1 Accounting in Action 1-1 Knowing the Numbers: Columbia Sportswear 1-1 Accounting Activities and Users 1-3 Three Activities 1-3 Who Uses Accounting Data 1-4 The Building Blocks of Accounting 1-6 Ethics in Financial Reporting 1-6 Generally Accepted Accounting Principles 1-8 Measurement Principles 1-8 Assumptions 1-9 The Accounting Equation 1-11 Assets 1-11 Liabilities 1-12 Stockholders'' Equity 1-12 Analyzing Business Transactions 1-13 Accounting Transactions 1-14 Transaction Analysis 1-15 Summary of Transactions 1-19 The Financial Statements 1-21 Income Statement 1-21 Retained Earnings Statement 1-23 Balance Sheet 1-23 Statement of Cash Flows 1-23 Appendix 1A: Career Opportunities in Accounting 1-25 Public Accounting 1-25 Private Accounting 1-25 Governmental Accounting 1-26 Forensic Accounting 1-26 "Show Me the Money" 1-26 2 The Recording Process 2-1 Accidents Happen: MF Global Holdings 2-1 Accounts, Debits, and Credits 2-3 Debits and Credits 2-3 Stockholders'' Equity Relationships 2-7 Summary of Debit/Credit Rules 2-7 The Journal 2-8 The Recording Process 2-8 The Journal 2-9 The Ledger and Posting 2-11 The Ledger 2-11 Posting 2-12 Chart of Accounts 2-13 The Recording Process Illustrated 2-14 Summary Illustration of Journalizing and Posting 2-20 The Trial Balance 2-22 Limitations of a Trial Balance 2-23 Locating Errors 2-23 Dollar Signs and Underlining 2-23 3 Adjusting the Accounts 3-1 Keeping Track of Groupons: Groupon 3-1 Accrual-Basis Accounting and Adjusting Entries 3-2 Fiscal and Calendar Years 3-3 Accrual- versus Cash-Basis Accounting 3-3 Recognizing Revenues and Expenses 3-3 The Need for Adjusting Entries 3-5 Types of Adjusting Entries 3-6 Adjusting Entries for Deferrals 3-7 Prepaid Expenses 3-7 Unearned Revenues 3-11 Adjusting Entries for Accruals 3-14 Accrued Revenues 3-14 Accrued Expenses 3-15 Summary of Basic Relationships 3-18 Adjusted Trial Balance and Financial Statements 3-21 Preparing the Adjusted Trial Balance 3-22 Preparing Financial Statements 3-22 Appendix 3A: Adjusting Entries for the Alternative Treatment of Deferrals 3-25 Prepaid Expenses 3-26 Unearned Revenues 3-27 Summary of Additional Adjustment Relationships 3-28 Appendix 3B: Financial Reporting Concepts 3-28 Qualities of Useful Information 3-28 Assumptions in Financial Reporting 3-29 Principles in Financial Reporting 3-29 Cost Constraint 3-31 4 Completing the Accounting Cycle 4-1 Everyone Likes to Win: Rhino Foods 4-1 The Worksheet 4-3 Steps in Preparing a Worksheet 4-3 Preparing Financial Statements from a Worksheet 4-7 Preparing Adjusting Entries from a Worksheet 4-8 Closing the Books 4-8 Preparing Closing Entries 4-9 Posting Closing Entries 4-11 Preparing a Post-Closing Trial Balance 4-12 The Accounting Cycle and Correcting Entries 4-15 Summary of the Accounting Cycle 4-15 Reversing Entries--An Optional Step 4-15 Correcting Entries--An Avoidable Step 4-15 Classified Balance Sheet 4-18 Current Assets 4-20 Long-Term Investments 4-20 Property, Plant, and Equipment 4-20 Intangible Assets 4-21 Current Liabilities 4-22 Long-Term Liabilities 4-23 Stockholders'' (Owners'') Equity 4-23 Appendix 4A: Reversing Entries 4-24 Reversing Entries Example 4-25 5 Accounting for Merchandising Operations 5-1 Buy Now, Vote Later: REI 5-1 Merchandising Operations and Inventory Systems 5-3 Operating Cycles 5-3 Flow of Costs 5-4 Recording Purchases Under a Perpetual System 5-6 Freight Costs 5-8 Purchase Returns and Allowances 5-9 Purchase Discounts 5-9 Summary of Purchasing Transactions 5-10 Recording Sales Under a Perpetual System 5-11 Sales Returns and Allowances 5-12 Sales Discounts 5-13 Data Analytics and Credit Sales 5-14 The Accounting Cycle for a Merchandising Company 5-15 Adjusting Entries 5-15 Closing Entries 5-16 Summary of Merchandising Entries 5-16 Multiple-Step Income Statement 5-18 Multiple-Step Income Statement 5-18 Single-Step Income Statement 5-21 Classified Balance Sheet 5-21 Appendix 5A: Merchandising Company Worksheet 5-23 Using a Worksheet 5-23 Appendix 5B: Periodic Inventory System 5-24 Determining Cost of Goods Sold Under a Periodic System 5-25 Recording Merchandise Transactions 5-26 Recording Purchases of Merchandise 5-26 Recording Sales of Merchandise 5-27 Journalizing and Posting Closing Entries 5-28 Using a Worksheet 5-29 6 Inventories 6-1 "Where Is That Spare Bulldozer Blade?": Caterpillar 6-1 Classifying and Determining Inventory 6-2 Classifying Inventory 6-3 Determining Inventory Quantities 6-4 Inventory Methods and Financial Effects 6-7 Specific Identification 6-7 Cost Flow Assumptions 6-8 Financial Statement and Tax Effects of Cost Flow Methods 6-13 Using Inventory Cost Flow Methods Consistently 6-15 Effects of Inventory Errors 6-16 Income Statement Effects 6-17 Balance Sheet Effects 6-18 Inventory Presentation and Analysis 6-18 Presentation 6-18 Lower-of-Cost-or-Net Realizable Value 6-19 Analysis 6-20 Appendix 6A: Inventory Cost Flow Methods in Perpetual Inventory Systems 6-22 First-In, First-Out (FIFO) 6-22 Last-In, First-Out (LIFO) 6-23 Average-Cost 6-23 Appendix 6B: Estimating Inventories 6-24 Gross Profit Method 6-24 Retail Inventory Method 6-25 Data Analytics in Action 6-47 7 Fraud, Internal Control, and Cash 7-1 Minding the Money in Madison: Barriques 7-2 Fraud and Internal Control 7-3 Fraud 7-3 The Sarbanes-Oxley Act 7-3 Internal Control 7-4 Principles of Internal Control Activities 7-4 Data Analytics and Internal Controls 7-10 Limitations of Internal Control 7-11 Cash Controls 7-12 Cash Receipts Controls 7-12 Cash Disbursements Controls 7-15 Petty Cash Fund 7-16 Control Features of a Bank Account 7-19 Making Bank Deposits 7-19 Writing Checks 7-20 Electronic Funds Transfer (EFT) System 7-21 Bank Statements 7-21 Reconciling the Bank Account 7-22 Reporting Cash 7-27 Cash Equivalents 7-27 Restricted Cash 7-28 Data Analytics in Action 7-46 8 Accounting for Receivables 8-1 What''s Cooking?: Nike 8-1 Recognition of Accounts Receivable 8-3 Types of Receivables 8-3 Recognizing Accounts Receivable 8-3 Valuation and Disposition of Accounts Receivable 8-5 Valuing Accounts Receivable 8-5 Disposing of Accounts Receivable 8-12 Notes Receivable 8-14 Determining the Maturity Date 8-15 Computing Interest 8-16 Recognizing Notes Receivable 8-16 Valuing Notes Receivable 8-16 Disposing of Notes Receivable 8-16 Presentation and Analysis of Receivables 8-19 Presentation 8-19 Analysis 8-20 Data Analytics and Receivables Management 8-21 9 Plant Assets, Natural Resources, and Intangible Assets 9-1 A Tale of Two Airlines: American Airlines 9-2 Plant Asset Expenditures 9-3 Determining the Cost of Plant Assets 9-3 Expenditures During Useful Life 9-5 Depreciation Methods 9-7 Factors in Computing Depreciation 9-8 Depreciation Methods 9-9 Depreciation and Income Taxes 9-14 Revising Periodic Depreciation 9-15 Impairments 9-16 Plant Asset Disposals 9-16 Sale of Plant Assets 9-17 Retirement of Plant Assets 9-18 Natural Resources and Intangible Assets 9-19 Natural Resources 9-19 Depletion 9-20 Intangible Assets 9-20 Accounting for Intangible Assets 9-21 Types of Intangible Assets 9-22 Research and Development Costs 9-23 Statement Presentation and Analysis 9-24 Presentation 9-24 Analysis 9-25 Appendix 9A: Exchange of Plant Assets 9-27 Loss Treatment 9-27 Gain Treatment 9-28 Data Analytics in Action 9-46 10 Liabilities 10-1 And Then There Were Two: Maxwell Car Company 10-1 Accounting for Current Liabilities 10-3 What Is a Current Liability? 10-3 Notes Payable 10-3 Sales Taxes Payable 10-4 Unearned Revenues 10-5 Current Maturities of Long-Term Debt 10-5 Payroll and Payroll Taxes Payable 10-6 Major Characteristics of Bonds 10-8 Types of Bonds 10-8 Issuing Procedures 10-9 Bond Trading 10-9 Determining the Market Price of a Bond 10-10 Accounting for Bond Transactions 10-12 Issuing Bonds at Face Value 10-13 Discount or Premium on Bonds 10-13 Issuing Bonds at a Discount 10-14 Issuing Bonds at a Premium 10-15 Redeeming Bonds at Maturity 10-17 Redeeming Bonds Before Maturity 10-17 Accounting for Long-Term Notes Payable 10-18 Mortgage Notes Payable 10-18