Text And Cases Thirteenth Edition - GBV
Text and CasesThirteenth EditionRobert N. AnthonyRoss G. Walker Professor EmeritusGraduate School of Business AdministrationHarvard UniversityDavid F. HawkinsLovett-Learned Professor of BusinessAdministrationGraduate School of Business AdministrationHarvard UniversityKenneth A. MerchantDeloitte & Touche LLP Chair of AccountancyLeventhal School of AccountingUniversity of Southern CaliforniaMcGraw-HillIrwin
ContentsPARTIFINANCIAL ACCOUNTING1Chapter 1The Nature and Purpose of Accounting 2The Need for Information 2Operating Information 3Financial Accounting Information 4Management Accounting Information 4Tax Accounting Information 5Definition of Accounting 6The Profession of Accounting 6Our Approach to Accounting 7Preconceptions about Accounting 7Plan of the Book 8The Financial Accounting Framework'Accounting as a Language 9Different Formats 9Nature of Principles 9Criteria 10Source of Accounting Principles 11Principles Vs. Rules 12Financial Statements 13The Balance Sheet 14The Income Statement 16"Package " of Financial Reports 17Financial Statement Objectives 17Sarbanes-Oxley Act 19Income Tax Reporting 19Summary 19Problems 20Cases 22Case 1—1: Ribbons an'Bows, Inc. 22Case 1-2: Kim Fuller 23Case 1-3: Baron Coburg 24Chapter 2Basic Accounting Concepts:The Balance Sheet 26Basic Concepts 26The Money Measurement Concept 27The Entity Concept 28The Going-Concern Concept 28The Cost Concept 29The Dual-Aspect Concept 328The Balance Sheet 33An Overall View 34Account Categories 35Assets 36Liabilities 38Owners 'Equity 39Ratios 42Current Ratio 42Balance Sheet Changes 42Original Capital Contribution 42Bank Loan 43Purchase of Merchandise 43Sale of Merchandise 43Concluding Comment 44Summary 44Problems 44Cases 47Case 2-1: Maynard Company (A) 47Case 2-2: Music Mart, Inc. 48Case 2-3: Lone Pine Cafe (A) 48Chapter 3Basic Accounting Concepts: The IncomeStatement 50The Nature of Income 50Basic Concepts 51The Accounting Period Concept 51The Conservatism Concept 54The Realization Concept 56The Matching Concept 57Recognition of Expenses 58Terminology 58Criteria for Expense Recognition 58Expenses and Expenditures 59Dividends 61Summary of Expense Measurement 62Gains and Losses 63The Consistency Concept 63The Materiality Concept 63The Income Statement 64Revenues 66Cost of Sales 66Gross Margin 67Expenses 67Net Income 67
ContentsStatement of Retained Earnings 67Relation between Balance Sheet and IncomeStatement 68Income Statement Percentages 68Other Concepts of Income 68" - Accrual versus Cash-Basis Accounting 68Income Tax Accounting 69Economic Income 70Pro Forma Earnings 70Summary 70Problems 71Cases 73Case 3-1: Maynard Company (B) 73Case 3-2: Lone Pine Cafe (B) 74Case 3-3: Dispensers of California, Inc. 74Case 3-4: Pinetree Motel 75Case 3-5: National Association ofAccountants 77Chapter 4Accounting Records and Systems80Recordkeeping Fundamentals 80The Account 81Permanent Accounts and Temporary Accounts 81The Ledger 82The Chart of Accounts 82Debit and Credit 82The Accounting Process 84Transaction Analysis 85Example: Campus Pizzeria, Inc. 85Balancing Accounts 88The Trial Balance 89The Adjusting and Closing Process 90Adjusting Entries 90Closing Entries 93Statement Preparation 95The Journal 96Accounting Systems 97Internal Accounting Controls 97Computer-Based Accounting Systems 98What a Computer-Based System Does 98Modules 99Problems with Computer Systems 99Summary 100Problems 100Cases 102Case 4-1: PC Depot 102Case 4-2: Save-Mart 104Case 4-3: Copies Express 104Case 4-4: Waltham Oil and Lube Center, Inc. 106Chapter 5Revenue and Monetary Assets108Timing of Revenue Recognition 108Basic Recognition Criteria 108SEC Response 110Delivery Method 112Percentage-of-Completion Method 113Production Method 114Installment Method 114Amount of Revenue Recognized 116Bad Debts 116Sales Discounts 119Credit Card Sales 119Sales Returns and Allowances 120Revenue Adjustment versus Expense 120Warranty Costs 121Interest Revenue 122Monetary Assets 124Difference in Reporting Monetary andNonmonetary Assets 124Cash 125Receivables 125Marketable Securities 125Analysis of Monetary Assets 126Current Ratio 126Acid-Test Ratio 127Days'Cash 127Days'Receivables 128Summary 129Problems 129Cases 132Case 5-1: Stern Corporation (A) 132Case 5-2: Grennell Farm 132Case 5-3: Joan Holtz (A) 135Case 5-4: Wareham SCSystems, Inc. 137Chapter 6Cost of Sales and Inventories141Types of Companies 141Supplies 142Merchandising Companies 142Acquisition Cost 142The Basic Measurement Problem 143Periodic Inventory Method 144Perpetual Inventory Method 145Comparison of Periodic and PerpetualMethods 146Retail Method 147xiii
xivContentsManufacturing Companies 148Inventory Accounts 148Materials Used 149Cost of Goods Manufactured 150Cost of Goods Sold 151Product Costing Systems 152Product Costs and Period Costs 152Service Companies 153Inventory Costing Methods 153Specific Identification Method 154Average Cost Method 154First-Jn, First-Out Method 155Last-In, First-Out Method 155Comparison of Methods 156Lower of Cost or Market 159Analysis of Inventory 160Inventory Turnover 160Gross Margin Percentage 161Summary 161Problems 162Cases 164Case 6—1: Browning ManufacturingCompany 164Case 6-2: Lewis Corporation 167Case 6-3: Morgan Manufacturing 168Case 6-4: Joan Holtz (B) 170Chapter 7Long-Lived Nonmonetary Assets andTheir Amortization 172Nature of Long-Lived Assets 172Types of Long-Lived Assets 173Plant and Equipment: Acquisition 174Distinction between Asset and Expense 174Items Included in Cost 175Acquisitions Recorded at Other Than Cost 176Basket Purchases 176Plant and Equipment: Depreciation 177Judgments Required 177Service Life 178Depreciation Methods 178Choice of a Depreciation Method 181Accounting for Depreciation 181Change in Depreciation Rates 182Partial- Year Depreciation 183Disclosure 183Plant and Equipment: Disposal 183Exchanges and Trade-Ins 185Group Depreciation 185Significance of Depreciation 186Income Tax Considerations 187Depreciation Allowances 187Investment Tax Credit 188Natural Resources 189Depletion 189Accretion and Appreciation 190Intangible Assets 190Limited Useful Life 190Indefinite Useful Life 191Goodwill 191Patents and Copyrights 192Leasehold Improvements 192Deferred Charges 192Research and Development Costs 192Analysis of Nonmonetary Assets 193Summary 194Problems 194Cases 196Case 7-1: Stern Corporation (B) 196Case 7-2: Joan Holtz (C) 197Case 7-3: Stafford Press 199Case 7-4: Silic: Choosing Cost or Fair Valueon Adoption of IFRS 200Case 7-5: Accounting Fraud at WorldCom 208Chapter 8Sources of Capital: Debt 220Nature of Liabilities 220Executory Contracts 220Contingencies 221Liabilities as a Source of Funds 222Debt Capital 223Term Loans 223Bonds 223Accounting for Bonds 224Recording a Bond Issue 224Balance Sheet Presentation 226Bond Interest Expense 22 7Retirement of Bonds 228Refunding a Bond Issue 229Leased Assets 229Capital Leases 230Sale and Leaseback 231Other Liabilities 231Current Liabilities 231Deferred Taxes 231Analysis of Capital Structure 231Debt Ratios 231Times Interest Earned 233Bond Ratings 233'
Contents xvSummary 233Appendix: Present Value 234Problems 241Cases 243Case 8-1: Norman Corporation (A)"" 243Case 8-2: Paul Murray 245Case 8-3: Joan Holtz (D) 245Case 8-4: Leasing Computers at Persistent Learning 24 7Case 8-5: Kim Park 252Chapter 9Sources of Capital: Owners' Equity 256Forms of Business Organization 256Sole Proprietorship 256Partnership 257Corporation 257Accounting for Proprietor's and Partners'Equity 258Proprietorship Equity 258Partnership Equity 258)Ownership in a Corporation 259Preferred Stock 259Common Stock 260Treasury Stock 261Retained Earnings 261Reserves 262Dividends 262Warrants and Stock Options 264/Employee Stock Ownership Plans 264Balance Sheet Presentation 265Earnings per Share 265The Line between Debt and Equity 267Zero-Coupon Bonds 268Debt with Warrants 268Redeemable Preferred Stock 269Equity in Nonprofit Organizations 269Summary 270Problems 270Cases 273Case 9-1: Xytech, Inc. 273Case 9-2: Innovative Engineering Company 274Case 9-3: UPC Inc. 275Case 9-4: Maxim Integrated Products, Inc. 278Chapter 10Other Items That Affect Net Income andOwners' Equity 283Total and Other Nonowner Changes in Owners'Equity 283Nonoperating Items 285Extraordinary Items 285Pro Forma Earnings 286Discontinued Operations 287Change in Accounting Principles 287Errors 288Personnel Costs 288Pensions 289Other Postretirement Benefits 292Compensated Absences 292Income Taxes 292Book-to-Tax Differences 292Deferred Income Taxes 295Deferred Tax Measurement 295Accounting Entries 297Foreign Currency Accounting 300Foreign Currency Transactions 300Foreign Currency TranslationAdjustments 301Derivatives 303Pro Forma Earnings 304Net Income 304Summary 305Problems 305Cases 308Case 10-1: Norman Corporation (B) 308Case 10-2: Silver Appliance Company 309Case 10-3: Freedom Technology Company 311Case 10-4: Proxim, Inc. 312Chapter 11The Statement of Cash Flows 314Purpose of the Cash Flow Statement 314Sources and Uses of Cash 315The Cash Flow Statement 316Statement Categories 317Investing Activities 317Financing Activities 319Noncash Transactions 321Cash Flow from Operating Activities 321Indirect Method Calculations 322Summary of the Cash Flow Statement 326Misconceptions about Depreciation 327Cash Flow Earnings 328Preparation of the Cash FlowStatement 328Cash Flow Worksheet 329Worksheet Entries 331Statement Preparation 333Summary of Preparation Procedures 334
xviContentsAnalysis of the Cash Flow Statement 335Summary 337Problems 337Cases 339Financial Condition Ratios" -Liquidity and SolvencyCase 11-1: Medieval Adventures Company 339Case 11-2: Amerbran Company (A) 340Acquisitions and ConsolidatedStatements 343Fair- Value Method 343Cost Method 344Equity Method 344Consolidated Basis 345Dividend Policy 379Growth Measures 381Making Comparisons 382384Case 13—1: Genmo Corporation 388Case 13-2: Amerbran Company (B) 390Case 13-3: Identify the Industries 391Case 13-4: Supplement to Identify the IndustriesCase 13-5: Springfield National Bank 391Case 13-6: Butler Lumber Company 398Business Combinations 345Purchase versus Pooling 346:Accounting as a Pooling 346 ' .Accounting as a Acquisition 347Consolidated Statements 348391Chapter 14Basis for Consolidation . 349Consolidation Procedure 349Asset Valuation 352Minority Interest 352Understanding Financial Statements402Additional Information in Annual Reports 402Summary 353Problems 353Cases 356Case 12-1: Hardin Tool Company 356Case 12-2: Carter Corporation 357Case 12-3: The Politics and Economics of Accountingfor Goodwill at Cisco Systems 358Case 12-4: Productos Finas 364Chapter 13Financial Statement Analysis 367367Return on Investment 368Sound Financial Position 369Structure of the Analysis 369Overall Measures 369Return on Investment 369Investment Turnover and Profit MarginPrice/Earnings Ratio 3753 74376Profit Margin 3 76Common-Size Financial Statements3793 79Summary 386Problems 386Cases 388Accounting for Investments 343Profitability Ratios377Difficulties 382Possible Bases for ComparisonUse of Comparisons 385Chapter 12Business ObjectivesInvestment Utilization RatiosInvestment Turnover 377Capital Asset Intensity 3 77Working Capital Measures 377Ratios 335Cash Flow Projections 3363 76Auditors' Opinion 402Notes to Financial Statements 405Segment Reporting 406Full Disclosure 406Comparative Statements 407Management's Discussion and Analysis 407Securities and Exchange Commission (SEC)Reports 407Review of Criteria and Concepts 408Criteria 408Concepts 409Accounting Alternatives 413Regulatory Requirements 413Income Tax Principles 413Latitude in Methods 414Basis of Choice 414Controversies over Principles 415Implications of These Differences 416Inherent Limitations 417Ethical Problems 417Meaning of the Financial Statements 418Income Statement 418Balance Sheet 419Statement of Cash Flows 421
ContentsSummary 421Problems 421Cases 424Case 14-1: Quick Lunch 424Case 14-2: Accounting at MacCloudWinery 425Case 14-3: PolyMedica Corporation (A) 426Case 14-4: Tokyo AFM 433PART 2MANAGEMENT ACCOUNTING 437Chapter 15The Nature of ManagementAccounting 438Management Accounting 438Management Accounting Is a RelativelyYoung Field 439Management Accountants 440Contrast between Management Accounting andFinancial Reporting 441Differences 441Similarities 443Types of Management Accounting Informationand Their Uses 444Measurement 445Control 446Alternative Choice Decisions 447 'Databases 447General Observations on ManagementAccounting 449Different Numbers for DifferentPurposes 450Accounting Numbers Are Approximations 450Working with Incomplete Data 450Accounting Evidence Is Only PartialEvidence 450People, Not Numbers, Get Things Done 451Summary 451Problems 452Case 454Case 15-1: Private Fitness, LLC 454Chapter 16The Behavior of Costs456Relation of Costs to Volume 456Variable and Fixed Costs 456Cost-Volume Diagrams 457Relation to Unit Costs 459Inherent Conditions 460Linear Assumption 463Estimating the Cost-Volume Relationship 464Measures of Volume 467Profitgraphs 468Break-Even Analysis 469Target Profit 470Operating Leverage 470Contribution 470Cash versus Accrual Profitgraphs 473Using the Profitgraph 473Several Products 474Other Influences on Costs 476Summary 477Appendix: Learning Curves 477Problems 479Cases 481Case 16-1: Hospital Supply, Inc. 481Case 16-2: Prestige Telephone Company 483Case 16-3: Bill French 486Chapter 17Full Costs and Their Uses490Cost Concepts 490General Definition 490Cost Object 491Full Cost 491Direct and Indirect Costs 491Applicable Accounting Principles 492Elements of Product Cost 493Product Costing Systems 495Account Flowchart 496Nonmanufacturing Costs 499Merchandising Companies 500Service Organizations 501Nonprofit Organizations 501Uses of Full Cost 502Financial Reporting 502Analyses of Profitability 502What Did It Cost? 502Setting Regulated Prices 503Product Pricing 503Summary 506Problems 506Cases 508Case 17-1: Delaney Motors 508Case 17-2: Lipman Bottle Company 511Case 17-3: Shelter Partnership, Inc. 515xvii
xviiiContentsChapter 18Additional Aspects of Product CostingSystems 519Job Order Costing and Process Costing" 519Production Processes 519Averaging 519Basic Types of Systems 520Job Order Costing 520Process Costing 521Choice of a System 523Variations in Practice 524Measurement of Direct Costs 524'Direct Labor Cost 525Direct Material Cost 526Direct versus Variable Cost 526Allocation of Indirect Costs 527Distinction between Direct and Indirect Costs 527Nature ofAllocation 528Cost Centers 528Calculating Overhead Rates 529 ,'Cost Drivers (Allocation Bases) 533Predetermined Overhead Rates 535Procedure for Establishing PredeterminedRates 536Underabsorbed and OverabsorbedOverhead 539Activity-Based Costing 539Cross-Subsidies 541Activity-Based Costing Concepts 541Summary 549Problems 550Cases 553Case 18-1: Huron Automotive Company 553Case 18-2: California Creamery, Inc. 557Case 18-3: Safety Monitoring Devices, Inc. 559Case 18-4: Sippican Corporation (A) 563Case 18-5: Sippican Corporation (B) 566Case 18-6: Midwest Office Products 567Chapter 19Standard Costs, Variable Costing Systems,Quality Costs, and Joint Costs 571Standard Costs 571Standard Cost Sheet 571Account Flowchart 5 72Variations in the Standard Cost Idea 576Terminology Ambiguities 577Uses of Standard Costs 577Variable Costing Systems 579Comparison ofAbsorption and Variable Costing 579Why Use Full Costing? 582Quality Costs 584Joint Products and By-Products 585Joint-Product Costing 585By-Product Costing 586Accuracy of Costs 587Judgment Calls 587Tendencies toward Uniformity 587Cost.System Design Choices 588Summary 588Appendix A: Standard CostingIllustration 589Appendix B: Absorption versus VariableCosting's Impact on Income 595Problems 596Cases 598Case 19-1: Bennett Body Company 598Case 19-2: Black Meter Company 600Case 19-3: Brisson Company 600Case 19-4: Landau Company 601Case 19-5: Lynch's Chicken Ranch, Inc. 603Chapter 20Production Cost VarianceAnalyses 606Variances 606Direct Material and Labor Variances 607Direct Material Variances 607Direct Labor Variances 611Overhead Variances 612Production Volume Variance 613Spending Variance 614Calculation of Overhead Variances 615Summary 618Problems 619Cases 621Case 20-1: SunAir Boat Builders, Inc. 621Case 20-2: Medi-Exam Health Services, Inc. 623Case 20-3: Cotter Company, Inc. 624Case 20-4: Lupton Company 625Chapter 21Other Variance Analyses628Overview of the Analytical ProcessThe Need for Variance Analysis 628Types of Variances 629628
Contents xixMarketing Variances 629Expense Variances 629Gross Margin Variances 631Production Cost Variances 637Correct Volume Measures 637"" —Other Variances 638Complete Analysis 639Marketing Variances 639Production Cost Variances 639Uses of Variances 641Summary 642Problems 643Cases 645Case 21-1: Campar Industries, Inc. 645Case 21-2: Darius Company 647Case 21-3: Woodside Products, Inc. 647Case 21-4: Olympic Car Wash 649Chapter 22Control: The Management ControlEnvironment 650Management Control 650The Environment 651The Nature of Organizations 651Rules, Guidelines, and Procedures 653Culture 653External Environment 653Responsibility Centers and ResponsibilityAccounts 654Inputs and Outputs 654Responsibility Accounting 655Effectiveness and Efficiency 657Types of Responsibility Centers 657Revenue Centers 658Expense Centers 658Profit Centers 659Transfer Prices 660Investment Centers 663Nonmonetary Measures 665Summary 665Problems 665Cases 667Case 22-1: Behavioral Implications ofAirline Depreciation Accounting PolicyChoices 667Case 22-2: Shuman Automobiles, Inc. 669Case 22-3: ZumwaldAG 673Case 22-4: Enager Industries, Inc. 675Case 22-5: Piedmont University 679Chapter 23Control: The Management ControlProcess 682Phases of Management Control 682Strategic Planning 682Budgeting 683Measurement and Reporting 683Evaluation 684Accounting Information Used in ManagementControl 684Controllable Costs 684Engineered, Discretionary, and Committed Costs 688Behavioral Aspects of Management Control 690Behavior of Participants 690Motivation 691Incentives 692Goal Congruence 693Cooperation and Conflict 694Other Types of Control 695Summary 695Problems 695Cases 698Case 23-1: Tru-Fit Parts, Inc. 698Case 23-2: Industrial Electronics, Inc. 701Case 23-3: Las Ferreterias de Mexico,S.A.deC.V 702Case 23-4: Berkshire Industries PLC 705Chapter 24Strategic Planning and Budgeting711Strategic Planning 711Ongoing Programs 712Proposed New Programs 713Formal Strategic Planning Systems 714Budgeting 714Uses of the Budget 714The Master Budget 716The Operating Budget 717Project Budgets 718Flexible (Variable) Budgets 718Management by Objectives 718Preparing the Operating Budget 720Organization for Budget Preparation 720Budget Timetable 721Setting Planning Guidelines 722Preparing the Sales Budget 722Initial Preparation of Other Budget Components 723Negotiation 724
xxContentsCoordination and Review 726Final Approval and Distribution 726Revisions 726Variations in Practice 727The Cash Budget 728 -*:rThe Capital Expenditure Budget 729Project Proposals 729Authorization 730Follow-Up 730Beyond Budgeting 730Summary 731Problems 731Cases 733Case 24-1: Body Glove 733Case 24-2: Waikerie Co-OperativeProducers Ltd. 740Case 24-3: Patagonia, Inc. 749Case 24-4: Borealis 762Chapter 25Reporting and Evaluationj773Control Reports 773Key Success Factors 773Types of Management Reports 774Period of Control Reports 775Contents of Control Reports 775Use of Control Reports 779Feedback 781Steps in the Control Process 781Reporting and Continuous Improvement 782Incentive Compensation 783Summary 784Problems 784Cases 787Case 25-1: Harwood Medical Instruments PLC 787Case 25-2: Armco, Inc.: Midwestern SteelDivision 788Case 25-3: Formosa Plastics Group 799Chapter 26Short-Run Alternative ChoiceDecisions 807The Differential Concept 807Cost Constructions for Various Purposes" 807Differential Costs and Revenues 808Contrasts with Full Costs 808Contribution Analysis 809Types of Cost 811Alternative Choice Problems 812Steps in the Analysis 813D
Text and Cases Thirteenth Edition Robert N. Anthony . Deloitte & Touche LLP Chair of Accountancy Leventhal School of Accounting University of Southern California McGraw-Hill Irwin. Contents PARTI FINANCIAL ACCOUNTING 1 Chapter 1 The Nature and Purpose of Accounting 2 The Need for Information 2 . Cases 22 Case 1—1: Ribbons an'Bows, Inc. 22 .
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CONTROL PROGRAM & MOSQUITO PREVENTION Allison Bray, M.S. Environmental Health Specialist, . WNV IN SAN DIEGO Human Cases (fatal) 2019: 3 cases (0) 2018: 2 cases (0) 2017: 2 cases (0) 2016: 22 cases (2) 2015: 44 cases (6) WNV IN CALIFORNIA Human Cases (fatal) 2019: 225 cases (6)
Making Connections Text-to-Text, Text-to-Self, Text-to-World Rationale Reading comes alive when we recognize how the ideas in the text connect to our experiences and beliefs, events happening in the larger world, our understanding of history, and our knowledge of other texts. "Text-to-Text, Text-to-Self, Text-to-World" is a strategy that helps
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Retail. Big data use cases 4-8. Healthcare . Big data use cases 9-12. Oil and gas. Big data use cases 13-15. Telecommunications . Big data use cases 16-18. Financial services. Big data use cases 19-22. 3 Top Big Data Analytics use cases. Manufacturing Manufacturing. The digital revolution has transformed the manufacturing industry. Manufacturers
Nutrition of ruminants Developing production systems for ruminants using tropical feed resources requires an understanding of the relative roles and nutrient needs of the two-compartment system represented by the symbiotic relationship between rumen micro-organisms and the host animal. Fibre-rich, low-protein forages and crop residues are the most abundant and appropriate feeds for ruminants .
