting for Undergraduates!


"THE MOST COMPELLING VALUE PROPOSITION OFFERED IN THE FINANCIAL AND MANAGERIAL ACCOUNTING MARKET!"

That has been our goal since this product’s inception, and we have made that value proposition even more compelling with the Third Edition of Financial & Managerial Accounting for Undergraduates. We created this product to satisfy the needs of students taking an introductory course in financial and managerial accounting by providing a high-quality, contemporary, and engaging textbook and online learning system at an affordable price. With a suggested retail price of $170 for the printed, full-color textbook that includes access to myBusinessCourse (MBC) for two terms, we challenge faculty to find a better overall value for their students. The digital version offers an even more compelling value.

Financial & Managerial Accounting for Undergraduates has become a best-seller, and should be considered for use it in your introductory financial and managerial accounting classes. Here's why:

  • Follows a pedagogy that encourages student success
  • Includes Data Analytics and Excel skill development for career readiness
  • Covers Environmental, Social, and Governance (ESG)
  • Uses real-world examples
  • Includes CMA Examination questions
  • Optional technology that improves learning and complements faculty instruction is available.


Pedagogy That Encourages Student Success

Financial accounting can be challenging—especially for students lacking business experience or previous exposure to business courses. To help students succeed in the course, we use a number of pedagogical devices throughout the textbook, and we provide a wealth of resources through our online learning and homework system, myBusinessCourse (MBC).

  • The Past/Present/Future feature puts each chapter in context

  • Road Maps outline each chapter and provide a quick reference table that summarizes the print and digital resources for that chapter.

  • Your Turns provide hands-on practice for each major concept to ensure mastery of a topic before proceeding to the next concept.

  • We use color and other visual cues pedagogically to help students learn and retain important concepts.
  • Margin notes provide hints and identify commonly used alternative terms.

Environmental, Social, and Governance (ESG)

Increasingly, companies have found that “doing good” leads to a more successful, profitable enterprise. Todays students are very engaged in the ESG movement, and we have incorporated ESG boxes and assignments to help students understand how corporate reporting on ESG is being embraced by forward-thinking enterprises as part of their long-term business models.


Real Company Examples

Students are more likely to engage in the learning process and retain the concepts taught if the examples used are real companies with which they are familiar. Throughout the textbook, we incorporate a wide range of examples using real companies such as Apple, Microsoft, Boeing, and the California State Bar. In addition, two companies are used consistently throughout the managerial accounting chapters. Environmental Business Consultants, LLC, is a fictitious consulting company that gives students an opportunity to apply what they have learned within the service industry; and Fezzari, which is a custom bike manufacturer. These two continuous examples allow students to apply new skills to familiar organizations as they move through the managerial accounting concepts in the text.


Service Industry in Focus

The service sector is the fastest growing segment of the U.S. economy. The Service Industry in Focus inserts help students understand how managerial accounting is applied to improve the competitiveness of service companies.


Accounting in Practice

These boxed inserts help students bridge the gap between the classroom and what students encounter in the real world. Accounting in Practice illustrations document situations a student will likely encounter and present choices that companies face in making decisions.

CMA® Examination Questions

The Certified Management Accountant (CMA®) is a professional certification administered by the Institute of Management Accountants (IMA®). The purpose of the CMA certificate is to prepare accountants to be strategic thinkers and to analyze data in order to make better business decisions. We include past CMA questions at the end of each chapter. These questions will help students experience how concepts are applied in realistic business situations and give them an advantage if they choose to pursue a career in management accounting and become a CMA. CMA questions are identified by a CMA icon in the margin.


Additional Features

Throughout the text these additional features emphasize the relevance of the current business environment on accounting concepts:

  • Principle Alerts discuss upcoming or new accounting pronouncements and changes in accounting principles.
  • Forensic Accounting boxes highlight how financial accounting knowledge can help aid in the prevention of errors and fraud.
  • Thinking Globally boxes emphasize the similarities and differences in business practices between companies in the U.S. and companies in other countries.
  • Ethics is discussed where appropriate and select assignments raise ethical issues relevant to the material.


New to the Third Edition

  • Data Analytics: we have expanded Data Analytics coverage in this edition.
    • New Data Analytics boxes have been incorporated throughout the text. These boxes describe how Data Analytics is being used in business.
    • New Data Analytics and Data Visualization assignments using Excel and Tableau have been included in each chapter.
    • Appendix F on Data Analytics has been expanded to include an overview of data analytics, data visualization, and best practices for the effective display of data.
  • Environmental, Social, and Governance Reporting (ESG): Increasingly, companies have found that “doing good” leads to a more successful, profitable enterprise. A new introduction to ESG reporting is included in Chapter 1, and ESG boxes are incorporated throughout the text to help students understand how ESG is being embraced by forward-thinking enterprises as part of their long-term business models. New ESG reporting assignments have also been added to every chapter to reinforce the concepts presented.

  • Streamlining:  We edited many chapters and exhibits to reduce redundancy and increase clarity. We believe the flow of topics and their presentation have been meaningfully improved this edition.
  • Chapter 12 on the statement of cash flow has been revised to be more intuitive for students.
  • New chapter sequencing:  In the third edition, we introduce flexible budgets (now Chapter 23) before the discussion of standard costs and variance analysis (now Chapter 24) to improve the pedagogy and students’ learning.
  • New graphics and illustrations have been incorporated to convey key concepts.
  • Updated financial data throughout the text and assignments where real data is used.
  • The focus companies for five chapters have been changed:
    • Salesforce replaces Krispy Kreme in Chapter 3
    • Nike replaced Best Buy in Chapter 6
    • Luckin Coffee is new to Chapter 7
    • Tesla replaces MGM Resorts International in Chapter 8
    • Lululemon replaces Facebook in Chapter 9
    • Adecoagro LP replaces Monsanto in Chapter 22
  • Expanded myBusinessCourse Resources:  Additional assignments have been added to MBC, so nearly all the textbook assignments are available in the system.
    • Increased the overall number of algorithmic assignments and test questions.
    • Expanded the number of guided example videos and assignments included in MBC.
    • Assignable YourTurns! New in the third edition, the quantitative, in-chapter YourTurns! have been programmed in MBC and can be assigned for a grade.
    • MBC now includes short videos that show students how to use various features and functions in Excel. The videos can be accessed within MBC as part of your MBC course.



Supplement Package

  • myBusinessCourse: A web-based learning and assessment program intended to complement your textbook and classroom instruction. 
  • Solutions Manual: Created by the authors, the Solutions Manual contains complete solutions to all the assignment material in the text.
  • PowerPoint: The PowerPoint slides outline key elements of each chapter.
  • Test Bank: The Test Bank includes multiple-choice items, matching questions, short essay questions, and problems. 


Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. v)
Chapter 1: Financial Accounting and Business Decisions (pg. 1-1)
Business Organization (pg. 1-3)
Your Turn! 1.1 (pg. 1-4)
Activities of a Business (pg. 1-4)
Financing Activities (pg. 1-4)
Investing Activities (pg. 1-4)
Operating Activities (pg. 1-5)
Your Turn! 1.2 (pg. 1-5)
Accounting Information and Its Use (pg. 1-5)
External Users of Accounting (pg. 1-5)
Internal Users of Accounting (pg. 1-6)
Your Turn! 1.3 (pg. 1-7)
Ethics and Accounting (pg. 1-7)
Your Turn! 1.4 (pg. 1-8)
The Accounting Process (pg. 1-8)
Generally Accepted Accounting Principles (pg. 1-9)
International Financial Reporting Standards (pg. 1-10)
Your Turn! 1.5 (pg. 1-10)
Financial Statements (pg. 1-11)
Balance Sheet (pg. 1-11)
Income Statement (pg. 1-13)
Statement of Stockholders’ Equity (pg. 1-13)
Statement of Cash Flows (pg. 1-15)
Relations Among the Financial Statements (pg. 1-15)
Your Turn! 1.6 (pg. 1-17)
Other Annual Report Components (pg. 1-17)
Notes to Financial Statements (pg. 1-18)
Independent Auditor’s Report (pg. 1-18)
Management’s Discussion and Analysis (pg. 1-18)
Your Turn! 1.7 (pg. 1-19)
Environmental, Social, and Governance Reporting (pg. 1-20)
Careers in Accounting (pg. 1-20)
Data Analytics and Blockchain Technology (pg. 1-21)
Comprehensive Problem (pg. 1-22)
Appendix 1A: FASB’s Conceptual Framework (pg. 1-23)
Financial Reporting Objectives (pg. 1-24)
Financial Statement Elements (pg. 1-24)
Qualitative Characteristics (pg. 1-24)
Recognition and Measurement Criteria (pg. 1-25)
Summary of Learning Objectives (pg. 1-26)
Key Terms (pg. 1-28)
Self-Study Questions (pg. 1-29)
Questions (pg. 1-30)
Short Exercises (pg. 1-31)
Data Analytics (pg. 1-34)
Data Visualization (pg. 1-35)
Exercises-Set A (pg. 1-35)
Exercises-Set B (pg. 1-39)
Problems-Set A (pg. 1-42)
Problems-Set B (pg. 1-46)
Serial Problem: Kate’s Cards (pg. 1-49)
Extending Your Knowledge (pg. 1-50)
Answers to Self-Study Questions: (pg. 1-53)
Your Turn! Solutions (pg. 1-53)
Chapter 2: Processing Accounting Information (pg. 2-1)
Accounting Cycle (pg. 2-3)
Your Turn! 2.1 (pg. 2-4)
Analyzing Transactions (pg. 2-4)
Accounting Equation Expanded (pg. 2-5)
Transactions and the Accounting Equation: An Illustration (pg. 2-5)
Transaction Summary (pg. 2-9)
Your Turn! 2.2 (pg. 2-10)
The Account System (pg. 2-11)
Chart of Accounts (pg. 2-11)
System of Debits and Credits (pg. 2-11)
Your Turn! 2.3 (pg. 2-13)
Your Turn! 2.4 (pg. 2-13)
Recording Transactions (pg. 2-14)
General Journal (pg. 2-14)
Posting Journal Entries to the General Ledger (pg. 2-15)
Illustration of the Recording Process (pg. 2-16)
Summary Illustration of Journalizing and Posting Transactions (pg. 2-20)
Your Turn! 2.5 (pg. 2-21)
Trial Balance (pg. 2-22)
Your Turn! 2.6 (pg. 2-23)
Comprehensive Problem (pg. 2-23)
Summary of Learning Objectives (pg. 2-25)
Key Terms (pg. 2-26)
Self-Study Questions (pg. 2-27)
Questions (pg. 2-28)
Short Exercises (pg. 2-29)
Data Analytics (pg. 2-30)
Data Visualization (pg. 2-31)
Exercises-Set A (pg. 2-31)
Exercises-Set B (pg. 2-34)
Problems-Set A (pg. 2-38)
Problems-Set B (pg. 2-46)
Serial Problem: Kate’s Cards (pg. 2-53)
Extending Your Knowledge (pg. 2-54)
Answers to Self-Study Questions: (pg. 2-59)
Your Turn! Solutions (pg. 2-59)
Chapter 3: Accrual Basis of Accounting (pg. 3-1)
Accrual Basis of Accounting (pg. 3-3)
Revenue Recognition Principle (pg. 3-3)
Expense Recognition (Matching) Principle (pg. 3-5)
Your Turn! 3.1 (pg. 3-6)
Adjusting Accounts (pg. 3-7)
Unadjusted Trial Balance (pg. 3-7)
Types of Adjustments (pg. 3-7)
Your Turn! 3.2 (pg. 3-8)
Deferral Adjusting Entries (pg. 3-8)
Allocating Previously Recorded Assets to Expenses (pg. 3-8)
Allocating Previously Recorded Unearned Revenue to Revenue (pg. 3-10)
Your Turn! 3.3 (pg. 3-11)
Accrual Adjusting Entries (pg. 3-11)
Recording Previously Unrecorded Expenses (pg. 3-11)
Recording Previously Unrecorded Revenues (pg. 3-12)
Summary of Accounting Adjustments (pg. 3-13)
Your Turn! 3.4 (pg. 3-15)
Adjusted Trial Balance and Financial Statements (pg. 3-15)
Preparing the Adjusted Trial Balance (pg. 3-15)
Preparing Financial Statements (pg. 3-16)
STEP 1: Income Statement (pg. 3-16)
STEP 2: Statement of Stockholders’ Equity (pg. 3-16)
STEP 3: Balance Sheet (pg. 3-17)
STEP 4: Statement of Cash Flows (pg. 3-17)
Your Turn! 3.5 (pg. 3-18)
Closing Process (pg. 3-19)
Your Turn! 3.6 (pg. 3-19)
Journalizing and Posting the Closing Entries (pg. 3-19)
Summary of the Accounting Cycle (pg. 3-21)
Your Turn! 3.7 (pg. 3-22)
Quality of Accounting Numbers (pg. 3-22)
Comprehensive Problem (pg. 3-23)
Appendix 3A: Closing Process-Using Income Summary Account (pg. 3-26)
Your Turn! 3A.1 (pg. 3-27)
Journalizing and Posting the Closing Entries (pg. 3-27)
Summary of the Accounting Cycle (pg. 3-29)
Your Turn! 3A.2 (pg. 3-30)
Appendix 3B: Using a Worksheet (pg. 3-30)
Preparing a Worksheet (pg. 3-30)
Summary of Learning Objectives (pg. 3-33)
Key Terms (pg. 3-34)
Self-Study Questions (pg. 3-34)
Questions (pg. 3-35)
Short Exercises (pg. 3-35)
Data Analytics (pg. 3-37)
Data Visualization (pg. 3-37)
Exercises-Set A (pg. 3-37)
Exercises-Set B (pg. 3-41)
Problems-Set A (pg. 3-44)
Problems-Set B (pg. 3-52)
Serial Problem: Kate’s Cards (pg. 3-60)
Extending Your Knowledge (pg. 3-61)
Answers to Self-Study Questions: (pg. 3-64)
Your Turn! Solutions (pg. 3-65)
Chapter 4: Understanding Financial Statements (pg. 4-1)
Balance Sheet Classification and Analysis (pg. 4-3)
Current Assets (pg. 4-3)
Long-Term Assets (pg. 4-4)
Current Liabilities (pg. 4-5)
LongTerm Liabilities (pg. 4-5)
Stockholders’ Equity (pg. 4-6)
Presentation Format (pg. 4-6)
Your Turn! 4.1 (pg. 4-7)
Income Statement Classification and Analysis (pg. 4-7)
Your Turn! 4.2 (pg. 4-11)
Working with Financial Statements (pg. 4-11)
Analysis Based on Ratios (pg. 4-11)
Working with the Balance Sheet (pg. 4-11)
Your Turn! 4.3 (pg. 4-13)
Working with the Income Statement (pg. 4-14)
Working with the Statement of Stockholders’ Equity (pg. 4-15)
Comprehensive Problem (pg. 4-18)
Summary of Learning Objectives (pg. 4-20)
Self-Study Questions (pg. 4-21)
Questions (pg. 4-23)
Short Exercises (pg. 4-23)
Data Analytics (pg. 4-25)
Data Visualization (pg. 4-26)
Exercises-Set A (pg. 4-26)
Exercises-Set B (pg. 4-27)
Problems-Set A (pg. 4-29)
Problems-Set B (pg. 4-32)
Serial Problem: Kate’s Cards (pg. 4-35)
Extending Your Knowledge (pg. 4-36)
Answers to Self-Study Questions: (pg. 4-39)
Your Turn! Solutions (pg. 4-39)
Chapter 5: Accounting for Merchandising Operations (pg. 5-1)
The Nature of Merchandising (pg. 5-3)
Operating Cycle of a Merchandising Firm (pg. 5-4)
Cost Flows (pg. 5-5)
Inventory Systems (pg. 5-5)
Your Turn! 5.1 (pg. 5-6)
Accounting for Purchases of Merchandise (pg. 5-6)
Transportation Costs (pg. 5-6)
Purchase Returns and Allowances (pg. 5-7)
Purchase Discounts (pg. 5-8)
Your Turn! 5.2 (pg. 5-10)
Accounting for Sales of Merchandise (pg. 5-10)
Revenue Side (pg. 5-11)
Cost Side (pg. 5-11)
Sales Returns and Allowances (pg. 5-11)
Sales Discounts (pg. 5-12)
Net Sales (pg. 5-13)
Your Turn! 5.3 (pg. 5-13)
Profitability Analysis (pg. 5-13)
Gross Profit Percentage (pg. 5-13)
Return on Sales Ratio (Profit Margin) (pg. 5-14)
Your Turn! 5.4 (pg. 5-15)
Comprehensive Problem (pg. 5-16)
Appendix 5A: Periodic Inventory System (pg. 5-17)
Accounting for Purchases of Merchandise (pg. 5-17)
Your Turn! 5A.1 (pg. 5-18)
Accounting for Sales of Merchandise (pg. 5-18)
Your Turn! 5A.2 (pg. 5-19)
Comparison of Entries under the Perpetual and Periodic Systems (pg. 5-19)
Cost of Goods Sold Using a Periodic System (pg. 5-20)
Your Turn! 5A.3 (pg. 5-20)
Appendix 5B: The Revenue Recognition Standard (pg. 5-21)
Adjusting Journal Entry for Sales Discounts (pg. 5-21)
Adjusting Journal Entry for Sales Returns and Allowances (pg. 5-21)
Your Turn! 5B.1 (pg. 5-22)
Summary of Learning Objectives (pg. 5-22)
Key Terms (pg. 5-24)
Self-Study Questions (pg. 5-24)
Questions (pg. 5-25)
Short Exercises (pg. 5-26)
Data Analytics (pg. 5-27)
Data Visualization (pg. 5-28)
Exercises-Set A (pg. 5-28)
Exercises-Set B (pg. 5-30)
Problems-Set A (pg. 5-32)
Problems-Set B (pg. 5-34)
Serial Problem: Kate’s Cards (pg. 5-36)
Extending Your Knowledge (pg. 5-37)
Answers to Self-Study Questions: (pg. 5-39)
Your Turn! Solutions (pg. 5-39)
Chapter 6: Accounting for Inventory (pg. 6-1)
Inventory Categories and Concepts (pg. 6-3)
Categories of Inventory (pg. 6-3)
Concepts of Inventory Management (pg. 6-4)
Inventory Ownership and Physical Count (pg. 6-4)
Ownership of Inventory (pg. 6-5)
Physical Count of Inventory (pg. 6-6)
Your Turn! 6.1 (pg. 6-7)
Inventory Costing Methods (pg. 6-7)
Goods Flow vs. Cost Flow (pg. 6-7)
Data for Illustration of Cost Flow Assumptions (pg. 6-8)
Specific Identification Method (pg. 6-9)
FirstIn, FirstOut (FIFO) Method (pg. 6-9)
LastIn, FirstOut (LIFO) Method (pg. 6-10)
Weighted-Average Cost Method (pg. 6-11)
Your Turn! 6.2 (pg. 6-12)
Comparative Analysis of Inventory Costing Methods and Gross Profit (pg. 6-12)
Selecting Inventory Methods (pg. 6-13)
Your Turn! 6.3 (pg. 6-17)
Lower-of-Cost-or-Net Realizable Value Method (pg. 6-17)
Net Realizable Value (pg. 6-17)
Lower-of-Cost-or-Net Realizable Value (pg. 6-17)
Your Turn! 6.4 (pg. 6-18)
Inventory Analysis (pg. 6-19)
Inventory Turnover and Days’ Sales in Inventory (pg. 6-19)
Your Turn! 6.5 (pg. 6-20)
Comprehensive Problem (pg. 6-20)
Appendix 6A: Inventory Costing Methods and the Perpetual Inventory System (pg. 6-21)
Specific Identification Method (pg. 6-22)
FirstIn, FirstOut (FIFO) Method (pg. 6-22)
LastIn, FirstOut (LIFO) Method (pg. 6-23)
Weighted-Average Cost Method (pg. 6-24)
Comparative Analysis of Inventory Costing Methods (pg. 6-25)
Your Turn! 6A.1 (pg. 6-26)
Appendix 6B: LIFO Reserve (pg. 6-26)
Your Turn! 6B.1 (pg. 6-27)
Summary of Learning Objectives (pg. 6-27)
Key Terms (pg. 6-29)
Self-Study Questions (pg. 6-29)
Questions (pg. 6-30)
Short Exercises (pg. 6-31)
Data Analytics (pg. 6-33)
Data Visualization (pg. 6-33)
Exercises-Set A (pg. 6-33)
Exercises-Set B (pg. 6-36)
Problems-Set A (pg. 6-39)
Problems-Set B (pg. 6-43)
Serial Problem: Kate’s Cards (pg. 6-46)
Extending Your Knowledge (pg. 6-47)
Answers to Self-Study Questions: (pg. 6-49)
Your Turn! Solutions (pg. 6-50)
Chapter 7: Internal Control and Cash (pg. 7-1)
Fraud (pg. 7-3)
Fraud Triangle (pg. 7-3)
Pressure (pg. 7-3)
Your Turn! 7.1 (pg. 7-4)
Internal Control (pg. 7-4)
COSO Framework (pg. 7-4)
Control Failures (pg. 7-8)
Sarbanes-Oxley Act (pg. 7-9)
Your Turn! 7.2 (pg. 7-9)
Accounting for Cash (pg. 7-10)
Reporting Cash (pg. 7-10)
Cash and Cash Equivalents (pg. 7-10)
Your Turn! 7.3 (pg. 7-11)
Internal Control of Cash Receipts Transactions (pg. 7-11)
Cash Received on Account (pg. 7-11)
Cash Received from Retail Cash Sales (pg. 7-13)
Checks (pg. 7-15)
Using Electronic Funds Transfer (pg. 7-16)
Petty Cash Fund (pg. 7-16)
Your Turn! 7.4 (pg. 7-17)
Reconciling The Bank Statement (pg. 7-17)
The Bank Reconciliation Process (pg. 7-18)
Your Turn! 7.5 (pg. 7-22)
Effective Cash Management (pg. 7-22)
Monitoring Cash (pg. 7-22)
Primary Activities of Effective Cash Management (pg. 7-23)
Your Turn! 7.6 (pg. 7-23)
Comprehensive Problem (pg. 7-24)
Appendix 7A: Auditing and Internal Control (pg. 7-25)
Financial Statement Audits (pg. 7-25)
Audit Procedures (pg. 7-25)
The Audit Report (pg. 7-26)
Operational Audits (pg. 7-26)
Your Turn! 7A.1 (pg. 7-26)
Summary of Learning Objectives (pg. 7-27)
Key Terms (pg. 7-28)
Self-Study Questions (pg. 7-29)
Questions (pg. 7-29)
Short Exercises (pg. 7-30)
Data Analytics (pg. 7-31)
Data Visualization (pg. 7-32)
Exercises-Set A (pg. 7-32)
Exercises-Set B (pg. 7-34)
Problems-Set A (pg. 7-35)
Problems-Set B (pg. 7-39)
Serial Problem: Kate’s Cards (pg. 7-42)
Extending Your Knowledge (pg. 7-43)
Answers to Self-Study Questions: (pg. 7-46)
Your Turn! Solutions (pg. 7-47)
Chapter 8: Accounting for Receivables (pg. 8-1)
Accounts Receivable (pg. 8-3)
Accounting for Bad Debts (pg. 8-3)
Allowance Method (pg. 8-4)
Your Turn! 8.1 (pg. 8-7)
Estimating Credit Losses (pg. 8-7)
Percentage of Net Sales Method (pg. 8-7)
Your Turn! 8.2 (pg. 8-8)
Accounts Receivable Aging Method (pg. 8-8)
Your Turn! 8.3 (pg. 8-11)
Credit Card Sales (pg. 8-11)
Your Turn! 8.4 (pg. 8-12)
Notes Receivable (pg. 8-12)
Interest on Notes Receivable (pg. 8-12)
Adjusting Entry for Interest (pg. 8-14)
Reporting Notes Receivable on the Balance Sheet (pg. 8-15)
Your Turn! 8.5 (pg. 8-15)
Analyzing and Managing Receivables (pg. 8-15)
Your Turn! 8.6 (pg. 8-16)
Factoring and Discounting (pg. 8-16)
Comprehensive Problem (pg. 8-17)
Appendix 8A: Direct Write-Off Method (pg. 8-19)
Your Turn! 8A.1 (pg. 8-19)
Summary of Learning Objectives (pg. 8-19)
Key Terms (pg. 8-21)
Self-Study Questions (pg. 8-21)
Questions (pg. 8-22)
Short Exercises (pg. 8-23)
Data Analytics (pg. 8-24)
Data Visualization (pg. 8-25)
Exercises-Set A (pg. 8-25)
Exercises-Set B (pg. 8-28)
Problems-Set A (pg. 8-32)
Problems-Set B (pg. 8-35)
Serial Problem: Kate’s Cards (pg. 8-38)
Extending Your Knowledge (pg. 8-39)
Answers to Self-Study Questions: (pg. 8-41)
Your Turn! Solutions (pg. 8-42)
Chapter 9: Accounting for Long-Lived and Intangible Assets (pg. 9-1)
Overview of Long-Lived Assets (pg. 9-3)
Measuring Acquisition Cost of Plant Assets (pg. 9-4)
Acquisition Cost (pg. 9-4)
Your Turn! 9.1 (pg. 9-6)
Nature of Depreciation (pg. 9-7)
Depreciation Accounting: Allocation versus Valuation (pg. 9-7)
Calculating Depreciation Expense (pg. 9-8)
A Comparison of Alternative Depreciation Methods (pg. 9-11)
Your Turn! 9.2 (pg. 9-13)
Depreciation Method Estimate Changes (pg. 9-13)
Revenue versus Capital Expenditures (pg. 9-15)
Revenue Expenditures (pg. 9-15)
Capital Expenditures (pg. 9-16)
Your Turn! 9.3 (pg. 9-16)
Disposals of Plant Assets (pg. 9-17)
Sale of Plant Assets (pg. 9-17)
Your Turn! 9.4 (pg. 9-18)
Intangible Assets and Natural Resources (pg. 9-18)
Measurement of Intangible Assets (Cost Determination) (pg. 9-18)
Amortization of Intangibles (pg. 9-19)
Examples of Intangible Assets (pg. 9-19)
Patents (pg. 9-19)
Copyright (pg. 9-19)
Franchises (pg. 9-20)
Trademarks (pg. 9-20)
Goodwill (pg. 9-20)
Your Turn! 9.5 (pg. 9-21)
Natural Resources (pg. 9-21)
Your Turn! 9.6 (pg. 9-22)
Balance Sheet Presentation (pg. 9-22)
Return on Assets and Asset Turnover (pg. 9-23)
Your Turn! 9.7 (pg. 9-23)
Comprehensive Problem (pg. 9-24)
Summary Of Learning Objectives (pg. 9-24)
Key Terms (pg. 9-26)
SelfStudy Questions (pg. 9-26)
Questions (pg. 9-27)
Short Exercises (pg. 9-28)
Data Analytics (pg. 9-29)
Data Visualization (pg. 9-30)
Exercises-Set A (pg. 9-30)
Exercises-Set B (pg. 9-32)
Problems-Set A (pg. 9-34)
Problems-Set B (pg. 9-37)
Serial Problem: Kate’s Cards (pg. 9-40)
Extending Your Knowledge (pg. 9-41)
Answers to Self-Study Questions: (pg. 9-43)
Your Turn! Solutions (pg. 9-43)
Chapter 10: Accounting for Liabilities (pg. 10-1)
Current Liabilities (pg. 10-3)
Accounts Payable (pg. 10-3)
Notes Payable and Interest (pg. 10-3)
Interest Payable (pg. 10-5)
Current Portion of LongTerm Debt (pg. 10-5)
Advance Payments-Unearned Revenue (pg. 10-5)
Sales and Excise Taxes Payable (pg. 10-6)
PayrollRelated Liabilities (pg. 10-6)
Your Turn! 10.1 (pg. 10-8)
Income Taxes Payable (pg. 10-8)
Long-Term Liabilities (pg. 10-9)
Long-Term Notes (Term Loans) (pg. 10-9)
Types of Bonds (pg. 10-10)
Bond Prices (pg. 10-11)
Recording Bonds (pg. 10-13)
Your Turn! 10.2 (pg. 10-17)
Advantages and Disadvantages of Long-Term Bonds and Notes (pg. 10-17)
Contingent Liabilities (pg. 10-19)
Examples of Contingent Liabilities (pg. 10-20)
Summary of Accounting Treatment for Liabilities (pg. 10-21)
Your Turn! 10.3 (pg. 10-22)
Analyzing Liabilities (pg. 10-22)
Current Ratio and Quick Ratio (pg. 10-22)
Times-Interest-Earned Ratio (pg. 10-23)
Your Turn! 10.4 (pg. 10-24)
Comprehensive Problem (pg. 10-25)
Appendix 10A: Bond Pricing (pg. 10-25)
Straight-line Interest Method of Discount Amortization (pg. 10-26)
Straight-line Interest Method of Premium Amortization (pg. 10-27)
Effective Interest Method of Discount Amortization (pg. 10-28)
Effective Interest Method of Premium Amortization (pg. 10-29)
Using a Financial Calculator (pg. 10-30)
Using an Electronic Spreadsheet (pg. 10-32)
Your Turn! 10A.1 (pg. 10-32)
Appendix 10B: Leases (pg. 10-32)
Your Turn! 10B.1 (pg. 10-33)
Summary of Learning Objectives (pg. 10-33)
Key Terms (pg. 10-35)
Self-Study Questions (pg. 10-35)
Questions (pg. 10-36)
Short Exercises (pg. 10-37)
Data Analytics (pg. 10-38)
Data Visualization (pg. 10-40)
Exercises-Set A (pg. 10-40)
Exercises-Set B (pg. 10-43)
Problems-Set A (pg. 10-46)
Problems-Set B (pg. 10-50)
Serial Problem: Kate’s Cards (pg. 10-53)
Extending Your Knowledge (pg. 10-53)
Answers to Self-Study Questions: (pg. 10-56)
Your Turn! Solutions (pg. 10-56)
Chapter 11: Stockholders’ Equity (pg. 11-1)
Nature and Formation of a Corporation (pg. 11-3)
Advantages of the Corporate Form of Organization (pg. 11-3)
Disadvantages of the Corporate Form of Organization (pg. 11-5)
Accounting for Stockholders’ Equity in Alternative Organizational Forms (pg. 11-6)
Your Turn! 11.1 (pg. 11-6)
Par Value Stock and NoPar Value Stock (pg. 11-6)
Your Turn! 11.2 (pg. 11-7)
Types of Capital Stock (pg. 11-7)
Common Stock (pg. 11-7)
Preferred Stock (pg. 11-8)
Your Turn! 11.3 (pg. 11-10)
Stock Issuances for Cash (pg. 11-10)
Issuing Stock at a Premium (pg. 11-11)
Issuing No-Par Stock (pg. 11-11)
Noncash Stock Issuances (pg. 11-11)
Your Turn! 11.4 (pg. 11-12)
Stock Splits (pg. 11-12)
Your Turn! 11.5 (pg. 11-13)
Treasury Stock (pg. 11-13)
Accounting for Treasury Stock (pg. 11-13)
Your Turn! 11.6 (pg. 11-14)
Cash Dividends and Stock Dividends (pg. 11-15)
Cash Dividends (pg. 11-15)
Stock Dividends (pg. 11-16)
Your Turn! 11.7 (pg. 11-18)
Retained Earnings and the Statement of Stockholders’ Equity (pg. 11-18)
Statement of Stockholders’ Equity (pg. 11-19)
Your Turn! 11.8 (pg. 11-19)
Analyzing Stockholders’ Equity (pg. 11-20)
Return on Equity (pg. 11-20)
Dividend Yield and Dividend Payout Ratio (pg. 11-20)
Your Turn! 11.9 (pg. 11-22)
Comprehensive Problem (pg. 11-22)
Summary of Learning Objectives (pg. 11-23)
Key Terms (pg. 11-24)
Self-Study Questions (pg. 11-24)
Questions (pg. 11-25)
Short Exercises (pg. 11-26)
Data Analytics (pg. 11-27)
Data Visualization (pg. 11-28)
Exercises-Set A (pg. 11-28)
Exercises-Set B (pg. 11-31)
Problems-Set A (pg. 11-33)
Problems-Set B (pg. 11-37)
Serial Problem: Kate’s Cards (pg. 11-42)
Extending Your Knowledge (pg. 11-42)
Answers to Self-Study Questions: (pg. 11-45)
Your Turn! Solutions (pg. 11-45)
Chapter 12: Statement of Cash Flows (pg. 12-1)
Cash and Cash Equivalents (pg. 12-3)
Activity Classifications in the Statement of Cash Flows (pg. 12-4)
Operating Activities (pg. 12-5)
Investing Activities (pg. 12-5)
Financing Activities (pg. 12-6)
Usefulness of Activity Classification (pg. 12-6)
Noncash Investing and Financing Activities (pg. 12-7)
Using the Statement of Cash Flows (pg. 12-8)
Cash Flow from Operating Activities (pg. 12-8)
Your Turn! 12.1 (pg. 12-9)
Preparing the Statement of Cash Flows Using the Indirect Method (pg. 12-9)
Five Steps to Preparing a Statement of Cash Flows (pg. 12-11)
Your Turn! 12.2 (pg. 12-17)
Analyzing Cash Flows (pg. 12-18)
Free Cash Flow (pg. 12-18)
Operating-Cash-Flow-to-Current-Liabilities Ratio (pg. 12-18)
Operating-Cash-Flow-to-Capital-Expenditures Ratio (pg. 12-19)
Your Turn! 12.3 (pg. 12-20)
Comprehensive Problem (pg. 12-20)
Appendix 12A: Preparing the Statement of Cash Flows Under the Direct Method (pg. 12-22)
Your Turn! 12A.1 (pg. 12-25)
Summary of Learning Objectives (pg. 12-25)
Key Terms (pg. 12-26)
Self-Study Questions (pg. 12-27)
Questions (pg. 12-28)
Short Exercises (pg. 12-29)
Data Analytics (pg. 12-30)
Data Visualization (pg. 12-31)
Exercises-Set A (pg. 12-31)
Exercises-Set B (pg. 12-34)
Problems-Set A (pg. 12-37)
Problems-Set B (pg. 12-42)
Serial Problem: Kate’s Cards (pg. 12-46)
Extending Your Knowledge (pg. 12-47)
Answers to Self-Study Questions: (pg. 12-50)
Your Turn! Solutions (pg. 12-50)
Chapter 13: Analysis and Interpretation of Financial Statements (pg. 13-1)
Persistent Earnings and the Income Statement (pg. 13-3)
Discontinued Operations (pg. 13-5)
Changes in Accounting Principles (pg. 13-5)
Comprehensive Income (pg. 13-5)
Your Turn! 13.1 (pg. 13-6)
Sources of Information (pg. 13-6)
Analytical Techniques (pg. 13-7)
Horizontal Analysis (pg. 13-7)
Trend Analysis (pg. 13-10)
Your Turn! 13.2 (pg. 13-11)
Vertical Analysis (pg. 13-12)
Your Turn! 13.3 (pg. 13-13)
Ratio Analysis (pg. 13-13)
Analyzing Firm Profitability (pg. 13-14)
Your Turn! 13.4 (pg. 13-17)
Analyzing ShortTerm Firm Liquidity (pg. 13-18)
Your Turn! 13.5 (pg. 13-22)
Analyzing LongTerm Firm Solvency (pg. 13-22)
Your Turn! 13.6 (pg. 13-24)
Financial Ratios for Common Stockholders (pg. 13-25)
Your Turn! 13.7 (pg. 13-27)
Limitations of Financial Statement Analysis (pg. 13-27)
Comprehensive Problem (pg. 13-28)
Appendix 13A: Financial Statement Disclosures (pg. 13-29)
Parenthetical Disclosures (pg. 13-29)
Notes to the Financial Statements (pg. 13-30)
Supplementary Information (pg. 13-32)
Summary of Learning Objectives (pg. 13-32)
Summary of Financial Statement Ratios (pg. 13-33)
Key Terms (pg. 13-35)
Self-Study Questions (pg. 13-35)
Questions (pg. 13-37)
Short Exercises (pg. 13-37)
Data Analytics (pg. 13-39)
Data Visualization (pg. 13-41)
Exercises-Set A (pg. 13-41)
Exercises-Set B (pg. 13-43)
Problems-Set A (pg. 13-46)
Problems-Set B (pg. 13-51)
Serial Problem: Kate’s Cards (pg. 13-57)
Extending Your Knowledge (pg. 13-59)
Answers to Self-Study Questions: (pg. 13-63)
Your Turn! Solutions (pg. 13-63)
Chapter 14: Overview of Managerial Accounting (pg. 14-1)
Introduction to Managerial Accounting (pg. 14-3)
Managerial Accounting versus Financial Accounting (pg. 14-3)
Objectives of Managerial Accounting (pg. 14-4)
Your Turn! 14.1 (pg. 14-4)
Types of Business Entities (pg. 14-5)
Your Turn! 14.2 (pg. 14-5)
Major Trends in Business and Managerial Accounting (pg. 14-6)
Big Data and Predictive Analytics (pg. 14-6)
Sustainability (pg. 14-7)
Factory Automation (pg. 14-7)
Customer Profitability (pg. 14-7)
Your Turn! 14.3 (pg. 14-8)
Introducing Two New Companies (pg. 14-8)
Fezzari-A U.S. Bicycle Manufacturer and Distributor (pg. 14-8)
Environmental Business Consultants, LLC-A U.S. Service Firm (pg. 14-9)
Careers in Managerial Accounting (pg. 14-10)
Alternative Career Paths (pg. 14-10)
Management Accountants’ Compensation (pg. 14-11)
Work/Life Balance (pg. 14-11)
Your Turn! 14.4 (pg. 14-12)
Professional Certifications (pg. 14-12)
Certified Public Accountant (CPA) (pg. 14-12)
Certified Management Accountant (CMA) (pg. 14-12)
Other Professional Certifications (pg. 14-12)
Ethics in Accounting (pg. 14-13)
Your Turn! 14.5 (pg. 14-13)
Summary of Learning Objectives (pg. 14-13)
Key Terms (pg. 14-15)
Self-Study Questions (pg. 14-15)
Questions (pg. 14-16)
Short Exercise (pg. 14-16)
Data Analytics, Data Visualization, and Excel Activities (pg. 14-17)
Extending Your Knowledge (pg. 14-17)
Answers to Self-Study Questions: (pg. 14-18)
Your Turn! Solutions (pg. 14-19)
Chapter 15: Managerial Accounting Concepts and Cost Flows (pg. 15-1)
Key Objectives of a Managerial Accounting System (pg. 15-3)
Product Costing in a Manufacturing Environment (pg. 15-3)
Product Costing in a Service and Merchandising Environment (pg. 15-6)
Your Turn! 15.1 (pg. 15-7)
Inventories and Cost Categories (pg. 15-8)
Inventories (pg. 15-8)
Manufacturing Product Cost Categories (pg. 15-9)
Product Cost Flows (pg. 15-10)
Raw Materials (pg. 15-10)
Labor (pg. 15-11)
Manufacturing Overhead (pg. 15-12)
Cost of Goods Manufactured (pg. 15-13)
Cost of Goods Sold (pg. 15-14)
Your Turn! 15.2 (pg. 15-14)
Illustration of Product Cost Accumulation (pg. 15-14)
Introduction of T-Accounts (pg. 15-14)
Real-World Manufacturing Example (pg. 15-15)
Schedule of Cost of Goods Manufactured (pg. 15-15)
Calculating Cost of Goods Sold (pg. 15-17)
Income Statement for a Manufacturing Firm (pg. 15-18)
Your Turn! 15.3 (pg. 15-18)
Illustration of Product Cost Journal Entries (pg. 15-18)
Cost Flows (pg. 15-20)
Financial Statements (pg. 15-22)
Your Turn! 15.4 (pg. 15-23)
Service Industry in Focus (pg. 15-24)
Comprehensive Problem (pg. 15-27)
Summary of Learning Objectives (pg. 15-28)
Key Terms (pg. 15-29)
Self-Study Questions (pg. 15-30)
Questions (pg. 15-30)
Short Exercises (pg. 15-31)
Data Analytics, Data Visualization, and Excel Activities (pg. 15-33)
Exercises-Set A (pg. 15-33)
Exercises-Set B (pg. 15-36)
Problems-Set A (pg. 15-38)
Problems-Set B (pg. 15-41)
Extending Your Knowledge (pg. 15-43)
Answers to Self-Study Questions: (pg. 15-44)
Your Turn! Solutions (pg. 15-44)
Chapter 16: Cost Accounting Systems: Job Order Costing (pg. 16-1)
Cost Accounting Systems (pg. 16-3)
Two Basic Types of Cost Accounting Systems (pg. 16-3)
Timely Product Costing (pg. 16-4)
Your Turn! 16.1 (pg. 16-5)
Predetermined Overhead Rates (pg. 16-5)
Calculation of Predetermined Overhead Rate (pg. 16-6)
Your Turn! 16.2 (pg. 16-7)
Job Order Costing Systems (pg. 16-7)
Illustration of Job Order Costing for a Manufacturer (pg. 16-8)
Your Turn! 16.3 (pg. 16-13)
Illustration of Job Order Costing for a Service Firm (pg. 16-17)
Your Turn! 16.4 (pg. 16-18)
Departmental Overhead Rates (pg. 16-18)
Departmental Overhead Rates (pg. 16-18)
Your Turn! 16.5 (pg. 16-19)
Service Industry in Focus (pg. 16-19)
Comprehensive Problem (pg. 16-21)
Summary of Learning Objectives (pg. 16-21)
Key Terms (pg. 16-23)
Self-Study Questions (pg. 16-23)
Questions (pg. 16-24)
Short Exercises (pg. 16-24)
Data Analytics, Data Visualization, and Excel Activities (pg. 16-26)
Exercises-Set A (pg. 16-26)
Exercises-Set B (pg. 16-29)
Problems-Set A (pg. 16-31)
Problems-Set B (pg. 16-35)
Extending Your Knowledge (pg. 16-39)
Answers to Self-Study Questions: (pg. 16-40)
Your Turn! Solutions (pg. 16-40)
Chapter 17: Cost Accounting Systems: Process Costing (pg. 17-1)
Introduction to Process Costing (pg. 17-3)
Job Order Costing Review (pg. 17-3)
Process Costing (pg. 17-4)
Characteristics of Process Costing (pg. 17-5)
Manufacturing Departments (pg. 17-6)
Basic Processing Patterns (pg. 17-6)
Process Costing Steps (pg. 17-7)
Step 1: Visualize the Physical Flow of the Units (pg. 17-9)
Your Turn! 17.1 (pg. 17-9)
Step 2: Calculate the Equivalent Units (pg. 17-10)
Your Turn! 17.2 (pg. 17-12)
Step 3: Determine the Per-Unit Costs (pg. 17-12)
Your Turn! 17.3 (pg. 17-13)
Step 4: Calculate the Cost of Goods Manufactured (pg. 17-13)
Your Turn! 17.4 (pg. 17-14)
Step 5: Calculate the Cost of Ending Work-in-Process Inventory (pg. 17-14)
Your Turn! 17.5 (pg. 17-14)
The Product Cost Report (pg. 17-15)
Companies with Multiple Production Processes (pg. 17-16)
Journal Entries Illustrated (pg. 17-16)
Materials (pg. 17-16)
Labor (pg. 17-17)
Manufacturing Overhead (pg. 17-17)
Your Turn! 17.6 (pg. 17-17)
Service Industry in Focus (pg. 17-18)
Comprehensive Problem (Including Transferred-in Costs) (pg. 17-19)
Appendix 4A: Process Costing Using FIFO Method (pg. 17-21)
Process Costing Steps (pg. 17-21)
The Product Cost Report (pg. 17-28)
Journal Entries Illustrated (pg. 17-29)
Summary of Learning Objectives (pg. 17-30)
Key Terms (pg. 17-32)
Self-Study Questions (pg. 17-32)
Questions (pg. 17-33)
Short Exercises (pg. 17-33)
Data Analytics, Data Visualization, and Excel Activities (pg. 17-35)
Exercises-Set A (pg. 17-35)
Exercises-Set B (pg. 17-37)
Problems-Set A (pg. 17-40)
Problems-Set B (pg. 17-43)
Extending Your Knowledge (pg. 17-47)
Answers to Self-Study Questions: (pg. 17-47)
Your Turn! Solutions (pg. 17-47)
Chapter 18: Activity-Based Costing (pg. 18-1)
Understanding Indirect Costs Using Activity-Based Costing (pg. 18-3)
Changing Cost Environment (pg. 18-4)
Activity-Based Costing (pg. 18-4)
ABC Product Costing Model (pg. 18-6)
Your Turn! 18.1 (pg. 18-8)
Traditional Product Costing and ABC Compared (pg. 18-8)
Applying Overhead with Activity-Based Costing (pg. 18-9)
Limitations of ABC Illustration (pg. 18-12)
Comparing Traditional and Activity-Based Costing (pg. 18-12)
Your Turn! 18.2 (pg. 18-12)
ABC Implementation Issues (pg. 18-13)
ABC Implementation Considerations (pg. 18-13)
Other Uses of ABC (pg. 18-14)
Your Turn! 18.3 (pg. 18-14)
ABC and Customer Profitability Analysis (pg. 18-14)
Customer Profitability Profile (pg. 18-14)
Your Turn! 18.4 (pg. 18-17)
Activity-Based Management (pg. 18-17)
Focus on Activities (pg. 18-17)
Your Turn! 18.5 (pg. 18-18)
Services Industry in Focus (pg. 18-18)
Customer Profitability Analysis (pg. 18-18)
Summary of Learning Objectives (pg. 18-20)
Key Terms (pg. 18-21)
Self-Study Questions (pg. 18-21)
Questions (pg. 18-22)
Short Exercises (pg. 18-22)
Data Analytics, Data Visualization, and Excel Activities (pg. 18-26)
Exercises-Set A (pg. 18-26)
ExerciseS-Set B (pg. 18-29)
Problems-Set A (pg. 18-32)
Problems-Set B (pg. 18-37)
Extending Your Knowledge (pg. 18-42)
Answers to Self-Study Questions: (pg. 18-43)
Your Turn! Solutions (pg. 18-43)
Chapter 19: Cost-Volume-Profit Relationships (pg. 19-1)
Cost Behavior Analysis (pg. 19-3)
Selecting the Activity Basis (pg. 19-3)
Cost-Volume Graphs (pg. 19-4)
Classifications of Cost Behavior Patterns (pg. 19-5)
Your Turn! 19.1 (pg. 19-6)
Relevant Range (pg. 19-6)
Your Turn! 19.2 (pg. 19-7)
Analyzing Cost Behavior (pg. 19-7)
Scattergraph Method (pg. 19-8)
High-Low Method (pg. 19-8)
Least Squares Regression Method (pg. 19-10)
Analyzing Costs in Practice (pg. 19-11)
Your Turn! 19.3 (pg. 19-12)
Cost-Volume-Profit (CVP) Analysis (pg. 19-13)
Break-Even Analysis (pg. 19-13)
Your Turn! 19.4 (pg. 19-15)
Contribution Margin Analysis (pg. 19-15)
Your Turn! 19.5 (pg. 19-17)
Planning for Profit (pg. 19-18)
Desired Profit (pg. 19-18)
Margin of Safety (pg. 19-20)
Operating Leverage (pg. 19-20)
Using Cost-Volume-Profit Relationships (pg. 19-23)
Break-Even Analysis and Multiple Products (pg. 19-25)
Cost-Volume-Profit Analysis for Retail Businesses (pg. 19-25)
Your Turn! 19.6 (pg. 19-27)
Service Industry in Focus (pg. 19-27)
Comprehensive Problem (pg. 19-28)
Summary of Learning Objectives (pg. 19-30)
Key Terms (pg. 19-32)
Self-Study Questions (pg. 19-32)
Questions (pg. 19-33)
Short Exercises (pg. 19-34)
Data Analytics, Data Visualization, and Excel Activities (pg. 19-34)
Exercises-Set A (pg. 19-35)
Exercises-Set B (pg. 19-38)
Problems-Set A (pg. 19-42)
Problems-Set B (pg. 19-46)
Extending Your Knowledge (pg. 19-50)
Answers to Self-Study Questions: (pg. 19-51)
Your Turn! Solutions (pg. 19-51)
Chapter 20: Variable Costing: A Tool for Decision-Making (pg. 20-1)
Treatment of Product Costs (pg. 20-3)
Absorption Costing (pg. 20-3)
Variable Costing (pg. 20-3)
Appropriate Use of Absorption Costing and Variable Costing (pg. 20-4)
Your Turn! 20.1 (pg. 20-5)
Variable Costing Income Statement (pg. 20-5)
Income Statement Preparation (pg. 20-5)
Your Turn! 20.2 (pg. 20-7)
Income Reconciliation (pg. 20-7)
Your Turn! 20.3 (pg. 20-10)
Advantages and Disadvantages of Variable Costing (pg. 20-10)
Advantages (pg. 20-10)
Disadvantages (pg. 20-10)
Your Turn! 20.4 (pg. 20-11)
Services Industry in Focus (pg. 20-11)
Comprehensive Problem (pg. 20-13)
Summary of Learning Objectives (pg. 20-14)
Key Terms (pg. 20-15)
Self-Study Questions (pg. 20-15)
Questions (pg. 20-16)
Short Exercises (pg. 20-16)
Data Analytics, Data Visualization, and Excel Activities (pg. 20-18)
Exercises-Set A (pg. 20-18)
Exercises-Set B (pg. 20-19)
Problems-Set A (pg. 20-19)
Problems-Set B (pg. 20-21)
Extending Your Knowledge (pg. 20-22)
Answers to Self-Study Questions: (pg. 20-23)
Your Turn! Solutions (pg. 20-23)
Chapter 21: Relevant Costs and ShortTerm Decision-Making (pg. 21-1)
Management and the Decision-Making Process (pg. 21-3)
Who Makes Decisions? (pg. 21-3)
Phases of Decision-Making (pg. 21-5)
Relevant Costs and Differential Analysis (pg. 21-6)
Relevant Costs (pg. 21-6)
Differential Analysis (pg. 21-7)
Your Turn! 21.1 (pg. 21-8)
Illustrations of Differential Analysis (pg. 21-8)
The Special Order (pg. 21-9)
Your Turn! 21.2 (pg. 21-10)
Make or Buy? (pg. 21-10)
Your Turn! 21.3 (pg. 21-12)
Dropping Unprofitable Segments (pg. 21-12)
Your Turn! 21.4 (pg. 21-13)
Your Turn! 21.5 (pg. 21-17)
Constrained Resources (pg. 21-17)
Your Turn! 21.6 (pg. 21-20)
Service Industry in Focus (pg. 21-20)
Summary of Learning Objectives (pg. 21-21)
Key Terms (pg. 21-22)
Self-Study Questions (pg. 21-23)
Questions (pg. 21-23)
Short Exercises (pg. 21-24)
Data Analytics, Data Visualization, and Excel Activities (pg. 21-26)
Exercises-Set A (pg. 21-26)
Exercises-Set B (pg. 21-30)
Problems-Set A (pg. 21-32)
Problems-Set B (pg. 21-35)
Extending Your Knowledge (pg. 21-38)
Answers to Self-Study Questions: (pg. 21-40)
Your Turn! Solutions (pg. 21-40)
Chapter 22: Planning and Budgeting (pg. 22-1)
The Planning Process (pg. 22-3)
Strategic Planning (pg. 22-4)
Operational Planning (pg. 22-5)
Progress Measurement and Reporting (pg. 22-5)
Your Turn! 22.1 (pg. 22-6)
The Budgeting Process (pg. 22-6)
Advantages of Budgeting (pg. 22-7)
Elements of Effective Budgeting (pg. 22-7)
Zero-Based Budgeting (pg. 22-8)
Your Turn! 22.2 (pg. 22-10)
The Framework of the Master Budget (pg. 22-10)
Master Budget Components (pg. 22-10)
Budget Interrelationships (pg. 22-10)
Your Turn! 22.3 (pg. 22-11)
Illustration of a Master Budget and Its Components (pg. 22-11)
Sales Budget (pg. 22-11)
Production Budget (pg. 22-12)
Direct Materials Budget (pg. 22-13)
Direct Labor Budget (pg. 22-14)
Manufacturing Overhead Budget (pg. 22-14)
Selling and Administrative Expense Budget (pg. 22-15)
Capital Expenditures Budget (pg. 22-16)
Cash Budget (pg. 22-17)
Illustration of a Service Firm’s Budgets (pg. 22-17)
Your Turn! 22.4 (pg. 22-20)
Budgeted Financial Statements (pg. 22-20)
Your Turn! 22.5 (pg. 22-23)
Services Industry in Focus (pg. 22-23)
Comprehensive Problem (pg. 22-24)
Summary of Learning Objectives (pg. 22-28)
Key Terms (pg. 22-29)
Self-Study Questions (pg. 22-30)
Questions (pg. 22-30)
Short Exercises (pg. 22-31)
Data Analytics, Data Visualization, and Excel Activities (pg. 22-33)
Exercises-Set A (pg. 22-33)
Exercises-Set B (pg. 22-35)
Problems-Set A (pg. 22-38)
Problems-Set B (pg. 22-40)
Extending Your Knowledge (pg. 22-44)
Answers to Self-Study Questions: (pg. 22-44)
Your Turn! Solutions (pg. 22-44)
Chapter 23: Flexible Budgets, Segment Reporting, and Performance Analysis (pg. 23-1)
Static Budgets (pg. 23-3)
Static Budget Performance Report (pg. 23-3)
Your Turn! 23.1 (pg. 23-4)
Flexible Budgets (pg. 23-4)
Flexible Budgets in a Manufacturing Environment (pg. 23-4)
Flexible Budgets in a Service Environment (pg. 23-7)
Your Turn! 23.2 (pg. 23-10)
Internal Reporting of Segment Operations (pg. 23-10)
Decentralized Organizations (pg. 23-10)
Segment Reporting (pg. 23-11)
Types of Business Segments (pg. 23-11)
Your Turn! 23.3 (pg. 23-13)
Performance Reporting (pg. 23-13)
Departmental Operations (pg. 23-15)
Contribution Margin Income Statement (pg. 23-15)
Segment Performance Evaluation (pg. 23-16)
Service Company Segment Reporting Illustration (pg. 23-16)
Office Margin (pg. 23-16)
Your Turn! 23.4 (pg. 23-19)
Performance Analysis (pg. 23-20)
Return on Investment (pg. 23-20)
Profit Margin (pg. 23-21)
Asset Turnover (pg. 23-21)
Residual Income (pg. 23-22)
Balanced Scorecard (pg. 23-23)
Your Turn! 23.5 (pg. 23-23)
Your Turn! 23.6 (pg. 23-23)
Service Industry in Focus (pg. 23-24)
Appendix 23A: Transfer Pricing (pg. 23-27)
Domestic Transfer Pricing (pg. 23-27)
International Transfer Pricing (pg. 23-33)
Your Turn! 23.7 (pg. 23-33)
Comprehensive Problem (pg. 23-33)
Summary of Learning Objectives (pg. 23-34)
Key Terms (pg. 23-36)
Self-Study Questions (pg. 23-37)
Questions (pg. 23-38)
Short Exercises (pg. 23-38)
Data Analytics, Data Visualization, and Excel Activities (pg. 23-40)
Exercises-Set A (pg. 23-41)
Exercises-Set B (pg. 23-42)
Problems-Set A (pg. 23-43)
Problems-Set B (pg. 23-47)
Extending Your Knowledge (pg. 23-50)
Answers to Self-Study Questions: (pg. 23-51)
Your Turn! Solutions (pg. 23-51)
Chapter 24: Standard Costing and Variance Analysis (pg. 24-1)
Standard Costs (pg. 24-3)
Uses of Standard Cost Accounting (pg. 24-4)
Your Turn! 24.1 (pg. 24-5)
Determining Standard Costs (pg. 24-5)
Direct Materials Standards (pg. 24-5)
Direct Labor Standards (pg. 24-6)
Variable Overhead Standards (pg. 24-6)
Review of Flexible Budget Cost Variance (pg. 24-8)
Your Turn! 24.2 (pg. 24-9)
Variable Manufacturing Cost Variances (pg. 24-9)
Direct Materials Variances (pg. 24-9)
Your Turn! 24.3 (pg. 24-13)
Direct Labor Variances (pg. 24-13)
Your Turn! 24.4 (pg. 24-16)
Variable Overhead Variances (pg. 24-16)
Your Turn! 24.5 (pg. 24-18)
Standard Costs in Financial Statements (pg. 24-18)
Your Turn! 24.6 (pg. 24-19)
Services Industry in Focus (pg. 24-19)
Appendix 24A: Cost Variance Journal Entries Illustrated (pg. 24-20)
Journal Entries Illustrated (pg. 24-20)
Your Turn! 24.7 (pg. 24-22)
Comprehensive Problem (pg. 24-23)
Summary of Learning Objectives (pg. 24-24)
Key Terms (pg. 24-25)
Self-Study Questions (pg. 24-26)
Questions (pg. 24-26)
Short Exercises (pg. 24-27)
Data Analytics, Data Visualization, and Excel Activities (pg. 24-28)
Exercises-Set A (pg. 24-28)
Exercises-Set B (pg. 24-29)
Problems-Set A (pg. 24-30)
Problems-Set B (pg. 24-32)
Extending Your Knowledge (pg. 24-34)
Answers to Self-Study Questions: (pg. 24-35)
Your Turn! Solutions (pg. 24-36)
Chapter 25: Capital Budgeting (pg. 25‑1)
Elements of Capital Budgeting (pg. 25‑3)
Capital Budgeting Phases (pg. 25‑3)
Capital Expenditure Analysis (pg. 25‑4)
Your Turn! 25.1 (pg. 25‑5)
Required Rates of Return and the Time Value of Money (pg. 25‑5)
Cost of Capital (pg. 25‑5)
Time Value of Money (pg. 25‑6)
Your Turn! 25.2 (pg. 25‑7)
Performing Net Present Value Calculations (pg. 25‑8)
Single-Sum Cash Flows (pg. 25‑8)
Annuity Cash Flows (pg. 25‑9)
Your Turn! 25.3 (pg. 25‑10)
Measurement of Investments and Returns (pg. 25‑10)
Cash Flows (pg. 25‑10)
After-Tax Cash Flows (pg. 25‑10)
Depreciation Tax Shield (pg. 25‑11)
Illustration of After-Tax Cash Flows (pg. 25‑11)
Summary of Concerns Underlying Capital Budgeting (pg. 25‑13)
Your Turn! 25.4 (pg. 25‑14)
Net Present Value Analysis (pg. 25‑14)
Basic Steps (pg. 25‑14)
Illustration of Net Present Value (NPV) Analysis (pg. 25‑15)
Liquidation Proceeds (pg. 25‑18)
Excess Present Value Index (pg. 25‑19)
Your Turn! 25.5 (pg. 25‑19)
Other Capital Budgeting Analyses (pg. 25‑20)
Internal Rate of Return Analysis (pg. 25‑20)
Basic Steps (pg. 25‑20)
Your Turn! 25.6 (pg. 25‑21)
Cash Payback Analysis (pg. 25‑21)
Average Rate of Return Analysis (pg. 25‑23)
Capital Budgeting: A Complex Subject (pg. 25‑25)
Your Turn! 25.7 (pg. 25‑25)
Service Industry in Focus (pg. 25‑25)
Appendix 12A: Time Value of Money Calculations (pg. 25‑26)
Using a Financial Calculator (pg. 25‑26)
Using an Electronic Spreadsheet (pg. 25‑28)
Comprehensive Problem (pg. 25‑29)
Summary of Learning Objectives (pg. 25‑30)
Key Terms (pg. 25‑32)
Self-Study Questions (pg. 25‑32)
Questions (pg. 25‑33)
Short Exercises (pg. 25‑34)
Data Analytics, Data Visualization, and Excel Activities (pg. 25‑36)
Exercises-Set A (pg. 25‑36)
Exercises-Set B (pg. 25‑37)
Problems-Set A (pg. 25‑38)
Problems-Set B (pg. 25‑41)
Extending Your Knowledge (pg. 25‑44)
Answers to Self-Study Questions: (pg. 25‑45)
Your Turn! Solutions (pg. 25‑45)
Appendix A: Columbia Sportswear Company (pg. A-1)
Report of Independent Auditors (pg. A-2)
Financial Statements (pg. A-5)
Notes To Financial Statements (pg. A-9)
Comparative Selected Financial Data (pg. A-25)
Report on Internal Control (pg. A-26)
Appendix B: Financial Statements for Under Armour (pg. B-1)
Appendix C: Financial Statements for LVMH Moët Hennessy-Louis Vuitton (pg. C-1)
Appendix D: Accounting for Investments and Consolidated Financial Statements (pg. D-1)
Investments (pg. D-2)
Debt and Equity Securities (pg. D-2)
Investment Categories (pg. D-2)
Your Turn! D-1 (pg. D-3)
Investments in Debt Securities (pg. D-3)
Purchase (pg. D-4)
Recognition of Interest Income (pg. D-5)
Balance Sheet Valuation (pg. D-5)
Sale or Redemption at Maturity (pg. D-7)
Your Turn! D-2 (pg. D-8)
Investments in Equity Securities (pg. D-8)
Purchase (pg. D-8)
Recognition of Investment Income (pg. D-9)
Balance Sheet Valuation (pg. D-10)
Sale (pg. D-10)
Current and Noncurrent Classifications (pg. D-11)
Your Turn! D-3 (pg. D-11)
ParentSubsidiary Relationship (pg. D-12)
Consolidated Financial Statements (pg. D-12)
Limitations of Consolidated Statements (pg. D-13)
Summary of Learning Objectives (pg. D-13)
Key Terms (pg. D-14)
Self-Study Questions (pg. D-14)
Questions (pg. D-16)
Exercises-Set A (pg. D-16)
Exercises-Set B (pg. D-18)
Problems-Set A (pg. D-20)
Problems-Set B (pg. D-22)
Answers to Self-Study Questions: (pg. D-24)
Your Turn! Solutions (pg. D-24)
Appendix E: Accounting and the Time Value of Money (pg. E-1)
Time Value of Money Concept (pg. E-2)
Time Value of Money: Simple Interest Model (pg. E-2)
Time Value of Money: Compound Interest Model (pg. E-2)
Your Turn! E-1 (pg. E-3)
Future Value of an Amount (pg. E-3)
Your Turn! E-2 (pg. E-5)
Future Value of an Annuity (pg. E-5)
Your Turn! E-3 (pg. E-6)
Present Value of an Amount (pg. E-7)
Your Turn! E-4 (pg. E-9)
Present Value of an Annuity (pg. E-9)
Your Turn! E-5 (pg. E-10)
Calculations Using a Calculator and a Spreadsheet (pg. E-10)
Summary of Learning Objectives (pg. E-11)
Key Terms (pg. E-11)
Self-Study Questions (pg. E-11)
Exercises-Set A (pg. E-12)
Exercises-Set B (pg. E-13)
Answers to Self-Study Questions (pg. E-14)
Your Turn! Solutions (pg. E-15)
Appendix F: Data Analytics and Blockchain Technology (pg. F-1)
Data Analytics (pg. F-2)
Big Data (pg. F-2)
Types of Data Analytics (pg. F-3)
Data Analytics in the Accounting Profession (pg. F-3)
The Analytics Mindset (pg. F-5)
Data Analytic Tools (pg. F-6)
Data Visualization (pg. F-7)
Blockchain Technology (pg. F-11)
Summary of Learning Objectives (pg. F-13)
Key Concepts and Terms (pg. F-13)
Video Resources For Tableau (pg. F-14)
Questions (pg. F-14)
Exercises (pg. F-15)
Problems (pg. F-15)
James S. Wallace

James S. Wallace

Associate Professor at The Peter F. Drucker and Masatoshi Ito Graduate School of Management at The Claremont Graduate University.

He received his Bachelors of Arts from the University of California, Santa Barbara, his MBA from the University of California, Davis, and his PhD from the University of Washington. Professor Wallace also holds a CPA certification from the state of California. He previously served on the faculty of the University of California, Irvine and has served as a visiting professor at the University of California, San Diego. Professor Wallace's work has appeared in leading academic journals including the Journal of Accounting and Economics, the Journal of Corporate Finance, and Information Systems Research, along with leading applied journals such as the Journal of Applied Corporate Finance, the Journal of Accountancy, Issues in Accounting Education and Accounting Horizons. Prior to his career in academics, Professor Wallace worked in public accounting and in industry with a Fortune 500 company. He has done consulting work with numerous companies in multiple industries.

Karen K. Nelson

Karen K. Nelson

M.J. Neeley Professor of Accounting at TCU. Former Harmon Whittington Professor of Accounting and past Accounting Area Coordinator at the Jones Graduate School of Business at Rice University.

Karen previously served on the faculty at Rice University, the Stanford University Graduate School of Business, and as a visiting professor at the University of Michigan. She earned her Ph.D. at the University of Michigan and a bachelor’s degree (summa cum laude) from the University of Colorado. She also holds a CPA license from the state of Colorado. Professor Nelson’s research focuses on financial reporting and disclosure issues, including the role of regulators, auditors, and private securities litigation in monitoring financial reporting quality. She has held research seminars at over 50 leading business schools in the U.S. and abroad, and published in a variety of leading academic journals including The Accounting Review, Journal of Accounting and Economics, Journal of Accounting, and Review of Accounting Studies. Her research has been featured in the financial press in publications such as The Wall Street Journal, Business Week, and Forbes. She is an active member of the American Accounting Association and serves on the Editorial Board of The Accounting Review. She has taught financial accounting at all levels, and her students have honored her with numerous awards for teaching excellence. She currently teaches intermediate accounting to undergraduates and financial accounting to MBAs. She is a member of the Standing Advisory Group of the Public Company Accounting Oversight Board.

Theodore E. Christensen

Theodore E. Christensen

Director and Terry Distinguished Chair of Business in the J.M. Tull School of Accounting at the University of Georgia (UGA).

Prior to coming to UGA, he was on the faculty at Brigham Young University from 2000-2015 and at Case Western Reserve University from 1995-2000. He was a visiting professor at the University of Michigan (2013-2014) and the University of Utah (2012) and has taught at Santa Clara University in a summer program since 2005. He received a B.S. degree in accounting from San Jose State University, an M.Acc. degree in tax from Brigham Young University, and a Ph.D. in accounting from the University of Georgia. Professor Christensen has authored and coauthored articles published in many journals, including The Accounting Review; the Journal of Accounting and Economics; the Journal of Accounting Research; Review of Accounting Studies; Contemporary Accounting Research; Accounting Organizations and Society; the Journal of Business Finance & Accounting; the Journal of Accounting, Auditing, and Finance; Accounting Horizons; and Issues in Accounting Education.

L. Scott Hobson

L. Scott Hobson

L. Scott Hobson is a teaching Professor of Accounting at Brigham Young University (BYU) since 2003.

He received his B.S. in Accounting and Master of Accountancy Degrees from BYU in 1983. Prior to his career in academics, Professor Hobson was the founder and the owner of Hilton Farnkopf & Hobson (now HFG Consultants), a management consulting firm headquartered in Walnut Creek, California, for 14 years. He also worked in public accounting at Price Waterhouse for 5.5 years in both audit and consulting. While at Price Waterhouse, he taught for 2 years as an adjunct faculty at San Jose University. He has taught accounting at all levels, from principles to M.B.A. courses, including managerial accounting, financial accounting, governmental and not-for-profit accounting, and management consulting. Professor Hobson is licensed as a CPA (inactive) in California. Professor Hobson has published a case titled "Managing the CPA Firm at Dodge Company" in Issues in Accounting Education.

Jason W. Matthews

Jason W. Matthews

Senior Lecturer of Accounting and Director of Undergraduate Programs in the J.M. Tull School of Accounting at the University of Georgia (UGA)

He received his B.S. from Missouri State University; his Master of Accountancy degree from North Carolina State University; and his Ph.D. from the University of Georgia. Prior to his career in academics, Dr. Matthews was the interim Chief Financial Officer at Roark Capital Group, a private equity firm with approximately $12 billion in equity capital based in Atlanta, Georgia. He was also the Director and Chief Financial Officer at United Coal Company, a producer of metallurgical and steam coal and the Director and Chief Financial Officer of Oculan Corporation, which developed hardware and software related to IT security management.  Dr. Matthews has taught across all levels at UGA, including financial accounting to full-time and Executive M.B.A. students, accounting information systems to MAcc students, cost accounting and audit to accounting majors, and introductory financial and managerial accounting to non-accounting majors. He is the recipient of numerous teaching awards, including most recently the 2018 Terry College of Business Instructional Excellence Award and the 2018 Pearcy B. Yeargin Outstanding Undergraduate Teacher of the Year award. He has been active in serving on committees in the Teaching Learning and Curriculum section of the American Accounting Association and is a CMA. 


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Errata
Last Updated: Apr 30 2024

Corrections to identified errors in the first printing. 

Excel Templates (Financial Chapters)
Last Updated: Jan 20 2024

Excel templates for use with identified end-of-chapter assignments in Chapters 1-13

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