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  1. Preface
  2. 1 Role of Accounting in Society
    1. Why It Matters
    2. 1.1 Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting
    3. 1.2 Identify Users of Accounting Information and How They Apply Information
    4. 1.3 Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities
    5. 1.4 Explain Why Accounting Is Important to Business Stakeholders
    6. 1.5 Describe the Varied Career Paths Open to Individuals with an Accounting Education
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
  3. 2 Introduction to Financial Statements
    1. Why It Matters
    2. 2.1 Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate
    3. 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses
    4. 2.3 Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Analyzing and Recording Transactions
    1. Why It Matters
    2. 3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
    3. 3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
    4. 3.3 Define and Describe the Initial Steps in the Accounting Cycle
    5. 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
    6. 3.5 Use Journal Entries to Record Transactions and Post to T-Accounts
    7. 3.6 Prepare a Trial Balance
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  5. 4 The Adjustment Process
    1. Why It Matters
    2. 4.1 Explain the Concepts and Guidelines Affecting Adjusting Entries
    3. 4.2 Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries
    4. 4.3 Record and Post the Common Types of Adjusting Entries
    5. 4.4 Use the Ledger Balances to Prepare an Adjusted Trial Balance
    6. 4.5 Prepare Financial Statements Using the Adjusted Trial Balance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  6. 5 Completing the Accounting Cycle
    1. Why It Matters
    2. 5.1 Describe and Prepare Closing Entries for a Business
    3. 5.2 Prepare a Post-Closing Trial Balance
    4. 5.3 Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity
    5. 5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  7. 6 Merchandising Transactions
    1. Why It Matters
    2. 6.1 Compare and Contrast Merchandising versus Service Activities and Transactions
    3. 6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems
    4. 6.3 Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System
    5. 6.4 Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System
    6. 6.5 Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods
    7. 6.6 Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies
    8. 6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  8. 7 Accounting Information Systems
    1. Why It Matters
    2. 7.1 Define and Describe the Components of an Accounting Information System
    3. 7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
    4. 7.3 Analyze and Journalize Transactions Using Special Journals
    5. 7.4 Prepare a Subsidiary Ledger
    6. 7.5 Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Fraud, Internal Controls, and Cash
    1. Why It Matters
    2. 8.1 Analyze Fraud in the Accounting Workplace
    3. 8.2 Define and Explain Internal Controls and Their Purpose within an Organization
    4. 8.3 Describe Internal Controls within an Organization
    5. 8.4 Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries
    6. 8.5 Discuss Management Responsibilities for Maintaining Internal Controls within an Organization
    7. 8.6 Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries
    8. 8.7 Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  10. 9 Accounting for Receivables
    1. Why It Matters
    2. 9.1 Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions
    3. 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches
    4. 9.3 Determine the Efficiency of Receivables Management Using Financial Ratios
    5. 9.4 Discuss the Role of Accounting for Receivables in Earnings Management
    6. 9.5 Apply Revenue Recognition Principles to Long-Term Projects
    7. 9.6 Explain How Notes Receivable and Accounts Receivable Differ
    8. 9.7 Appendix: Comprehensive Example of Bad Debt Estimation
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  11. 10 Inventory
    1. Why It Matters
    2. 10.1 Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions
    3. 10.2 Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method
    4. 10.3 Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method
    5. 10.4 Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet
    6. 10.5 Examine the Efficiency of Inventory Management Using Financial Ratios
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  12. 11 Long-Term Assets
    1. Why It Matters
    2. 11.1 Distinguish between Tangible and Intangible Assets
    3. 11.2 Analyze and Classify Capitalized Costs versus Expenses
    4. 11.3 Explain and Apply Depreciation Methods to Allocate Capitalized Costs
    5. 11.4 Describe Accounting for Intangible Assets and Record Related Transactions
    6. 11.5 Describe Some Special Issues in Accounting for Long-Term Assets
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Current Liabilities
    1. Why It Matters
    2. 12.1 Identify and Describe Current Liabilities
    3. 12.2 Analyze, Journalize, and Report Current Liabilities
    4. 12.3 Define and Apply Accounting Treatment for Contingent Liabilities
    5. 12.4 Prepare Journal Entries to Record Short-Term Notes Payable
    6. 12.5 Record Transactions Incurred in Preparing Payroll
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  14. 13 Long-Term Liabilities
    1. Why It Matters
    2. 13.1 Explain the Pricing of Long-Term Liabilities
    3. 13.2 Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method
    4. 13.3 Prepare Journal Entries to Reflect the Life Cycle of Bonds
    5. 13.4 Appendix: Special Topics Related to Long-Term Liabilities
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  15. 14 Corporation Accounting
    1. Why It Matters
    2. 14.1 Explain the Process of Securing Equity Financing through the Issuance of Stock
    3. 14.2 Analyze and Record Transactions for the Issuance and Repurchase of Stock
    4. 14.3 Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits
    5. 14.4 Compare and Contrast Owners’ Equity versus Retained Earnings
    6. 14.5 Discuss the Applicability of Earnings per Share as a Method to Measure Performance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  16. 15 Partnership Accounting
    1. Why It Matters
    2. 15.1 Describe the Advantages and Disadvantages of Organizing as a Partnership
    3. 15.2 Describe How a Partnership Is Created, Including the Associated Journal Entries
    4. 15.3 Compute and Allocate Partners’ Share of Income and Loss
    5. 15.4 Prepare Journal Entries to Record the Admission and Withdrawal of a Partner
    6. 15.5 Discuss and Record Entries for the Dissolution of a Partnership
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  17. 16 Statement of Cash Flows
    1. Why It Matters
    2. 16.1 Explain the Purpose of the Statement of Cash Flows
    3. 16.2 Differentiate between Operating, Investing, and Financing Activities
    4. 16.3 Prepare the Statement of Cash Flows Using the Indirect Method
    5. 16.4 Prepare the Completed Statement of Cash Flows Using the Indirect Method
    6. 16.5 Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency
    7. 16.6 Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  18. Financial Statement Analysis
  19. Time Value of Money
  20. Suggested Resources
  21. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
  22. Index
PB1.

LO 4.1Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.

  1. expense now, pay now
  2. expense later, pay now
  3. expense now, pay later
PB2.

LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.

  1. issued stock for cash $20,000
  2. purchased supplies inventory on account $1,800
  3. paid employee salaries; assume it was current day’s expenses $950
  4. paid note payment to bank (principal only) $1,200
  5. collected balance on accounts receivable $4,750
PB3.

LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.

  1. fees earned and billed, but not collected
  2. recorded depreciation expense
  3. fees collected in advance of services
  4. salaries owed but not yet paid
  5. property rentals costs, prepaid for future months
  6. inventory purchased for cash
PB4.

LO 4.2Identify which type of adjustment is associated with this account, and what the other account is in the adjustment. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.

  1. Salaries Payable
  2. Interest Receivable
  3. Unearned Fee Revenue
  4. Prepaid Rent
PB5.

LO 4.2Indicate what impact the following adjustments have on the accounting equation: Assets = Liabilities + Equity (assume normal balances).

 
    Impact 1 Impact 2
A. Unearned Rent adjusted from $15,000 to $9,500    
B. Recorded salaries payable of $3,750    
C. Prepaid Rent adjusted from $6,000 to $4,000    
D. Recorded depreciation expense of $5,500    
Table 4.7
PB6.

LO 4.2What two accounts are affected by each of these adjustments?

  1. recorded accrued interest on note payable
  2. adjusted unearned rent to correct
  3. recorded depreciation for the year
  4. adjusted salaries payable to correct
  5. sold merchandise to customers on account
PB7.

LO 4.3Using the following information,

  1. Make the December 31 adjusting journal entry for depreciation.
  2. Determine the net book value (NBV) of the asset on December 31.
  • Cost of asset, $195,000
  • Accumulated depreciation, beginning of year, $26,000
  • Current year depreciation, $13,000
PB8.

LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.

Unearned Fee Revenue: T-Account Balance 12,000, Correct Balance 9,000. Supplies: T-Account Balance 3,200, Correct Balance 1,050. Interest Payable: T-Account Balance 1,850, Correct Balance 1,975.
PB9.

LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.

Prepaid Insurance: T-Account Balance 12,000, Correct Balance 5,000. Taxes Payable: T-Account Balance 8,850, Correct Balance 9,900. Unearned Rental Revenue: T-Account Balance 6,000, Correct Balance 2,000.
PB10.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Supplies, post any entries that affect the account, and tally ending balance for the account (assume Supplies beginning balance of $6,550).

  1. January 26, purchased additional supplies for cash, $9,500
  2. December 31, actual count of supplies, $8,500
PB11.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Unearned Revenue, post any entries that affect the account, tally ending balance for the account (assume Unearned Revenue beginning balance of $12,500).

  1. May 1, collected an advance payment from client, $15,000
  2. December 31, remaining unearned advances, $7,500
PB12.

LO 4.3Determine the amount of cash expended for Insurance Premiums during the month, based on the entries in the following accounts (assume 0 beginning balances).

Insurance Expense, Debit 31,000. Debit balance, 31,000. Prepaid Insurance, Debit 9,000. Debit Balance 9,000.
PB13.

LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.

Excerpt from Unadjusted Trial Balance, Debits: Buildings and Equipment 250,000; Prepaid Advertising 6,400. Credits: Accumulated Depreciation 56,000; Unearned Rental Revenue 8,900; Interest Payable 3,500.
  1. depreciation on buildings and equipment, $17,500
  2. advertising still prepaid at year end, $2,200
  3. interest due on notes payable, $4,300
  4. unearned rental revenue, $6,900
  5. interest receivable on notes receivable, $1,200
PB14.

LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Dividends (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.

Accounts Payable 9,000; Accounts Receivable 16,032; Cash 20,450; Common Stock 24,000; Dividends ?; Equipment 29,000; Prepaid Insurance 9,444; Land 34,000; Notes Payable 8,000; Retained Earnings 31,315; Insurance Expense 12,689; Service Revenue 82,500; Supplies 9,700; Salaries Expense 51,500.
PB15.

LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Building and Equipment were recently purchased, so there is neither depreciation expense nor accumulated depreciation.

Accounts Payable 3,600; Accounts Receivable 45,333; Building 156,000; Cash 50,480; Common Stock 110,000; Dividends 18,000; Equipment 33,500; Fees Earned Revenue 225,430; Land 18,000; Supplies Expense 5,123; Notes Payable 85,500; Retained Earnings 60,606; Salaries Expense 151,900; Supplies 6,800.

Adjustments needed:

  • Physical count of supplies inventory remaining at end of period, $3,300
  • Customer fees collected in advance (payments were recorded as Fees Earned), $18,500
PB16.

LO 4.4Prepare an adjusted trial balance from the following account information, and also considering the adjustment data provided (assume accounts have normal balances).

Accounts Payable 18,000; Accounts Receivable 4,000; Investments 88,000; Cash 19,000; Common Stock 30,000; Dividends 16,000; Prepaid Insurance 20,000; Insurance Expense 8,000; Land 26,000; Notes Payable (long term) 55,000; Salaries Expense 37,000; Sales Revenue 115,000.

Adjustments needed:

  • Accrued interest revenue on investments at period end, $2,200
  • Insurance still unexpired at end of the period, $12,000
PB17.

LO 4.5Using the following Company X information, prepare a Retained Earnings Statement:

  • Retained earnings balance January 1, 2019, $121,500
  • Net income for year 2019, $145,800
  • Dividends declared and paid for year 2019, $53,000
PB18.

LO 4.5From the following Company Z adjusted trial balance, prepare simple financial statements, as follows:

  1. Income Statement
  2. Retained Earnings Statement
  3. Balance Sheet
Adjusted Trial Balance. Debit Accounts: Cash 54,650; Accounts Receivable 28,750; Prepaid Insurance 8,000; Land 22,000; Dividends 36,000; Insurance Expense 32,000; Salaries Expense 126,500; Miscellaneous Expense 56,900; Total Debits 364,800. Credit Accounts: Accounts Payable 14,300; Salaries Payable 4,250; Common Stock 50,000; Retained Earnings 38,900; Service Revenue 257,350; Total Credits 364,800.
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