Horngren's Financial & Managerial Accounting: The financial Chapters

Cover
Title Page
Copyright
About the Authors
Brief Contents
Contents
Financial & Managerial Accounting . . . Expanding on Proven Success
Solving Learning and Teaching Challenges
Acknowledgments
Chapter 1: Accounting and the Business Environment
Why Is Accounting Important?
Decision Makers: The Users of Accounting Information
Accounting Matters
What Are the Organizations and Rules that Govern Accounting?
Governing Organizations
Generally Accepted Accounting Principles
The Economic Entity Assumption
The Cost Principle
The Going Concern Assumption
The Monetary Unit Assumption
International Financial Reporting Standards
Ethics in Accounting and Business
What Is the Accounting Equation?
Assets
Liabilities
Equity
How Do You Analyze a Transaction?
Transaction Analysis for Smart Touch Learning
How Do You Prepare Financial Statements?
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
How Do You Use Financial Statements to Evaluate Business Performance?
Kohl’s Corporation
Return on Assets (ROA)
Review
Assess Your Progress
Critical Thinking
Chapter 2: Recording Business Transactions
What Is an Account?
Assets
Liabilities
Equity
Chart of Accounts
Ledger
What Is Double-Entry Accounting?
The T-Account
Increases and Decreases in the Accounts
Expanding the Rules of Debit and Credit
The Normal Balance of an Account
Determining the Balance of a T-Account
How Do You Record Transactions?
Source Documents—The Origin of the Transactions
Journalizing and Posting Transactions
The Ledger Accounts After Posting
The Four-Column Account: An Alternative to the T-Account
What Is the Trial Balance?
Preparing Financial Statements from the Trial Balance
Correcting Trial Balance Errors
How Do You Use the Debt Ratio to Evaluate Business Performance?
Review
Assess Your Progress
Critical Thinking
Chapter 3: The Adjusting Process
What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
What Concepts and Principles Apply to Accrual Basis Accounting?
The Time Period Concept
The Revenue Recognition Principle
The Matching Principle
What Are Adjusting Entries, and How Do We Record Them?
Deferred Expenses
Deferred Revenues
Accrued Expenses
Accrued Revenues
What Is the Purpose of the Adjusted Trial Balance, and How Do We Prepare It?
What Is the Impact of Adjusting Entries on the Financial Statements?
How Could a Worksheet Help in Preparing Adjusting Entries and the Adjusted Trial Balance?
Appendix 3A: Alternative Treatment of Recording Deferred Expenses and Deferred Revenues
What Is an Alternative Treatment of Recording Deferred Expenses and Deferred Revenues?
Deferred Expenses
Deferred Revenues
Review
Assess Your Progress
Critical Thinking
Chapter 4: Completing the Accounting Cycle
How Do We Prepare Financial Statements?
Relationships Among the Financial Statements
Classified Balance Sheet
How Could a Worksheet Help in Preparing Financial Statements?
Section 5—Income Statement
Section 6—Balance Sheet
Section 7—Determine Net Income or Net Loss
What Is the Closing Process, and How Do We Close the Accounts?
Closing Temporary Accounts—Net Income for the Period
Closing Temporary Accounts—Net Loss for the Period
Closing Temporary Accounts—Summary
How Do We Prepare a Post-Closing Trial Balance?
What Is the Accounting Cycle?
How Do We Use the Current Ratio to Evaluate Business Performance?
Appendix 4A: Reversing Entries: An Optional Step
What Are Reversing Entries?
Accounting for Accrued Expenses
Accounting Without a Reversing Entry
Accounting with a Reversing Entry
Review
Assess Your Progress
Critical Thinking
Comprehensive Problem F:4-1 for Chapters F:1–F:4
Comprehensive Problem F:4-2 for Chapters F:1–F:4
Chapter 5: Merchandising Operations
What Are Merchandising Operations?
The Operating Cycle of a Merchandising Business
Merchandise Inventory Systems: Perpetual and Periodic Inventory Systems
How Are Purchases of Merchandise Inventory Recorded in a Perpetual Inventory System?
Purchase of Merchandise Inventory
Purchase Returns and Allowances
Purchase Discounts
Transportation Costs
Net Cost of Inventory Purchased
How Are Sales of Merchandise Inventory Recorded in a Perpetual Inventory System?
Cash and Credit Card Sales
Sales on Account, No Discount
Sales Returns and Allowances
Sales on Account, with Discount
Transportation Costs—Freight Out
What Are the Adjusting and Closing Entries for a Merchandiser?
Adjusting Merchandise Inventory for Inventory Shrinkage
Adjusting Sales Revenue and Merchandise Inventory for Estimated Sales Returns
Closing the Accounts of a Merchandiser
How Are a Merchandiser’s Financial Statements Prepared?
Income Statement
Multi-Step Income Statement
Statement of Retained Earnings and the Balance Sheet
How Do We Use the Gross Profit Percentage to Evaluate Business Performance?
Appendix 5A: Accounting for Multiple Performance Obligations
How Are Multiple Performance Obligations Recorded in a Perpetual Inventory System?
Appendix 5B: Accounting for Merchandise Inventoryin a Periodic Inventory System
How Are Merchandise Inventory Transactions Recorded in a Periodic Inventory System?
Purchases of Merchandise Inventory—Periodic Inventory System
Purchase Returns and Allowances—Periodic Inventory System
Purchase Discounts—Periodic Inventory System
Transportation Costs—Periodic Inventory System
Net Cost of Inventory Purchased
Sale of Merchandise Inventory—Periodic Inventory System
Preparing Financial Statements—Periodic Inventory System
Adjusting and Closing Entries—Periodic Inventory System
Review
Assess Your Progress
Critical Thinking
Chapter 6: Merchandise Inventory
What Are the Accounting Principles and Controls that Relate to Merchandise Inventory?
Accounting Principles
Control Over Merchandise Inventory
How Are Merchandise Inventory Costs Determined Under a Perpetual Inventory System?
Specific Identification Method
First-In, First-Out (FIFO) Method
Last-In, First-Out (LIFO) Method
Weighted-Average Method
How Are Financial Statements Affected by Using Different Inventory Costing Methods?
Income Statement
Balance Sheet
How Is Merchandise Inventory Valued When Using the Lower-of-Cost-or-Market Rule?
Computing the Lower-of-Cost-or-Market
Recording the Adjusting Journal Entry to Adjust Merchandise Inventory
What Are the Effects of Merchandise Inventory Errors on the Financial Statements?
How Do We Use Inventory Turnover and Days’ Sales in Inventory to Evaluate Business Performance?
Inventory Turnover
Days’ Sales in Inventory
Evaluating Kohl’s Corporation
Appendix 6A: Merchandise Inventory Costs Under aPeriodic Inventory System
How Are Merchandise Inventory Costs Determined Under a Periodic Inventory System?
First-In, First Out (FIFO) Method
Last-In, First-Out (LIFO) Method
Weighted-Average Method
Review
Assess Your Progress
Critical Thinking
Chapter 7: Internal Control and Cash
What Is Internal Control, and How Can It Be Used to Protect a Company’s Assets?
Internal Control and the Sarbanes-Oxley Act
The Components of Internal Control
Internal Control Procedures
The Limitations of Internal Control—Costs and Benefits
What Are the Internal Control Procedures with Respect to Cash Receipts?
Cash Receipts Over the Counter
Cash Receipts by Mail
What Are the Internal Control Procedures with Respect to Cash Payments?
Controls Over Payment by Check
What Are the Internal Control Procedures Needed for Petty Cash and How Are Petty Cash Transactions Recorded?
Setting Up the Petty Cash Fund
Replenishing the Petty Cash Fund
Changing the Amount of the Petty Cash Fund
What Are the Internal Controls Needed with Debit and Credit Card Sales and How Are These Types of Sales Recorded?
How Can the Bank Account Be Used as a Control Device?
Signature Card
Deposit Ticket
Check
Bank Statement
Electronic Funds Transfers
Bank Reconciliation
Examining a Bank Reconciliation
Journalizing Transactions from the Bank Reconciliation
How Can the Cash Ratio Be Used to Evaluate Business Performance?
Review
Assess Your Progress
Critical Thinking
Chapter 8: Receivables
What Are Common Types of Receivables, and How Are Credit Sales Recorded?
Types of Receivables
Exercising Internal Control Over Receivables
Recording Sales on Credit
Decreasing Collection Time and Credit Risk
How Are Uncollectibles Accounted for When Using the Direct Write-Off Method?
Recording and Writing Off Uncollectible Accounts—Direct Write-off Method
Recovery of Accounts Previously Written Off—Direct Write-off Method
Limitations of the Direct Write-off Method
How Are Uncollectibles Accounted for When Using the Allowance Method?
Recording Bad Debts Expense—Allowance Method
Writing Off Uncollectible Accounts—Allowance Method
Recovery of Accounts Previously Written Off—Allowance Method
Comparison of Recording Transactions for Uncollectibles Using the Direct Write-Off Method versus the Allowance Method
Estimating and Recording Bad Debts Expense—Allowance Method
Comparison of Income Statement Approach versus Balance Sheet Approach
How Are Notes Receivable Accounted for?
Identifying Maturity Date
Computing Interest on a Note
Accruing Interest Revenue and Recording Honored Notes Receivable
Recording Dishonored Notes Receivable
How Do We Use the Acid-Test Ratio, Accounts Receivable Turnover Ratio,  and Days’ Sales in Receivables to Evaluate Business Performance?
Acid-Test (or Quick) Ratio
Accounts Receivable Turnover Ratio
Days’ Sales in Receivables
Review
Assess Your Progress
Critical Thinking
Chapter 9: Plant Assets, Natural Resources, and Intangibles
How Does a Business Measure the Cost of Property, Plant, and Equipment?
Land and Land Improvements
Buildings
Machinery and Equipment
Furniture and Fixtures
Lump-Sum Purchase
Capital and Revenue Expenditures
What Is Depreciation, and How Is It Computed?
Factors in Computing Depreciation
Depreciation Methods
Partial-Year Depreciation
Changing Estimates of a Depreciable Asset
Reporting Property, Plant, and Equipment
How Are Disposals of Plant Assets Recorded?
Discarding Plant Assets
Selling Plant Assets
How Are Natural Resources Accounted for?
How Are Intangible Assets Accounted for?
Accounting for Intangibles
Specific Intangibles
Reporting of Intangible Assets
How Do We Use the Asset Turnover Ratio to Evaluate Business Performance?
Appendix 9A: Exchanging Plant Assets
How Are Exchanges of Plant Assets Accounted for?
Exchange of Plant Assets–Gain Situation
Exchange of Plant Assets–Loss Situation
Review
Assess Your Progress
Critical Thinking
Comprehensive Problem for Chapters F:7, F:8, and F:9
Chapter 10: Investments
Why Do Companies Invest?
Debt Securities Versus Equity Securities
Reasons to Invest
Classification and Reporting of Investments
How Are Investments in Debt Securities Accounted for?
Purchase of Debt Securities
Interest Revenue
Disposition at Maturity
Other Accounting Issues for Debt Investments
How Are Investments in Equity Securities Accounted for?
Equity Securities with No Significant Influence (Fair Value Method)
Equity Securities with Significant Influence (Equity Method)
Equity Securities with Controlling Interest (Consolidation Method)
How Are Debt and Equity Securities Reported?
Trading Debt Investments (Fair Value Method)
Available-for-Sale Debt Investments (Fair Value Method)
Held-to-Maturity Debt Investments (Amortized Cost)
Equity Investments with No Significant Influence (Fair Value Method)
How Do We Use the Rate of Return on Total Assets to Evaluate Business Performance?
Review
Assess Your Progress
Critical Thinking
Chapter 11: Current Liabilities and Payroll
How Are Current Liabilities of Known Amounts Accounted for?
Accounts Payable
Sales Tax Payable
Income Tax Payable
Unearned Revenue
Short-term Notes Payable
Current Portion of Long-term Notes Payable
How Do Companies Account for and Record Payroll?
Gross Pay and Net (Take-Home) Pay
Employee Payroll Withholding Deductions
Payroll Register
Journalizing Employee Payroll
Employer Payroll Taxes
Payment of Employer Payroll Taxes and Employees’ Withholdings
Internal Control Over Payroll
How Are Current Liabilities That Must Be Estimated Accounted for?
Bonus Plans
Vacation, Health, and Pension Benefits
Warranties
How Are Contingent Liabilities Accounted for?
Remote Contingent Liability
Reasonably Possible Contingent Liability
Probable Contingent Liability
How Do We Use the Times-Interest-Earned Ratio to Evaluate Business Performance?
Review
Assess Your Progress
Critical Thinking
Chapter 12: Long-Term Liabilities
How Are Long-Term Notes Payable and Mortgages Payable Accounted for?
Long-term Notes Payable
Mortgages Payable
What Are Bonds?
Types of Bonds
Bond Prices
Present Value and Future Value
Bond Interest Rates
Issuing Bonds Versus Issuing Stock
How Are Bonds Payable Accounted for Using the Straight-Line Amortization Method?
Issuing Bonds Payable at Face Value
Issuing Bonds Payable at a Discount
Issuing Bonds Payable at a Premium
How Is the Retirement of Bonds Payable Accounted for?
Retirement of Bonds at Maturity
Retirement of Bonds Before Maturity
How Are Liabilities Reported on the Balance Sheet?
How Do We Use the Debt to Equity Ratio to Evaluate Business Performance?
Appendix 12A: The Time Value of Money
What Is the Time Value of Money, and How Are Present Value and Future Value Calculated?
Time Value of Money Concepts
Present Value of a Lump Sum
Present Value of an Annuity
Present Value of Bonds Payable
Future Value of a Lump Sum
Future Value of an Annuity
Appendix 12B: Effective-Interest Method of Amortization
How Are Bonds Payable Accounted for Using the Effective-Interest Amortization Method?
Effective-Interest Amortization for a Bond Discount
Effective-Interest Amortization of a Bond Premium
Review
Assess Your Progress
Critical Thinking
Chapter 13 Stockholders’ Equity
What Is a Corporation?
Characteristics of Corporations
Stockholders’ Equity Basics
How Is the Issuance of Stock Accounted for?
Issuing Common Stock at Par Value
Issuing Common Stock at a Premium
Issuing No-Par Common Stock
Issuing Stated Value Common Stock
Issuing Common Stock for Assets Other Than Cash
Issuing Preferred Stock
How Is Treasury Stock Accounted for?
Treasury Stock Basics
Purchase of Treasury Stock
Sale of Treasury Stock
Retirement of Stock
How Are Dividends and Stock Splits Accounted for?
Cash Dividends
Stock Dividends
Stock Splits
Cash Dividends, Stock Dividends, and Stock Splits Compared
How Is the Complete Corporate Income Statement Prepared?
Continuing Operations
Discontinued Operations
Earnings per Share
How Is Equity Reported for a Corporation?
Statement of Retained Earnings
Statement of Stockholders’ Equity
How Do We Use Stockholders’ Equity Ratios to Evaluate Business Performance?
Earnings per Share
Price/Earnings Ratio
Rate of Return on Common Stockholders’ Equity
Review
Assess Your Progress
Critical Thinking
Comprehensive Problem for Chapters F:11, F:12, and F:13
Chapter 14: The Statement of Cash Flows
What Is the Statement of Cash Flows?
Purpose of the Statement of Cash Flows
Classification of Cash Flows
Two Formats for Operating Activities
How Is the Statement of Cash Flows Prepared Using the Indirect Method?
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Net Change in Cash and Cash Balances
Non-cash Investing and Financing Activities
How Do We Use Free Cash Flow to Evaluate Business Performance?
Appendix 14A: Preparing the Statement of Cash Flows by the Direct Method
How Is the Statement of Cash Flows Prepared Using the Direct Method?
Cash Flows from Operating Activities
Appendix 14B: Preparing the Statement of Cash Flows Using the Indirect Method and a Spreadsheet
How Is the Statement of Cash Flows Prepared Using the Indirect Method and a Spreadsheet?
Review
Assess Your Progress
Critical Thinking
Chapter 15: Financial Statement Analysis
How Are Financial Statements Used to Analyze a Business?
Purpose of Analysis
Tools of Analysis
Corporate Financial Reports
How Do We Use Horizontal Analysis to Analyze a Business?
Horizontal Analysis of the Income Statement
Horizontal Analysis of the Balance Sheet
Trend Analysis
How Do We Use Vertical Analysis to Analyze a Business?
Vertical Analysis of the Income Statement
Vertical Analysis of the Balance Sheet
Common-Size Statements
Benchmarking
How Do We Use Ratios to Analyze a Business?
Evaluating the Ability to Pay Current Liabilities
Evaluating the Ability to Sell Merchandise Inventory and Collect Receivables
Evaluating the Ability to Pay Long-term Debt
Evaluating Profitability
Evaluating Stock as an Investment
Red Flags in Financial Statement Analyses
Review
Assess Your Progress
Critical Thinking
Appendix A: Present Value Tables and Future Value Tables
Appendix B: Accounting Information Systems
Glossary
Subject Index