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The Wiley Faculty Network
by Donald E. Kieso, Jerry J. Weygandt, Paul D. Kimmel
Financial Accounting: Tools for Business Decision Making, 7th Edition
Cover Page
Title Page
Copyright
Brief Contents
From the Authors
Your Team for Success in Accounting
Author Commitment
The Wiley Faculty Network
WileyPLUS
What's New?
Content Changes by Chapter
Active Teaching and Learning Supplementary Material
Acknowledgments
Contents
Student success is a team effort.
Chapter 1: Introduction to Financial Statements
Knowing the Numbers
Forms of Business Organization
Users and Uses of Financial Information
Internal Users
External Users
Ethics in Financial Reporting
Business Activities
Financing Activities
Investing Activities
Operating Activities
Communicating with Users
Income Statement
Retained Earnings Statement
Balance Sheet
Statement of Cash Flows
Interrelationships of Statements
Other Elements of an Annual Report
A Look at IFRS
Chapter 2: A Further Look at Financial Statements
Just Fooling Around?
The Classified Balance Sheet
Current Assets
Long-Term Investments
Property, Plant, and Equipment
Intangible Assets
Current Liabilities
Long-Term Liabilities
Stockholders’ Equity
Using the Financial Statements
Ratio Analysis
Using the Income Statement
Using the Statement of Stockholders’ Equity
Using a Classified Balance Sheet
Keeping an Eye on Cash
Financial Reporting Concepts
The Standard-Setting Environment
Qualities of Useful Information
Assumptions in Financial Reporting
Principles in Financial Reporting
Cost Constraint
A Look at IFRS
Chapter 3: The Accounting Information System
Accidents Happen
The Accounting Information System
Accounting Transactions
Analyzing Transactions
Summary of Transactions
The Account
Debits and Credits
Debit and Credit Procedures
Stockholders’ Equity Relationships
Summary of Debit/Credit Rules
Steps in the Recording Process
The Journal
The Ledger
Chart of Accounts
Posting
The Recording Process Illustrated
Summary Illustration of Journalizing and Posting
The Trial Balance
Limitations of a Trial Balance
Keeping an Eye on Cash
A Look at IFRS
Chapter 4: Accrual Accounting Concepts
Keeping Track of Groupons
Timing Issues
The Revenue Recognition Principle
The Expense Recognition Principle
Accrual versus Cash Basis of Accounting
The Basics of Adjusting Entries
Types of Adjusting Entries
Adjusting Entries for Deferrals
Adjusting Entries for Accruals
Summary of Basic Relationships
The Adjusted Trial Balance and Financial Statements
Preparing the Adjusted Trial Balance
Preparing Financial Statements
Quality of Earnings
Closing the Books
Preparing Closing Entries
Preparing a Post-Closing Trial Balance
Summary of the Accounting Cycle
Keeping an Eye on Cash
APPENDIX 4A: Adjusting Entries in an Automated World—Using a Worksheet
A Look at IFRS
Chapter 5: Merchandising Operations and the Multiple-Step Income Statement
Buy Now, Vote Later
Merchandising Operations
Operating Cycles
Flow of Costs
Recording Purchases of Merchandise
Freight Costs
Purchase Returns and Allowances
Purchase Discounts
Summary of Purchasing Transactions
Recording Sales of Merchandise
Sales Returns and Allowances
Sales Discounts
Income Statement Presentation
Sales Revenues
Gross Profit
Operating Expenses
Nonoperating Activities
Determining Cost of Goods Sold Under a Periodic System
Evaluating Profitability
Gross Profit Rate
Profit Margin
Keeping an Eye on Cash
APPENDIX 5A: Periodic Inventory System
Recording Merchandise Transactions
Recording Purchases of Merchandise
Freight Costs
Recording Sales of Merchandise
Comparison of Entries—Perpetual vs. Periodic
A Look at IFRS
Chapter 6: Reporting and Analyzing Inventory
“Where Is That Spare Bulldozer Blade?”
Classifying and Determining Inventory
Classifying Inventory
Determining Inventory Quantities
Inventory Costing
Specific Identification
Cost Flow Assumptions
Financial Statement and Tax Effects of Cost Flow Methods
Keeping an Eye on Cash
Using Inventory Cost Flow Methods Consistently
Lower-of-Cost-or-Market
Analysis of Inventory
Inventory Turnover
Analysts' Adjustments for LIFO Reserve
APPENDIX 6A: Inventory Cost Flow Methods in Perpetual Inventory Systems
First-In, First-Out (FIFO)
Last-In, First-Out (LIFO)
Average-Cost
APPENDIX 6B: Inventory Errors
Income Statement Effects
Balance Sheet Effects
A Look at IFRS
Chapter 7: Fraud, Internal Control, and Cash
Minding the Money in Moose Jaw
Fraud and Internal Control
Fraud
The Sarbanes-Oxley Act
Internal Control
Principles of Internal Control Activities
Limitations of Internal Control
Cash Controls
Cash Receipts Controls
Cash Disbursements Controls
Control Features: Use of a Bank
Bank Statements
Reconciling the Bank Account
Reporting Cash
Cash Equivalents
Restricted Cash
Managing and Monitoring Cash
Basic Principles of Cash Management
Keeping an Eye on Cash
APPENDIX 7A: Operation of the Petty Cash Fund
Establishing the Petty Cash Fund
Making Payments from Petty Cash
Replenishing the Petty Cash Fund
A Look at IFRS
Chapter 8: Reporting and Analyzing Receivables
What's Cooking?
Types of Receivables
Accounts Receivable
Recognizing Accounts Receivable
Valuing Accounts Receivable
Notes Receivable
Determining the Maturity Date
Computing Interest
Recognizing Notes Receivable
Valuing Notes Receivable
Disposing of Notes Receivable
Financial Statement Presentation of Receivables
Managing Receivables
Extending Credit
Establishing a Payment Period
Monitoring Collections
Evaluating Liquidity of Receivables
Accelerating Cash Receipts
Keeping an Eye on Cash
A Look at IFRS
Chapter 9: Reporting and Analyzing Long-Lived Assets
A Tale of Two Airlines
Plant Assets
Determining the Cost of Plant Assets
To Buy or Lease?
Accounting for Plant Assets
Depreciation
Factors in Computing Depreciation
Depreciation Methods
Revising Periodic Depreciation
Expenditures During Useful Life
Impairments
Plant Asset Disposals
Analyzing Plant Assets
Return on Assets
Asset Turnover
Profit Margin Revisited
Intangible Assets
Accounting for Intangible Assets
Types of Intangible Assets
Financial Statement Presentation of Long-Lived Assets
Keeping an Eye on Cash
APPENDIX 9A: Calculation of Depreciation Using Other Methods
Declining-Balance
Units-of-Activity
A Look at IFRS
Chapter 10: Reporting and Analyzing Liabilities
And Then There Were Two
Current Liabilities
What Is a Current Liability?
Notes Payable
Sales Taxes Payable
Unearned Revenues
Current Maturities of Long-Term Debt
Payroll and Payroll Taxes Payable
Bonds: Long-Term Liabilities
Types of Bonds
Issuing Procedures
Determining the Market Price of Bonds
Accounting for Bond Issues
Issuing Bonds at Face Value
Discount or Premium on Bonds
Issuing Bonds at a Discount
Issuing Bonds at a Premium
Accounting for Bond Redemptions
Redeeming Bonds at Maturity
Redeeming Bonds before Maturity
Financial Statement Presentation and Analysis
Balance Sheet Presentation
Keeping an Eye on Cash
Analysis
Off-Balance-Sheet Financing
APPENDIX 10A: Straight-Line Amortization
Amortizing Bond Discount
Amortizing Bond Premium
APPENDIX 10B: Effective-Interest Amortization
Amortizing Bond Discount
Amortizing Bond Premium
APPENDIX 10C: Accounting for Long-Term Notes Payable
A Look at IFRS
Chapter 11: Reporting and Analyzing Stockholders' Equity
Oh Well, I Guess I'll Get Rich
The Corporate Form of Organization
Characteristics of a Corporation
Forming a Corporation
Stockholder Rights
Stock Issue Considerations
Authorized Stock
Issuance of Stock
Par and No-Par Value Stocks
Accounting for Issues of Common Stock
Accounting for Treasury Stock
Purchase of Treasury Stock
Preferred Stock
Dividend Preferences
Liquidation Preference
Dividends
Cash Dividends
Stock Dividends
Stock Splits
Retained Earnings
Retained Earnings Restrictions
Financial Statement Presentation of Stockholders' Equity
Balance Sheet Presentation
Keeping an Eye on Cash
Measuring Corporate Performance
Dividend Record
Earnings Performance
Debt versus Equity Decision
APPENDIX 11A: Entries for Stock Dividends
A Look at IFRS
Chapter 12: Statement of Cash Flows
Got Cash?
The Statement of Cash Flows: Usefulness and Format
Usefulness of the Statement of Cash Flows
Classification of Cash Flows
Significant Noncash Activities
Format of the Statement of Cash Flows
The Corporate Life Cycle
Preparing the Statement of Cash Flows
Indirect and Direct Methods
Preparation of the Statement of Cash Flows—Indirect Method
Step 1: Operating Activities
Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Methods
Step 2: Investing and Financing Activities
Step 3: Net Change in Cash
Using Cash Flows to Evaluate a Company
Free Cash Flow
Keeping an Eye on Cash
Assessing Liquidity and Solvency Using Cash Flows
APPENDIX 12A: Statement of Cash Flows—Direct Method
Step 1: Operating Activities
Step 2: Investing and Financing Activities
Step 3: Net Change in Cash
APPENDIX 12B: Statement of Cash Flows—T-Account Approach
A Look at IFRS
Chapter 13: Financial Analysis: The Big Picture
It Pays to Be Patient
Sustainable Income
Irregular Items
Changes in Accounting Principle
Comprehensive Income
Concluding Remarks
Comparative Analysis
Horizontal Analysis
Vertical Analysis
Ratio Analysis
Liquidity Ratios
Solvency Ratios
Profitability Ratios
Quality of Earnings
Alternative Accounting Methods
Pro Forma Income
Improper Recognition
Price-Earnings Ratio
APPENDIX 13A: Comprehensive Illustration of Ratio Analysis
Liquidity Ratios
Solvency Ratios
Profitability Ratios
A Look at IFRS
Appendix A: Specimen Financial Statements: Tootsie Roll Industries, Inc.
The Annual Report
Letter to the Stockholders
Financial Highlights
Management Discussion and Analysis
Financial Statements and Accompanying Notes
Auditor's Report
Appendix B: Specimen Financial Statements: The Hershey Company
Appendix C: Specimen Financial Statements: Zetar plc
Appendix D: Time Value of Money
Nature of Interest
Simple Interest
Compound Interest
Future Value Concepts
Future Value of a Single Amount
Future Value of an Annuity
Present Value Concepts
Present Value Variables
Present Value of a Single Amount
Present Value of an Annuity
Time Periods and Discounting
Computing the Present Value of a Long-Term Note or Bond
Using Financial Calculators
Present Value of a Single Sum
Present Value of an Annuity
Useful Applications of the Financial Calculator
Appendix E: Reporting and Analyzing Investments
Why Corporations Invest
Accounting for Debt Investments
Recording Acquisition of Bonds
Recording Bond Interest
Recording Sale of Bonds
Accounting for Stock Investments
Holdings of Less Than 20%
Holdings Between 20% and 50%
Holdings of More Than 50%
Valuing and Reporting Investments
Categories of Securities
Balance Sheet Presentation
Presentation of Realized and Unrealized Gain or Loss
Statement of Cash Flows Presentation
Company Index
Subject Index
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