Financial Accounting.pdf

Weygandt helps corporate managers see the relevance of accounting in their everyday lives. Challenging accounting concepts are introduced with examples that are familiar to them, which helps build motivation to learn the material. Accounting issues are also placed within the context of marketing, management, IT, and finance. The new Do It! feature reinforces the basics by providing quick-hitting examples of brief exercises. The chapters also incorporate the All About You (AAY) feature as well as the Accounting Across the Organization (AAO) boxes that highlight the impact of accounting concepts. With these features, corporate managers will learn the concepts and understand how to effectively apply them.
Table of contents :
Cover Page ......Page 1
Dedication......Page 8
Title Page ......Page 9
Acknowledgments ......Page 20
Brief Contents ......Page 21
Contents ......Page 22
Feature Story: KNOWING THE NUMBERS ......Page 42
Three Activities ......Page 44
Who Uses Accounting Data? ......Page 46
Ethics in Financial Reporting' ......Page 47
Generally Accepted Accounting Principles ......Page 48
Assumptions ......Page 49
Liabilities ......Page 52
Stockholders’ Equity ......Page 53
Using the Basic Accounting Equation ......Page 54
Transaction Analysis ......Page 55
Summary of Transactions ......Page 60
Financial Statements ......Page 61
Balance Sheet ......Page 63
Statement of Cash Flow ......Page 64
Private Accounting ......Page 70
“Show Me the Money” ......Page 71
Feature Story: ACCIDENTS HAPPEN ......Page 90
The Account ......Page 92
Debit and Credit Procedure ......Page 93
Summary of Debit/Credit Rules ......Page 96
Steps in the Recording Process ......Page 97
The Journal ......Page 98
The Ledger ......Page 100
Posting ......Page 103
The Recording Process Illustrated ......Page 104
Summary Illustration of Journalizing and Posting ......Page 110
The Trial Balance ......Page 111
Limitations of a Trial Balance ......Page 112
Use of Dollar Signs ......Page 113
Feature Story: WHAT WAS YOUR PROFIT? ......Page 136
Fiscal and Calendar Years ......Page 138
Recognizing Revenues and Expenses ......Page 139
Types of Adjusting Entries ......Page 141
Adjusting Entries for Deferrals ......Page 142
Adjusting Entries for Accruals ......Page 149
Summary of Journalizing and Posting ......Page 154
Preparing the Adjusted Trial Balance ......Page 156
Preparing Financial Statements ......Page 157
APPENDIX: Alternative Treatment of Prepaid Expenses and Unearned Revenues ......Page 162
Prepaid Expenses ......Page 163
Unearned Revenues ......Page 164
Summary of Additional Adjustment Relationships ......Page 165
Feature Story: EVERYONE LIKES TO WIN ......Page 188
Steps in Preparing a Worksheet ......Page 190
Preparing Financial Statements from a Worksheet ......Page 198
Closing the Books ......Page 200
Preparing Closing Entries ......Page 201
Posting Closing Entries ......Page 203
Preparing a Post-Closing Trial Balance ......Page 205
Summary of the Accounting Cycle ......Page 207
Correcting Entries—An Avoidable Step ......Page 208
The Classified Balance Sheet ......Page 210
Current Assets ......Page 211
Long-Term Investments ......Page 212
Intangible Assets ......Page 213
Current Liabilities ......Page 214
Stockholders’ (Owners’) Equity ......Page 215
Reversing Entries Example ......Page 221
Feature Story: WHO DOESN’T SHOP AT WAL-MART? ......Page 246
Merchandising Operations ......Page 248
Flow of Costs ......Page 249
Recording Purchases of Merchandise ......Page 251
Freight Costs ......Page 253
Purchase Discounts ......Page 254
Summary of Purchasing Transactions ......Page 255
Recording Sales of Merchandise ......Page 256
Sales Returns and Allowances ......Page 257
Sales Discounts ......Page 258
Adjusting Entries ......Page 259
Summary of Merchandising Entries ......Page 260
Multiple-Step Income Statement ......Page 262
Classified Balance Sheet ......Page 265
Determining Cost of Goods Sold Under a Periodic System ......Page 269
Recording Purchases of Merchandise ......Page 270
Recording Sales of Merchandise ......Page 271
Using a Worksheet ......Page 273
Feature Story: “WHERE IS THAT SPARE BULLDOZER BLADE?” ......Page 296
Classifying Inventory ......Page 298
Taking a Physical Inventory ......Page 299
Determining Ownership of Goods ......Page 300
Inventory Costing ......Page 301
Specific Identification ......Page 302
Cost Flow Assumptions ......Page 303
Financial Statement and Tax Effects of Cost Flow Methods ......Page 308
Lower-of-Cost-or-Market ......Page 310
Income Statement Effects ......Page 311
Presentation ......Page 313
Analysis Using Inventory Turnover ......Page 314
First-In, First-Out (FIFO) ......Page 319
Average-Cost ......Page 320
APPENDIX 6B: Estimating Inventories ......Page 322
Gross Profit Method ......Page 323
Retail Inventory Method ......Page 324
Feature Story: MINDING THE MONEY IN MOOSE JAW ......Page 348
Fraud ......Page 350
Internal Control ......Page 352
Principles of Internal Control ......Page 353
Limitations of Internal Control ......Page 360
Over-the-Counter Receipts ......Page 361
Mail Receipts ......Page 363
Voucher System Controls ......Page 364
Petty Cash Fund Controls ......Page 366
Control Features: Use of a Bank ......Page 368
Bank Statements ......Page 369
Reconciling the Bank Account ......Page 371
Electronic Funds Transfer (EFT) System ......Page 375
Reporting Cash ......Page 376
Feature Story: A DOSE OF CAREFUL MANAGEMENT KEEPS RECEIVABLES HEALTHY ......Page 400
Recognizing Accounts Receivable ......Page 403
Valuing Accounts Receivable ......Page 404
Disposing of Accounts Receivable ......Page 410
Notes Receivable ......Page 413
Determining the Maturity Date ......Page 414
Valuing Notes Receivable ......Page 415
Disposing of Notes Receivable ......Page 416
Analysis ......Page 418
Feature Story: HOW MUCH FOR A RIDE TO THE BEACH? ......Page 440
SECTION 1: Plant Assets ......Page 442
Land Improvements ......Page 443
Equipment ......Page 444
Depreciation ......Page 446
Depreciation Methods ......Page 447
Revising Periodic Depreciation ......Page 452
Expenditures During Useful Life ......Page 453
Retirement of Plant Assets ......Page 454
Sale of Plant Assets ......Page 455
Accounting for Natural Resources ......Page 457
Accounting for Intangible Assets ......Page 458
Copyrights ......Page 459
Franchises and Licenses ......Page 460
Research and Development Costs ......Page 461
Presentation ......Page 462
Analysis ......Page 463
Gain Treatment ......Page 468
Feature Story: FINANCING HIS DREAMS ......Page 488
What Is a Current Liability? ......Page 490
Notes Payable ......Page 491
Payroll and Payroll Taxes Payable ......Page 492
Unearned Revenues ......Page 494
Current Maturities of Long-Term Debt ......Page 495
Analysis ......Page 496
Bond Basics ......Page 497
Issuing Procedures ......Page 499
Bond Trading ......Page 500
Determining the Market Value of Bonds ......Page 501
Issuing Bonds at Face Value ......Page 502
Discount or Premium on Bonds ......Page 503
Issuing Bonds at a Discount ......Page 504
Issuing Bonds at a Premium ......Page 505
Redeeming Bonds before Maturity ......Page 506
Accounting for Long-Term Notes Payable ......Page 507
Presentation ......Page 509
Analysis ......Page 510
Present Value of Face Value ......Page 516
Present Value of Interest Payments (Annuities) ......Page 518
Time Periods and Discounting ......Page 519
Computing the Present Value of a Bond ......Page 520
APPENDIX 10B: Effective-Interest Method of Bond Amortization ......Page 521
Amortizing Bond Discount ......Page 522
Amortizing Bond Premium ......Page 523
Amortizing Bond Discount ......Page 525
Amortizing Bond Premium ......Page 527
Feature Story: “HAVE YOU DRIVEN A FORD LATELY?” ......Page 550
The Corporate Form of Organization ......Page 552
Characteristics of a Corporation ......Page 553
Ownership Rights of Stockholders ......Page 556
Stock Issue Considerations ......Page 558
Corporate Capital ......Page 560
Issuing Par-Value Common Stock for Cash ......Page 561
Issuing No-Par Common Stock for Cash ......Page 562
Issuing Common Stock for Services or Noncash Assets ......Page 563
Accounting for Treasury Stock ......Page 564
Purchase of Treasury Stock ......Page 565
Disposal of Treasury Stock ......Page 566
Dividend Preferences ......Page 568
SECTION 2: Dividends ......Page 569
Entries for Cash Dividends ......Page 570
Allocating Cash Dividends between Preferred and Common Stock ......Page 571
Entries for Stock Dividends ......Page 574
Effects of Stock Dividends ......Page 575
Stock Splits ......Page 576
SECTION 3: Retained Earnings ......Page 577
Retained Earnings Restrictions ......Page 578
Prior Period Adjustments ......Page 579
Retained Earnings Statement ......Page 580
Presentation......Page 581
Analysis ......Page 582
APPENDIX 11A: Stockholders’ Equity Statement ......Page 587
Book Value per Share ......Page 588
Book Value versus Market Value ......Page 589
Feature Story: “IS THERE ANYTHING ELSE WE CAN BUY?” ......Page 612
Why Corporations Invest ......Page 614
Recording Sale of Bonds ......Page 616
Accounting for Stock Investments ......Page 617
Holdings of Less than 20% ......Page 618
Holdings Between 20% and 50% ......Page 619
Valuing and Reporting Investments ......Page 622
Categories of Securities ......Page 623
Balance Sheet Presentation ......Page 626
Presentation of Realized and Unrealized Gain or Loss ......Page 627
Classified Balance Sheet ......Page 628
APPENDIX: Preparing Consolidated Financial Statements ......Page 632
Consolidated Balance Sheet ......Page 633
Consolidated Income Statement ......Page 636
Feature Story: GOT CASH? ......Page 656
Usefulness of the Statement of Cash Flows ......Page 658
Classification of Cash Flows ......Page 659
Significant Noncash Activities ......Page 660
Format of the Statement of Cash Flows ......Page 661
Indirect and Direct Methods ......Page 662
Preparing the Statement of Cash Flows— Indirect Method ......Page 664
Step 1: Operating Activities ......Page 665
Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method ......Page 669
Step 2: Investing and Financing Activities ......Page 670
Step 3: Net Change in Cash ......Page 671
Free Cash Flow ......Page 674
APPENDIX 13A: Using a Worksheet to Prepare the Statement of Cash Flows—Indirect Method ......Page 679
Preparing the Worksheet ......Page 680
APPENDIX 13B: Statement of Cash Flows— Direct Method ......Page 685
Step 1: Operating Activities ......Page 686
Step 2: Investing and Financing Activities ......Page 690
Step 3: Net Change in Cash ......Page 691
Feature Story: IT PAYS TO BE PATIENT ......Page 718
Need for Comparative Analysis ......Page 720
Horizontal Analysis ......Page 721
Balance Sheet ......Page 722
Income Statement ......Page 723
Retained Earnings Statement ......Page 724
Income Statement ......Page 725
Ratio Analysis ......Page 727
Liquidity Ratios ......Page 728
Profitability Ratios ......Page 731
Solvency Ratios ......Page 735
Summary of Ratios ......Page 737
Discontinued Operations ......Page 740
Extraordinary Items ......Page 741
Changes in Accounting Principle ......Page 742
Quality of Earnings ......Page 743
Improper Recognition ......Page 744
APPENDIX A: Specimen Financial Statements: PepsiCo, Inc. ......Page 771
APPENDIX B: Specimen Financial Statements: The Coca-Cola Company ......Page 805
SimpIe Interest ......Page 809
Compound Interest ......Page 810
Future Value of a Single Amount ......Page 811
Future Value of an Annuity ......Page 813
Present Value Variables ......Page 815
Present Value of a Single Amount ......Page 816
Present Value of an Annuity ......Page 818
Computing the Present Value of a Long-Term Note or Bond ......Page 820
Present Value of a Single Sum ......Page 823
Useful Applications of the Financial Calculator ......Page 824
Mortgage Loan Amount ......Page 825
Internal Control of Payroll ......Page 831
Hiring Employees ......Page 832
Preparing the Payroll ......Page 833
Gross Earnings ......Page 834
Payroll Deductions ......Page 835
Net Pay ......Page 837
Maintaining Payroll Department Records ......Page 838
Recognizing Payroll Expenses and Liabilities ......Page 839
Recording Payment of the Payroll ......Page 840
Federal Unemployment Taxes ......Page 841
Recording Employer Payroll Taxes ......Page 842
Filing and Remitting Payroll Taxes ......Page 843
Nature and Purpose of Subsidiary Ledgers ......Page 855
Subsidiary Ledger Example ......Page 856
Advantages of Subsidiary Ledgers ......Page 857
Sales Journal ......Page 858
Posting the Sales Journal ......Page 859
Cash Receipts Journal ......Page 861
Journalizing Cash Receipts Transactions ......Page 863
Proving the Ledgers ......Page 864
Posting the Purchases Journal ......Page 865
Journalizing Cash Payments Transactions ......Page 867
Posting the Cash Payments Journal ......Page 869
Effects of Special Journals on the General Journal ......Page 870
Contingent Liabilities......Page 893
Recording a Contingent Liability ......Page 894
Operating Leases ......Page 895
Capital Leases ......Page 896
Additional Liabilities for Employee Fringe Benefits ......Page 897
Paid Absences ......Page 898
Postretirement Benefits......Page 899
IFRS Appendix ......Page 909
Photo Credits ......Page 949
Company Index ......Page 951
Subject Index ......Page 953