Accounting Principles

Fourteenth Edition

JERRY J. WEYGANDT P hD, CPA

University of Wisconsin—Madison
Madison, Wisconsin

PAUL D. KIMMEL P h D, CPA

University of Wisconsin—Madison
Madison, Wisconsin

JILL E. MITCHELL MS, MEd , CIA

Northern Virginia Community College
Annandale, Virginia
 Brief Contents
1 Accounting in Action 1-1

2 The Recording Process 2-1

3 Adjusting the Accounts 3-1

4 Completing the Accounting Cycle 4-1

5 Accounting for Merchandising Operations 5-1

6 Inventories 6-1

7 Accounting Information Systems 7-1

8 Fraud, Internal Control, and Cash 8-1

9 Accounting for Receivables 9-1

10 Plant Assets, Natural Resources, and Intangible Assets 10-1

11 Current Liabilities and Payroll Accounting 11-1

12 Accounting for Partnerships 12-1

13 Corporations: Organization and Capital Stock Transactions 13-1

14 Corporations: Dividends, Retained Earnings, and Income

Reporting 14-1

15 Long-Term Liabilities 15-1

16 Investments 16-1

17 Statement of Cash Flows 17-1

18 Financial Analysis: The Big Picture 18-1

19 Managerial Accounting 19-1

20 Job Order Costing 20-1

21 Process Costing 21-1

22 Cost-Volume-Profit 22-1

23 Incremental Analysis 23-1

24 Budgetary Planning 24-1

ix
x BRIEF CONTENTS

25 Budgetary Control and Responsibility Accounting 25-1

26 Standard Costs and Balanced Scorecard 26-1

27 Planning for Capital Investments 27-1

A P P EN D IC ES

A Specimen Financial Statements: Apple Inc. A-1

B Specimen Financial Statements: PepsiCo, Inc. B-1

C Specimen Financial Statements: The Coca-Cola Company C-1

D Specimen Financial Statements: Amazon.com, Inc. D-1

E Specimen Financial Statements: Walmart Inc. E-1

F Specimen Financial Statements: Louis Vuitton F-1

G Time Value of Money G-1

H Just-in-Time Processing and Activity-Based Costing H-1

CO MPA N Y IN D EX / S U BJE CT INDE X I-1

RA P ID R EVIEW : C H A PT E R CO NT E NT

Available in Wiley’s Online Course and Wiley Custom:

C H APT E R 5A Accounting for Merchandising Operations (Periodic

Approach) 5A-1

C H APT E R 6A Inventories (Perpetual Approach) 6A-1

C H APT E R 20A Job Order Costing: Non-Debit-and-Credit Approach 20A-1

C H APT E R 21A Process Costing: Non-Debit-and-Credit Approach 21A-1

Cases for Management Decision Making

 Contents
Summary Illustration of Journalizing and Posting 2-20
1 Accounting in Action 1-1
The Trial Balance 2-22
Limitations of a Trial Balance 2-23
Knowing the Numbers: Columbia Sportswear 1-1
Locating Errors 2-23
Accounting Activities and Users 1-3
Dollar Signs and Underlining 2-24
Three Activities 1-3
A Look at IFRS 2-48
Who Uses Accounting Data 1-4
Data Analytics Insight: Using Data Science to Create Art 1-5
The Building Blocks of Accounting 1-7
Ethics in Financial Reporting 1-7 3 Adjusting the Accounts 3-1
Generally Accepted Accounting Principles 1-8
Measurement Principles 1-9 Keeping Track of Groupons: Groupon 3-1
Assumptions 1-10 Accrual-Basis Accounting and Adjusting Entries 3-2
The Accounting Equation 1-12 Fiscal and Calendar Years 3-3
Assets 1-13 Accrual- versus Cash-Basis Accounting 3-4
Liabilities 1-13 Recognizing Revenues and Expenses 3-4
Owner’s Equity 1-13 The Need for Adjusting Entries 3-6
Analyzing Business Transactions 1-15 Types of Adjusting Entries 3-7
Accounting Transactions 1-16 Adjusting Entries for Deferrals 3-8
Transaction Analysis 1-17 Prepaid Expenses 3-8
Summary of Transactions 1-21 Unearned Revenues 3-13
The Four Financial Statements 1-22 Adjusting Entries for Accruals 3-16
Income Statement 1-24 Accrued Revenues 3-16
Owner’s Equity Statement 1-24 Accrued Expenses 3-18
Balance Sheet 1-25 Summary of Basic Relationships 3-21
Statement of Cash Flows 1-25 Adjusted Trial Balance and Financial Statements 3-23
Financial Statements: Order of Preparation 1-26 Preparing the Adjusted Trial Balance 3-24
Appendix 1A: Career Opportunities in Accounting 1-27 Preparing Financial Statements 3-24
Public Accounting 1-28 Appendix 3A: Adjusting Entries for the Alternative
Private Accounting 1-28 Treatment of Deferrals 3-27
Governmental Accounting 1-28 Prepaid Expenses 3-28
Forensic Accounting 1-29 Unearned Revenues 3-29
“Show Me the Money” 1-29 Summary of Additional Adjustment Relationships 3-30
A Look at IFRS 1-52 Appendix 3B: Financial Reporting Concepts 3-30
Qualities of Useful Information 3-31
Assumptions in Financial Reporting 3-32
2 The Recording Process 2-1
Principles in Financial Reporting 3-32
Cost Constraint 3-33
Accidents Happen: MF Global Holdings 2-1
A Look at IFRS 3-62
Accounts, Debits, and Credits 2-3
Debits and Credits 2-3
Summary of Debit/Credit Rules 2-7
The Journal 2-8 4 Completing the Accounting
The Recording Process 2-8 Cycle 4-1
The Journal 2-9
The Ledger and Posting 2-11 Everyone Likes to Win: Rhino Foods 4-1
The Ledger 2-11 The Worksheet 4-3
Posting 2-12 Steps in Preparing a Worksheet 4-3
Chart of Accounts 2-13 Preparing Financial Statements from a Worksheet 4-7
The Recording Process Illustrated 2-15 Preparing Adjusting Entries from a Worksheet 4-8
xxiii
xxiv CONTENTS

Closing the Books 4-9 Recording Sales of Merchandise 5-28

Preparing Closing Entries 4-9 Journalizing and Posting Closing Entries 5-29
Posting Closing Entries 4-11 Using a Worksheet 5-30
Preparing a Post-Closing Trial Balance 4-13 A Look at IFRS 5-57
The Accounting Cycle and Correcting Entries 4-16
Summary of the Accounting Cycle 4-16
Reversing Entries—An Optional Step 4-16 6 Inventories 6-1
Correcting Entries—An Avoidable Step 4-16
Classified Balance Sheet 4-19 “Where Is That Spare Bulldozer Blade?”:
Current Assets 4-21 Caterpillar 6-1
Long-Term Investments 4-21 Classifying and Determining Inventory 6-2
Property, Plant, and Equipment 4-22 Classifying Inventory 6-3
Intangible Assets 4-22 Determining Inventory Quantities 6-4
Current Liabilities 4-23 Inventory Methods and Financial Effects 6-7
Long-Term Liabilities 4-24 Specific Identification 6-7
Owner’s Equity 4-25 Cost Flow Assumptions 6-8
Appendix 4A: Reversing Entries 4-26 Financial Statement and Tax Effects of Cost Flow
Reversing Entries Example 4-26 Methods 6-13
A Look at IFRS 4-57 Using Inventory Cost Flow Methods Consistently 6-15
Effects of Inventory Errors 6-16
Income Statement Effects 6-17
5 Accounting for Merchandising Balance Sheet Effects 6-18
Operations 5-1 Inventory Presentation and Analysis 6-18
Presentation 6-18
Buy Now, Vote Later: REI 5-1 Lower-of-Cost-or-Net Realizable Value 6-19
Merchandising Operations and Inventory Systems 5-3 Analysis 6-20
Operating Cycles 5-3 Appendix 6A: Inventory Cost Flow Methods in Perpetual
Flow of Costs 5-4 Inventory Systems 6-22
Recording Purchases Under a Perpetual System 5-7 First-In, First-Out (FIFO) 6-22
Freight Costs 5-8 Last-In, First-Out (LIFO) 6-23
Purchase Returns and Allowances 5-9 Average-Cost 6-23
Purchase Discounts 5-9 Appendix 6B: Estimating Inventories 6-24
Summary of Purchasing Transactions 5-10 Gross Profit Method 6-25
Recording Sales Under a Perpetual System 5-11 Retail Inventory Method 6-26
Sales Returns and Allowances 5-12 Data Analytics in Action 6-49
Sales Discounts 5-14 A Look at IFRS 6-52
Data Analytics and Credit Sales 5-14
The Accounting Cycle for a Merchandising
Company 5-16 7 Accounting Information
Adjusting Entries 5-16 Systems 7-1
Closing Entries 5-16
Summary of Merchandising Entries 5-17 QuickBooks® Helps This Business Reach More Collegiate
Multiple-Step Income Statement and Classified Fans: Soul to Sole Footwear 7-1
Balance Sheet 5-19 Overview of Accounting Information Systems 7-2
Multiple-Step Income Statement 5-19 Computerized Accounting Systems 7-3
Single-Step Income Statement 5-22 Manual Accounting Systems 7-5
Classified Balance Sheet 5-23 Subsidiary Ledgers 7-6
Appendix 5A: Merchandising Company Worksheet 5-24 Subsidiary Ledger Example 7-7
Using a Worksheet 5-24 Advantages of Subsidiary Ledgers 7-8
Appendix 5B: Periodic Inventory System 5-26 Special Journals 7-8
Determining Cost of Goods Sold Under a Periodic Sales Journal 7-9
System 5-26 Cash Receipts Journal 7-12
Recording Merchandise Transactions 5-27 Purchases Journal 7-16
Recording Purchases of Merchandise 5-27 Cash Payments Journal 7-18
 CONTENTS xxv

Effects of Special Journals on the General

Journal 7-20
10 Plant Assets, Natural Resources,
Cybersecurity: A Final Comment 7-22 and Intangible Assets 10-1
A Look at IFRS 7-45
A Tale of Two Airlines: Southwest Airlines and JetBlue
Airways 10-2
8 Fraud, Internal Control, Plant Asset Expenditures 10-3
and Cash Determining the Cost of Plant Assets 10-3
8-1
Expenditures During Useful Life 10-6
Minding the Money in Madison: Barriques 8-2 Depreciation Methods 10-7
Fraud and Internal Control 8-3 Factors in Computing Depreciation 10-8
Fraud 8-3 Depreciation Methods 10-9
The Sarbanes-Oxley Act 8-3 Depreciation and Income Taxes 10-15
Internal Control 8-4 Revising Periodic Depreciation 10-15
Principles of Internal Control Activities 8-4 Impairments 10-16
Data Analytics and Internal Controls 8-10 Plant Asset Disposals 10-17
Limitations of Internal Control 8-11 Sale of Plant Assets 10-18
Cash Controls 8-12 Retirement of Plant Assets 10-19
Cash Receipts Controls 8-12 Natural Resources and Intangible Assets 10-20
Cash Disbursements Controls 8-15 Natural Resources 10-20
Petty Cash Fund 8-16 Depletion 10-20
Control Features of a Bank Account 8-19 Intangible Assets 10-21
Making Bank Deposits 8-20 Accounting for Intangible Assets 10-22
Writing Checks 8-20 Types of Intangible Assets 10-22
Electronic Banking 8-21 Research and Development Costs 10-24
Bank Statements 8-22 Statement Presentation and Analysis 10-25
Reconciling the Bank Account 8-24 Presentation 10-26
Reporting Cash 8-29 Analysis 10-26
Cash Equivalents 8-29 Appendix 10A: Exchange of Plant Assets 10-28
Restricted Cash 8-30 Loss Treatment 10-28
Data Analytics in Action 8-48 Gain Treatment 10-29
A Look at IFRS 8-52 Data Analytics in Action 10-48
A Look at IFRS 10-51

9 Accounting for Receivables 9-1

11 Current Liabilities and Payroll
What’s Cooking?: Nike 9-1 Accounting 11-1
Recognition of Accounts Receivable 9-2
Types of Receivables 9-3 Financing His Dreams: Wilbert Murdock 11-1
Recognizing Accounts Receivable 9-3 Accounting for Current Liabilities 11-2
Valuation and Disposition of Accounts Receivable 9-5 What Is a Current Liability? 11-3
Valuing Accounts Receivable 9-5 Notes Payable 11-3
Disposing of Accounts Receivable 9-12 Sales Taxes Payable 11-4
Notes Receivable 9-15 Unearned Revenues 11-4
Determining the Maturity Date 9-16 Current Maturities of Long-Term Debt 11-5
Computing Interest 9-16 Reporting and Analyzing Current Liabilities 11-6
Recognizing Notes Receivable 9-17 Reporting Uncertainty 11-6
Valuing Notes Receivable 9-17 Reporting of Current Liabilities 11-8
Disposing of Notes Receivable 9-17 Analysis of Current Liabilities 11-8
Presentation and Analysis of Receivables 9-20 Accounting for Payroll 11-10
Presentation 9-20 Determining the Payroll 11-10
Analysis 9-21 Recording the Payroll 11-14
Data Analytics and Receivables Management 9-22 Employer Payroll Taxes 11-17
A Look at IFRS 9-42 Filing and Remitting Payroll Taxes 11-19
xxvi CONTENTS

Internal Control for Payroll 11-20 Dividend Preferences 14-5

Appendix 11A: Additional Fringe Benefits 11-21 Stock Dividends 14-7
Paid Absences 11-22 Stock Splits 14-9
Postretirement Benefits 11-22 Reporting and Analyzing Stockholders’ Equity 14-11
A Look at IFRS 11-42 Retained Earnings 14-11
Statement Presentation and Analysis 14-14
Corporate Income Statements 14-17
12 Accounting for Partnerships 12-1 Income Statement Presentation 14-17
Income Statement Analysis 14-18
From Trials to the Top Ten: Razor & Tie Music 12-1 Appendix 14A: Stockholders’ Equity Statement 14-19
Forming a Partnership 12-2 Appendix 14B: Book Value per Share 14-20
Characteristics of Partnerships 12-3 Book Value per Share Example 14-20
Organizations with Partnership Characteristics 12-4 Book Value versus Market Price 14-21
Advantages and Disadvantages of Partnerships 12-6 Data Analytics in Action 14-37
The Partnership Agreement 12-6 A Look at IFRS 14-40
Accounting for a Partnership Formation 12-7
Accounting for Net Income or Net Loss 12-8
Dividing Net Income or Net Loss 12-8 15 Long-Term Liabilities 15-1
Partnership Financial Statements 12-11
Liquidation of a Partnership 12-12 And Then There Were Two: Chrysler 15-1
No Capital Deficiency 12-13 Major Characteristics of Bonds 15-3
Capital Deficiency 12-15 Types of Bonds 15-3
Appendix 12A: Admissions and Withdrawals Issuing Procedures 15-4
of Partners 12-18 Bond Trading 15-5
Admission of a Partner 12-18 Determining the Market Price of a Bond 15-5
Withdrawal of a Partner 12-21 Accounting for Bond Transactions 15-7
Data Analytics in Action 12-37 Issuing Bonds at Face Value 15-7
Discount or Premium on Bonds 15-8
Issuing Bonds at a Discount 15-9
13 Corporations: Organization and Issuing Bonds at a Premium 15-10
Capital Stock Transactions 13-1 Redeeming Bonds at Maturity 15-12
Redeeming Bonds Before Maturity 15-12
Oh Well, I Guess I’ll Get Rich: Facebook 13-1 Accounting for Long-Term Notes Payable 15-14
Corporate Form of Organization 13-2 Mortgage Notes Payable 15-14
Characteristics of a Corporation 13-3 Reporting and Analyzing Long-Term Liabilities 15-15
Forming a Corporation 13-6 Presentation 15-15
Stockholder Rights 13-6 Use of Ratios 15-16
Stock Issue Considerations 13-8 Debt and Equity Financing 15-17
Corporate Capital 13-10 Lease Liabilities 15-18
Accounting for Stock Issuances 13-12 Appendix 15A: Straight-Line Amortization 15-19
Accounting for Common Stock 13-12 Amortizing Bond Discount 15-19
Accounting for Preferred Stock 13-14 Amortizing Bond Premium 15-20
Accounting for Treasury Stock 13-15 Appendix 15B: Effective-Interest Amortization 15-21
Statement Presentation of Stockholders’ Equity 13-19 Amortizing Bond Discount 15-22
A Look at IFRS 13-37 Amortizing Bond Premium 15-23
A Look at IFRS 15-42
14 Corporations: Dividends,
Retained Earnings, and Income 16 Investments 16-1
Reporting 14-1
“Is There Anything Else We Can Buy?”:
Owning a Piece of the Action: Van Meter Inc. 14-1 WarnerMedia 16-1
Accounting for Dividends and Stock Splits 14-2 Accounting for Debt Investments 16-2
Cash Dividends 14-3 Why Corporations Invest 16-3
 CONTENTS xxvii

Accounting for Debt Investments 16-4 Quality of Earnings 18-7

Accounting for Stock Investments 16-6 Horizontal Analysis and Vertical Analysis 18-9
Holdings of Less Than 20% 16-6 Horizontal Analysis 18-10
Holdings Between 20% and 50% 16-7 Vertical Analysis 18-12
Holdings of More Than 50% 16-8 Ratio Analysis 18-15
Reporting Investments in Financial Statements 16-10 Liquidity Ratios 18-16
Debt Securities 16-11 Solvency Ratios 18-17
Equity Securities 16-14 Profitability Ratios 18-17
Balance Sheet Presentation 16-14 Financial Analysis and Data Analytics 18-18
Presentation of Realized and Unrealized Gain or Loss 16-16 Comprehensive Example of Ratio Analysis 18-18
A Look at IFRS 16-35 A Look at IFRS 18-54

17 Statement of Cash Flows 17-1 19 Managerial Accounting 19-1

Just Add Water . . . and Paddle: Current Designs 19-1

Got Cash?: Microsoft 17-2
Managerial Accounting Basics 19-3
Usefulness and Format of the Statement of
Comparing Managerial and Financial Accounting 19-3
Cash Flows 17-3
Management Functions 19-4
Usefulness of the Statement of Cash Flows 17-3
Organizational Structure 19-5
Classification of Cash Flows 17-3
Managerial Cost Concepts 19-7
Significant Noncash Activities 17-4
Manufacturing Costs 19-8
Format of the Statement of Cash Flows 17-5
Product versus Period Costs 19-9
Preparing the Statement of Cash Flows—
Illustration of Cost Concepts 19-10
Indirect Method 17-6
Manufacturing Costs in Financial Statements 19-12
Indirect and Direct Methods 17-7
Balance Sheet 19-12
Indirect Method—Computer Services
Income Statement 19-13
Company 17-7
Cost of Goods Manufactured 19-14
Step 1: Operating Activities 17-9
Cost of Goods Manufactured Schedule 19-15
Summary of Conversion to Net Cash Provided
Managerial Accounting Today 19-16
by Operating Activities—Indirect
Service Industries 19-16
Method 17-12
Focus on the Value Chain 19-17
Step 2: Investing and Financing Activities 17-13
Balanced Scorecard 19-19
Step 3: Net Change in Cash 17-15
Business Ethics 19-19
Analyzing the Statement of Cash Flows 17-17
Corporate Social Responsibility 19-20
Free Cash Flow 17-17
The Value of Data Analytics 19-20
Appendix 17A: Statement of Cash Flows—Direct
Data Analytics Insight: Using Data in Its Own World 19-21
Method 17-20
Data Analytics in Action 19-42
Step 1: Operating Activities 17-21
Step 2: Investing and Financing Activities 17-26
Step 3: Net Change in Cash 17-27 20 Job Order Costing 20-1
Appendix 17B: Worksheet for the Indirect Method 17-27
Preparing the Worksheet 17-28 Profiting from the Silver Screen: Disney 20-1
Appendix 17C: Statement of Cash Flows—T-Account Cost Accounting Systems 20-3
Approach 17-32 Process Cost System 20-3
Data Analytics in Action 17-58 Job Order Cost System 20-4
A Look at IFRS 17-61 Data Analytics Insight: Providing Service Through the
Cloud 20-4
Job Order Cost Flow 20-5
18 Financial Analysis: The Big Accumulating Manufacturing Costs 20-5
Picture 18-1 Assigning Manufacturing Costs 20-7
Raw Materials Costs 20-8
It Pays to Be Patient: Warren Buffett 18-2 Factory Labor Costs 20-10
Sustainable Income and Quality of Earnings 18-3 Predetermined Overhead Rates 20-13
Sustainable Income 18-3 Entries for Jobs Completed and Sold 20-16
xxviii CONTENTS

Assigning Costs to Finished Goods 20-17 Target Net Income and Margin of Safety 22-20
Assigning Costs to Cost of Goods Sold 20-17 Target Net Income 22-20
Summary of Job Order Cost Flows 20-18 Margin of Safety 22-21
Job Order Costing for Service Companies 20-19 CVP and Data Analytics 22-22
Advantages and Disadvantages of Job Order Costing 20-20 Appendix 22A: Regression Analysis 22-23
Applied Manufacturing Overhead 20-22 Data Analytics in Action 22-45
Under- or Overapplied Manufacturing Overhead 20-22
Data Analytics in Action 20-41 23 Incremental Analysis 23-1

21 Process Costing 21-1 Keeping It Clean: Method Products 23-1

Decision-Making and Incremental Analysis 23-3
The Little Guy Who Could: Jones Soda 21-1 Incremental Analysis Approach 23-3
Overview of Process Cost Systems 21-3 How Incremental Analysis Works 23-4
Uses of Process Cost Systems 21-3 Qualitative Factors 23-5
Process Costing for Service Companies 21-4 Relationship of Incremental Analysis
Similarities and Differences Between Job Order Cost and Activity-Based Costing 23-5
and Process Cost Systems 21-4 Types of Incremental Analysis 23-6
Process Cost Flow and Assigning Costs 21-6 Special Orders 23-6
Process Cost Flow 21-6 Make or Buy 23-8
Assigning Manufacturing Costs—Journal Entries 21-7 Opportunity Cost 23-9
Equivalent Units 21-9 Sell or Process Further 23-11
Weighted-Average Method 21-10 Single-Product Case 23-11
Refinements on the Weighted-Average Method 21-10 Multiple-Product Case 23-12
The Production Cost Report 21-13 Repair, Retain, or Replace Equipment 23-14
Compute the Physical Unit Flow (Step 1) 21-14 Eliminate Unprofitable Segment or Product 23-16
Compute the Equivalent Units of Production (Step 2) 21-15
Compute Unit Production Costs (Step 3) 21-15
Prepare a Cost Reconciliation Schedule (Step 4) 21-16
24 Budgetary Planning 24-1

Preparing the Production Cost Report 21-17 What’s in Your Cupcake?: Erin McKennaʼs Bakery NYC 24-1
Costing Systems—Final Comments 21-18 Effective Budgeting and the Master Budget 24-3
Appendix 21A: FIFO Method for Equivalent Units 21-19 Budgeting and Accounting 24-3
Equivalent Units Under FIFO 21-19 The Benefits of Budgeting 24-3
Comprehensive Example 21-20 Essentials of Effective Budgeting 24-4
FIFO and Weighted-Average 21-24 The Master Budget 24-7
Sales, Production, and Direct Materials Budgets 24-8
22 Cost-Volume-Profit 22-1 Sales Budget 24-8
Production Budget 24-10
Don’t Worry—Just Get Big: Amazon.com 22-1 Direct Materials Budget 24-10
Cost Behavior Analysis 22-3 Direct Labor, Manufacturing Overhead, and S&A
Variable Costs 22-3 Expense Budgets 24-14
Fixed Costs 22-4 Direct Labor Budget 24-14
Relevant Range 22-5 Manufacturing Overhead Budget 24-15
Mixed Costs 22-7 Selling and Administrative Expense Budget 24-15
Mixed Costs Analysis 22-8 Budgeted Income Statement 24-16
High-Low Method 22-8 Data Analytics Insight: That’s Some Tasty Data! 24-17
Importance of Identifying Variable and Fixed Costs 22-10 Cash Budget and Budgeted Balance Sheet 24-18
Cost-Volume-Profit Analysis 22-11 Cash Budget 24-18
Basic Components 22-11 Budgeted Balance Sheet 24-21
CVP Income Statement 22-12 Budgeting in Nonmanufacturing Companies 24-23
Break-Even Analysis 22-16 Merchandisers 24-23
Mathematical Equation 22-16 Service Companies 24-24
Contribution Margin Techniques 22-17 Not-for-Profit Organizations 24-25
Graphic Presentation 22-19 Data Analytics in Action 24-47
 CONTENTS xxix

25 Budgetary Control and Income Statement Presentation of Variances 26-19

Balanced Scorecard 26-20
Responsibility Accounting 25-1
Appendix 26A: Standard Cost Accounting System 26-23
Journal Entries 26-23
Pumpkin Madeleines and a Movie: The Roxy Hotel
Ledger Accounts 26-24
Tribeca 25-1
Appendix 26B: Overhead Controllable
Budgetary Control and Static Budget Reports 25-3
and Volume Variances 26-25
Budgetary Control 25-3
Overhead Controllable Variance 26-25
Static Budget Reports 25-4
Overhead Volume Variance 26-26
Flexible Budget Reports 25-7
Data Analytics in Action 26-45
Why Flexible Budgets? 25-7
Developing the Flexible Budget 25-9
Flexible Budget—A Case Study 25-10
Flexible Budget Reports 25-12 27 Planning for Capital
Data Analytics Insight: These Forecasts Move with the Investments 27-1
Times! 25-13
Responsibility Accounting and Responsibility Floating Hotels: Holland America Line 27-2
Centers 25-14 Capital Budgeting and Cash Payback 27-3
Controllable versus Noncontrollable Revenues Cash Flow Information 27-3
and Costs 25-16 Illustrative Data 27-4
Principles of Performance Evaluation 25-16 Cash Payback 27-4
Data Analytics Insight: Hitting the Road with Zero-Based Net Present Value Method 27-6
Budgeting 25-18 Equal Annual Cash Flows 27-7
Responsibility Reporting System 25-18 Unequal Annual Cash Flows 27-8
Types of Responsibility Centers 25-19 Choosing a Discount Rate 27-9
Investment Centers 25-24 Simplifying Assumptions 27-10
Return on Investment (ROI) 25-24 Comprehensive Example 27-10
Responsibility Report 25-25 Capital Budgeting Challenges and
Alternative Measures of ROI Inputs 25-26 Refinements 27-12
Improving ROI 25-26 Intangible Benefits 27-12
Appendix 25A: ROI versus Residual Income 25-28 Profitability Index for Mutually Exclusive
Residual Income Compared to ROI 25-29 Projects 27-14
Residual Income Weakness 25-30 Risk Analysis 27-15
Data Analytics in Action 25-50 Post-Audit of Investment Projects 27-16
Internal Rate of Return 27-17
Comparing Discounted Cash Flow
Methods 27-18
26 Standard Costs and Balanced Annual Rate of Return 27-20
Scorecard 26-1 Data Analytics Insight: Increasing the Chances of Gaming
Wins 27-21
80,000 Different Caffeinated Combinations: Starbucks 26-2 Data Analytics in Action 27-35
Overview of Standard Costs 26-3
Distinguishing Between Standards and Budgets 26-4
Setting Standard Costs 26-4 Appendix A Specimen Financial
Direct Materials Variances 26-8 Statements:
Analyzing and Reporting Variances 26-8
Calculating Direct Materials Variances 26-10
Apple Inc. A-1
Direct Labor and Manufacturing Overhead
Variances 26-13
Direct Labor Variances 26-13
Data Analytics Insight: Speedy Data to the Rescue! 26-16 Appendix B Specimen Financial
Manufacturing Overhead Variances 26-16 Statements:
Variance Reports and Balanced Scorecards 26-18 PepsiCo, Inc. B-1
Reporting Variances 26-18
xxx CONTENTS

Capital Budgeting Situations G-16

Appendix C Specimen Financial Using Financial Calculators G-18
Statements: The Coca- Present Value of a Single Sum G-19
Cola Company C-1 Present Value of an Annuity G-20
Future Value of a Single Sum G-20
Future Value of an Annuity G-20
Internal Rate of Return G-21
Appendix D Specimen Financial Useful Applications of the Financial Calculator G-21
Statements:
Amazon.com, Inc. D-1 Appendix H Just-in- Time
Processing and
Appendix E Specimen Financial Activity-Based
Statements: Walmart Costing H-1
Inc. E-1 Just-in-Time Processing and Activity-Based Costing H-1
Just-in-Time Processing H-2
Activity-Based Costing H-4
Appendix F Specimen Financial Applying Activity-Based Costing H-4
Identify and Classify Activities and Assign Overhead to Cost
Statements: Louis Pools (Step 1) H-5
Vuitton F-1 Identify Cost Drivers (Step 2) H-6
Compute Activity-Based Overhead Rates (Step 3) H-6
Allocate Overhead Costs to Products (Step 4) H-7
Appendix G Time Value of Comparing Unit Costs H-8
Benefits of ABC H-8
Money G-1 Limitations of ABC H-9

Interest and Future Values G-2 CASES FOR MANAGEMENT DECISION-MAKING

Nature of Interest G-2 (The full text of these cases is available in Wiley’s online
Future Value of a Single Amount G-3 course.)
Future Value of an Annuity G-5
Present Values G-8 COMPANY INDEX I-1
Present Value Variables G-8
Present Value of a Single Amount G-9 SUBJECT INDEX I-5
Present Value of an Annuity G-11
Time Periods and Discounting G-13 RAPID REVIEW: CH A PT E R CO NT E NT
Present Value of a Long-Term Note or Bond G-13