Intermediate Accounting, Update, 11th Edition

by Donald E. Kieso (Northern Illinois Univ.); Jerry J. Weygandt (Univ. of Wisconsin, Madison); Terry D. Warfield (Univ. of Wisconsin, Madison)

• ISBN13: 9780471661801
• ISBN10: 0471661805
• Edition: 11th
• Format: Hardcover
• Copyright: 2004-12-01
• Publisher: WILEY

Summary

This bestseller has powered the careers of countless professionals. This update to the 11th edition builds on the book's reputation for comprehensiveness, accuracy, and currency, incorporating all the recent changes to the accounting literature. It integrates numerous examples from real corporations throughout the chapters to help readers understand the application of accounting principles and techniques in practice. They'll also find problems that are modeled on the AICPA 'Simulations' _ a new question format designed for the computerized uniform CPA Exam. These problems prepare readers for the exam, testing their ability to read, digest, research and respond to both a numeric problem and a short answer essay.

Table of Contents

Financial Accounting and Accounting Standards	1	(26)
Learning Objectives	1	(1)
Vignette: The Size of the New York City Phone Book	1	(1)
Preview of Chapter	1	(1)
Financial Statements and Financial Reporting	2	(4)
Accounting and Capital Allocation	3	(1)
The Challenges Facing Financial Accounting	4	(1)
Objectives of Financial Reporting	4	(1)
The Need to Develop Standards	5	(1)
Parties Involved in Standards Setting	6	(6)
Securities and Exchange Commission (SEC)	6	(1)
American Institute of Certified Public Accountants, (AICPA)	7	(1)
Financial Accounting Standards Board (FASB)	8	(3)
Governmental Accounting Standards Board (GASB)	11	(1)
Generally Accepted Accounting Principles	12	(2)
Issues in Financial Reporting	14	(13)
Standards Setting in a Political Environment	14	(1)
The Expectations Gap	15	(1)
International Accounting Standards	16	(1)
Ethics in the Environment of Financial Accounting	16	(1)
Conclusion	17	(1)
Summary of Learning Objectives, Key Terms	18	(1)
Questions	19	(1)
Conceptual Cases	20	(4)
Using Your Judgment: Financial Reporting Problem	24	(1)
International Reporting Case	25	(1)
Professional Simulation	26	(1)
Conceptual Framework Underlying Financial Accounting	27	(34)
Learning Objectives	27	(1)
Vignette: Show Me the Earnings!	27	(1)
Preview of Chapter 2
Conceptual Framework	28	(2)
Need for Conceptual Framework	28	(1)
Development of Conceptual Framework	29	(1)
First Level: Basic Objectives	30	(1)
Second Level: Fundamental Concepts	31	(4)
Qualitative Characteristics of Accounting Information	31	(3)
Basic Elements	34	(1)
Third Level: Recognition and Measurement Concepts	35	(26)
Basic Assumptions	36	(2)
Basic Principles of Accounting	38	(5)
Constraints	43	(3)
Summary of the Structure	46	(1)
Summary of Learning Objectives, Key Terms	47	(1)
Questions	48	(1)
Brief Exercises	49	(2)
Exercises	51	(3)
Conceptual Cases	54	(4)
Using Your Judgment: Financial Reporting Problem	58	(1)
Financial Statement Analysis Case	58	(1)
Comparative Analysis Case	58	(1)
Research Cases	58	(1)
International Reporting Case	59	(1)
Professional Simulation	60	(1)
The Accounting Information System	61	(62)
Learning Objectives	61	(1)
Vignette: Needed: A Reliable Information System	61	(1)
Preview of Chapter 3
Accounting Information System	62	(6)
Basic Terminology	63	(1)
Debits and Credits	64	(1)
Basic Equation	64	(2)
Financial Statements and Ownership Structure	66	(2)
The Accounting Cycle	68	(18)
Identifying and Recording Transactions and Other Events	68	(1)
Journalizing	69	(1)
Posting	70	(1)
Trial Balance	71	(1)
Adjusting Entries	72	(10)
Adjusted Trial Balance	82	(1)
Closing	83	(2)
Post-Closing Trial Balance	85	(1)
Reversing Entries	85	(1)
The Accounting Cycle Summarized	86	(1)
Using a Work Sheet	86	(7)
Adjustments Entered on the Work Sheet	86	(2)
Work Sheet Columns	88	(1)
Preparing Financial Statements from a Work Sheet	89	(2)
Closing Entries	91	(1)
Summary of Learning Objectives, Key Terms	92	(1)
APPENDIX 3A Cash-Basis Accounting versus Accrual-Basic Accounting	93	(1)
Differences Between Cash and Accrual Basis	93	(2)
Conversion From Cash Basis to Accrual Basis	95	(2)
Service Revenue Computation	95	(1)
Operating Expense Computation	96	(1)
Theoretical Weaknesses of the Cash Basis	97	(1)
Summary of Learning Objective for Appendix 3A, Key Terms	97	(1)
APPENDIX 3B Using Reversing Entries	98	(1)
Illustration of Reversing Entries---Accruals	98	(1)
Illustration of Reversing Entries---Prepayments	99	(1)
Summary of Reversing Entries	100	(23)
Summary of Learning Objective for Appendix 3B	100	(1)
Questions	100	(1)
Brief Exercises	100	(3)
Exercises	103	(8)
Problems	111	(7)
Using Your Judgment: Financial Reporting Problem	118	(1)
Financial Statement Analysis Case	118	(1)
Comparative Analysis Case	119	(1)
Research Case	119	(1)
Professional Simulations	120	(3)
Income Statement and Related Information	123	(46)
Learning Objectives	123	(1)
Vignette: Which Income Number?	123	(1)
Preview of Chapter 4
Income Statement	124	(3)
Usefulness of the Income Statement	124	(1)
Limitations of the Income Statement	125	(1)
Quality of Earnings	125	(2)
Format of the Income Statement	127	(5)
Elements of the Income Statement	127	(1)
Single-Step Income Statements	128	(1)
Multiple-Step Income Statements	129	(1)
Condensed Income Statements	130	(2)
Reporting Irregular Items	132	(9)
Discontinued Operations	134	(1)
Extraordinary Items	135	(2)
Unusual Gains and Losses	137	(2)
Changes in Accounting Principle	139	(1)
Changes in Estimates	140	(1)
Summary of Irregular Items	140	(1)
Special Reporting Issues	141	(28)
Intraperiod Tax Allocation	141	(2)
Earnings per Share	143	(1)
Retained Earnings Statement	144	(1)
Comprehensive Income	145	(3)
Summary of Learning Objectives, Key Terms	148	(1)
Questions	149	(2)
Brief Exercises	151	(1)
Exercises	152	(4)
Problems	156	(3)
Conceptual Cases	159	(4)
Using Your Judgment: Financial Reporting Problem	163	(1)
Financial Statement Analysis Cases	164	(1)
Comparative Analysis Case	165	(1)
Research Cases	165	(1)
International Reporting Case	166	(1)
Professional Simulation	167	(2)
Balance Sheet and Statement of Cash Flows	169	(82)
Learning Objectives	169	(1)
Vignette: ``There Ought to Be a Law,''	169	(1)
Preview of Chapter 5
Section 1 Balance Sheet	170	(1)
Usefulness of the Balance Sheet	170	(1)
Limitations of the Balance Sheet	171	(1)
Classification in the Balance Sheet	172	(12)
Current Assets	173	(4)
Non-Current Assets	177	(2)
Liabilities	179	(3)
Owners' Equity	182	(1)
Balance Sheet Format	182	(2)
Additional Information Reported	184	(3)
Contingencies	185	(1)
Accounting Policies	185	(1)
Contractual Situations	186	(1)
Fair Values	186	(1)
Techniques of Disclosure	187	(3)
Parenthetical Explanations	187	(1)
Notes	187	(1)
Cross References and Contra Items	188	(1)
Supporting Schedules	189	(1)
Terminology	189	(1)
Section 2 Statement of Cash Flows	190	(1)
Purpose of the Statement of Cash Flows	190	(1)
Content and Format of the Statement of Cash Flows	191	(2)
Preparation of the Statement of Cash Flows	193	(2)
Usefulness of the Statement of Cash Flows	195	(5)
Financial Liquidity	196	(1)
Financial Flexibility	197	(1)
Free Cash Flow	197	(1)
Summary of Learning Objectives, Key Terms	198	(2)
APPENDIX 5A Ratio Analysis---A Reference	200	(1)
Using Ratios to Analyze Financial Performance	200	(2)
Summary of Learning Objectives for Appendix 5A, Key Terms	201	(1)
APPENDIX 5B Specimen Financial Statement: 3M Company	202	(49)
Questions	229	(1)
Brief Exercises	230	(1)
Exercises	231	(8)
Problems	239	(4)
Conceptual Cases	243	(3)
Using Your Judgment: Financial Reporting Problem	246	(1)
Financial Statement Analysis Cases	247	(1)
Comparative Analysis Case	248	(1)
Research Case	248	(1)
International Reporting Case	249	(1)
Professional Simulation	250	(1)
Accounting and the Time Value of Money	251	(62)
Learning Objectives	251	(1)
Vignette: The Magic of Interest	251	(1)
Preview of Chapter 6
Basic Time Value Concepts	252	(7)
Applications of Time Value Concepts	252	(1)
The Nature of Interest	253	(1)
Simple Interest	254	(1)
Compound Interest	254	(4)
Fundamental Variables	258	(1)
Single-Sum Problems	259	(5)
Future Value of a Single Sum	259	(2)
Present Value of a Single Sum	261	(2)
Solving for Other Unknowns in Single-Sum Problems	263	(1)
Annuities	264	(11)
Future Value of an Ordinary Annuity	265	(2)
Future Value of an Annuity Due	267	(1)
Illustrations of Future Value of Annuity Problems	268	(2)
Present Value of an Ordinary Annuity	270	(2)
Present Value of an Annuity Due	272	(1)
Illustrations of Present Value of Annuity Problems	273	(2)
More Complex Situations	275	(4)
Deferred Annuities	275	(2)
Valuation of Long-Term Bonds	277	(1)
Effective Interest Method of Amortization of Bond Discount or Premium	278	(1)
Present Value Measurement	279	(5)
Choosing an Appropriate Interest Rate	280	(1)
Expected Cash Flow Illustration	281	(1)
Summary of Learning Objectives, Key Terms	282	(2)
APPENDIX 6A Using Financial Calculators	284	(1)
Future Value of a Single Sum	284	(1)
Plus and Minus	285	(1)
Compounding Periods	285	(1)
Rounding	285	(1)
Present Value of a Single Sum	285	(1)
Future Value of an Ordinary Annuity	285	(1)
Future Value of an Annuity Due	286	(1)
Present Value of an Ordinary Annuity	286	(1)
Useful Features of the Financial Calculator	287	(15)
Auto Loan	287	(1)
Mortgage Loan Amount	287	(1)
Individual Retirement Account (IRA)	288	(1)
Summary of Learning Objective for Appendix 6A	288	(1)
Questions	288	(1)
Brief Exercises	289	(1)
Exercises	290	(4)
Problems	294	(5)
Using Your Judgment: Financial Reporting Problem	299	(1)
Financial Statement Analysis Case	300	(1)
Comparative Analysis Case	300	(1)
Research Cases	300	(1)
Professional Simulation	301	(1)
Time Value of Money Tables	302	(11)
Cash and Receivables	313	(54)
Learning Objectives	313	(1)
Vignette: Ugly Duckling or Swan?	313	(1)
Preview of Chapter 7
Section 1 Cash	314	(1)
What Is Cash?	314	(1)
Management and Control of Cash	315	(1)
Reporting Cash	316	(2)
Restricted Cash	316	(1)
Bank Overdrafts	317	(1)
Cash Equivalents	317	(1)
Summary of Cash-Related Items	318	(1)
Section 2 Receivables	318	(2)
Recognition of Accounts Receivable	320	(2)
Trade Discounts	320	(1)
Cash Discounts (Sales Discounts)	320	(1)
Nonrecognition of Interest Element	321	(1)
Valuation of Accounts Receivable	322	(4)
Uncollectible Accounts Receivable	322	(4)
Recognition of Notes Receivable	326	(5)
Note Issued at Face Value	327	(1)
Note Not Issued at Face Value	328	(3)
Choice of Interest Rate	331	(1)
Valuation of Notes Receivable	331	(1)
Disposition of Accounts and Notes Receivable	332	(5)
Secured Borrowing	333	(1)
Sales of Receivables	334	(2)
Secured Borrowing versus Sale	336	(1)
Presentation and Analysis	337	(3)
Presentation of Receivables	337	(1)
Analysis of Receivables	338	(1)
Summary of Learning Objectives, Key Terms	339	(1)
APPENDIX 7A Cash Controls	340	(1)
Using Bank Accounts	340	(1)
The Imprest Petty Cash System	341	(1)
Physical Protection of Cash Balances	342	(1)
Reconciliation of Bank Balances	342	(25)
Summary of Learning Objective for Appendix 7A, Key Terms	345	(1)
Questions	346	(1)
Brief Exercises	347	(1)
Exercises	348	(6)
Problems	354	(6)
Conceptual Cases	360	(4)
Using Your Judgment: Financial Reporting Problem	364	(1)
Financial Statement Analysis Case	364	(1)
Comparative Analysis Case	365	(1)
Research Cases	365	(1)
Professional Simulation	366	(1)
Valuation of Inventories: A Cost Basis Approach	367	(54)
Learning Objectives	367	(1)
Vignette: Inventories in the Crystal Ball	367	(1)
Preview of Chapter 8
Inventory Classification and Control	368	(4)
Classification	368	(2)
Control	370	(2)
Basic Issues in Inventory Valuation	372	(1)
Physical Goods Included in Inventory	372	(5)
Goods in Transit	373	(1)
Consigned Goods	373	(1)
Special Sale Agreements	374	(1)
Effect of Inventory Errors	375	(2)
Costs Included in Inventory	377	(2)
Product Costs	377	(1)
Period Costs	377	(1)
Treatment of Purchase Discounts	378	(1)
What Cost Flow Assumption Should Be Adopted?	379	(5)
Specific Identification	380	(1)
Average Cost	381	(1)
First-In, First-Out (FIFO)	382	(1)
Last-In, First-Out (LIFO)	383	(1)
Special Issues Related to LIFO	384	(10)
LIFO Reserve	384	(1)
LIFO Liquidation	385	(1)
Dollar-Value LIFO	386	(5)
Comparison of LIFO Approaches	391	(1)
Major Advantages of LIFO	391	(1)
Major Disadvantages of LIFO	392	(2)
Basis For Selection of Inventory Method	394	(27)
Inventory Valuation Methods---Summary Analysis	396	(1)
Summary of Learning Objectives, Key Terms	397	(1)
Questions	398	(1)
Brief Exercises	399	(1)
Exercises	400	(8)
Problems	408	(5)
Conceptual Cases	413	(3)
Using Your Judgment: Financial Statement Analysis Cases	416	(2)
Research Cases	418	(1)
Professional Simulation	419	(2)
Inventories: Additional Valuation Issues	421	(48)
Learning Objectives	421	(1)
Vignette: What Do Inventory Changes Tell Us?	421	(1)
Preview of Chapter 9
Lower of Cost or Market	422	(7)
Lower of Cost or Market---Ceiling and Floor	423	(1)
How Lower of Cost or Market Works	424	(1)
Methods of Applying Lower of Cost or Market	425	(1)
Recording ``Market'' Instead of Cost	426	(2)
Evaluation of the Lower of Cost or Market Rule	428	(1)
Valuation Bases	429	(3)
Valuation at Net Realizable Value	429	(1)
Valuation Using Relative Sales Value	429	(1)
Purchase Commitments---A Special Problem	430	(2)
The Gross Profit Method of Estimating Inventory	432	(3)
Computation of Gross Profit Percentage	433	(2)
Evaluation of Gross Profit Method	435	(1)
Retail Inventory Method	435	(5)
Retail Method Terminology	436	(1)
Retail Inventory Method with Markups and Markdowns---Conventional Method	437	(2)
Special Items Relating to Retail Method	439	(1)
Evaluation of Retail Inventory Method	440	(1)
Presentation and Analysis	440	(4)
Presentation of Inventories	440	(2)
Analysis of Inventories	442	(1)
Summary of Learning Objectives, Key Terms	443	(1)
APPENDIX 9A LIFO Retail Methods	444	(1)
LIFO Retail Methods	444	(3)
Stable Prices---LIFO Retail Method Key Terms	444	(1)
Fluctuating Prices---Dollar-Value LIFO Retail Method	445	(1)
Subsequent Adjustments Under Dollar-Value LIFO Retail	446	(1)
Changing From Conventional Retail to LIFO	447	(22)
Summary of Learning Objective for Appendix 9A, Key Terms	448	(1)
Questions	449	(1)
Brief Exercises	450	(1)
Exercises	451	(6)
Problems	457	(6)
Conceptual Cases	463	(2)
Using Your Judgment: Financial Reporting Problem	465	(1)
Financial Statement Analysis Cases	465	(2)
Comparative Analysis Case	467	(1)
Research Cases	467	(1)
Professional Simulation	468	(1)
Acquisition and Disposition of Property, Plant, and Equipment	469	(50)
Learning Objectives	469	(1)
Vignette: Where Have All the Assets Gone?	469
Preview of Chapter	10	(461)
Acquisition of Property, Plant, and Equipment	471	(8)
Cost of Land	471	(1)
Cost of Buildings	472	(1)
Cost of Equipment	472	(1)
Self-Constructed Assets	472	(1)
Interest Costs During Construction	473	(5)
Observations	478	(1)
Valuation	479	(10)
Cash Discounts	479	(1)
Deferred Payment Contracts	479	(1)
Lump Sum Purchases	480	(1)
Issuance of Stock	481	(1)
Exchanges of Nonmonetary Assets	482	(5)
Accounting for Contributions	487	(1)
Other Asset Valuation Methods	488	(1)
Costs Subsequent to Acquisition	489	(4)
Additions	490	(1)
Improvements and Replacements	490	(1)
Rearrangement and Reinstallation	491	(1)
Repairs	491	(1)
Summary of Costs Subsequent to Acquisition	492	(1)
Dispositions of Plant Assets	493	(26)
Sale of Plant Assets	493	(1)
Involuntary Conversion	494	(1)
Miscellaneous Problems	494	(1)
Summary of Learning Objectives, Key Terms	495	(1)
Questions	496	(1)
Brief Exercises	497	(1)
Exercises	498	(9)
Problems	507	(6)
Conceptual Cases	513	(2)
Using Your Judgment: Financial Statement Analysis Case	515	(1)
Research Case	516	(1)
Professional Simulation	517	(2)
Depreciation, Impairments, and Depletion	519	(50)
Learning Objectives	519	(1)
Vignette: Do They Matter?	519	(1)
Preview of Chapter 11
Depreciation---A Method of Cost Allocation	520	(12)
Factors Involved in the Depreciation Process	521	(2)
Methods of Depreciation	523	(3)
Special Depreciation Methods	526	(2)
Special Depreciation Issues	528	(4)
Impairments	532	(4)
Recognizing Impairments	533	(1)
Measuring Impairments	533	(1)
Restoration of Impairment Loss	534	(1)
Assets to Be Disposed Of	535	(1)
Depletion	536	(5)
Establishing a Depletion Base	536	(1)
Write-Off of Resource Cost	537	(1)
Continuing Controversy	538	(2)
Special Problems in Depletion Accounting	540	(1)
Presentation and Analysis	541	(4)
Presentation of Property, Plant, Equipment, and Natural Resources	541	(1)
Analysis of Property, Plant, Equipment, and Natural Resources	542	(2)
Summary of Learning Objectives, Key Terms	544	(1)
APPENDIX 11A Income Tax Depreciation	545	(1)
Modified Accelerated Cost Recovery System	545	(24)
Tax Lives (Recovery Periods)	545	(1)
Tax Depreciation Methods	546	(1)
Illustration---MACRS System	546	(2)
Optional Straight-Line Method	548	(1)
Tax versus Book Depreciation	548	(1)
Summary of Learning Objective for Appendix 11A, Key Terms	548	(1)
Questions	548	(2)
Brief Exercises	550	(1)
Exercises	550	(6)
Problems	556	(6)
Conceptual Cases	562	(2)
Using Your Judgment: Financial Reporting Problem	564	(1)
Financial Statement Analysis Case	564	(1)
Comparative Analysis Case	565	(1)
Research Case	566	(1)
International Reporting Case	566	(1)
Professional Simulation	567	(2)
Intangible Assets	569	(46)
Learning Objectives	569	(1)
Vignette: Untouchable	569	(1)
Preview of Chapter 12
Intangible Asset Issues	570	(3)
Characteristics	570	(1)
Valuation	571	(1)
Amortization of Intangibles	571	(2)
Types of Intangible Assets	573	(8)
Marketing-Related Intangible Assets	573	(1)
Customer-Related Intangible Assets	574	(1)
Artistic-Related Intangible Assets	575	(1)
Contract-Related Intangible Assets	575	(1)
Technology-Related Intangible Assets	576	(2)
Goodwill	578	(3)
Impairment of Intangible Assets	581	(3)
Impairment of Limited-Life Intangibles	581	(1)
Impairment of Indefinite-Life Intangibles Other Than Goodwill	582	(1)
Impairment of Goodwill	583	(1)
Research and Development Costs	584	(6)
Identifying R & D Activities	585	(1)
Accounting for R & D Activities	585	(2)
Other Costs Similar to R & D Costs	587	(2)
Conceptual Questions	589	(1)
Presentation of Intangibles and Related Items	590	(4)
Presentation of Intangible Assets	590	(1)
Presentation of Research and Development Costs	590	(2)
Summary of Learning Objectives, Key Terms	592	(2)
APPENDIX 12A Accounting for Computer Software Costs	594	(1)
Diversity in Practice	594	(1)
The Profession's Position	595	(1)
Accounting For Capitalized Software Costs	595	(1)
Reporting Software Costs	596	(1)
Setting Standards for Software Accounting	596	(19)
Summary of Learning Objective for Appendix 12A	597	(1)
Questions	598	(1)
Brief Exercises	599	(1)
Exercises	600	(6)
Problems	606	(2)
Conceptual Cases	608	(2)
Using Your Judgment: Financial Reporting Problem	610	(1)
Financial Statement Analysis Case	611	(1)
Comparative Analysis Case	611	(1)
Research Case	611	(1)
International Reporting Case	612	(1)
Professional Simulation	613	(2)
Current Liabilities and Contingencies	615	(54)
Learning Objectives	615	(1)
Vignette: Microsoft's Liabilities---Good or Bad?	615	(1)
Preview of Chapter 13
Section 1 Current Liabilities	616	(1)
What Is A Liability	616	(2)
What Is A Current Liability?	618	(12)
Accounts Payable	618	(1)
Notes Payable	619	(1)
Current Maturities of Long-Term Debt	620	(1)
Short-Term Obligations Expected to Be Refinanced	621	(1)
Dividends Payable	622	(1)
Returnable Deposits	623	(1)
Unearned Revenues	623	(1)
Sales Taxes Payable	624	(1)
Income Taxes Payable	625	(1)
Employee-Related Liabilities	625	(5)
Section 2 Contingencies	630	(1)
Gain Contingencies	630	(1)
Loss Contingencies	631	(9)
Litigation, Claims, and Assessments	633	(1)
Guarantee and Warranty Costs	634	(2)
Premiums and Coupons	636	(1)
Environmental Liabilities	637	(1)
Asset Retirement Obligations	638	(2)
Self-Insurance	640	(1)
Presentation and Analysis	640	(5)
Presentation of Current Liabilities	640	(2)
Presentation of Contingencies	642	(1)
Analysis of Current Liabilities	643	(1)
Summary of Learning Objectives, Key Terms	644	(1)
APPENDIX 13A Computation of Employees' Bonuses	645	(24)
Summary of Learning Objective for Appendix 13A	647	(1)
Questions	647	(1)
Brief Exercises	648	(2)
Exercises	650	(6)
Problems	656	(5)
Conceptual Cases	661	(3)
Using Your Judgment: Financial Reporting Problem	664	(1)
Financial Statement Analysis Cases	664	(1)
Comparative Analysis Case	665	(1)
Research Cases	665	(1)
International Reporting Case	666	(1)
Professional Simulation	667	(2)
Long-Term Liabilities	669	(54)
Learning Objectives	669	(1)
Vignette: Your Debt Is Killing My Stock	669	(1)
Preview of Chapter 14
Section 1 Bonds Payable	670	(1)
Issuing Bonds	671	(1)
Types and Ratings of Bonds	671	(1)
Valuation of Bonds Payable---Discount and Premium	672	(4)
Bonds Issued at Par on Interest Date	675	(1)
Bonds Issued at Discount or Premium on Interest Date	675	(1)
Bonds Issued between Interest Dates	676	(1)
Effective Interest Method	676	(4)
Bonds Issued at a Discount	677	(1)
Bonds Issued at a Premium	678	(1)
Accruing Interest	679	(1)
Classification of Discount and Premium	680	(1)
Costs of Issuing Bonds	680	(1)
Treasury Bonds	681	(1)
Extinguishment of Debt	681	(2)
Section 2 Long-Term Notes Payable	683	(1)
Notes Issued at Face Value	684	(1)
Notes Not Issued at Face Value	684	(2)
Zero-Interest-Bearing Notes	684	(1)
Interest-Bearing Notes	685	(1)
Special Notes Payable Situations	686	(2)
Notes Issued for Property, Goods, and Services	686	(1)
Choice of Interest Rate	687	(1)
Mortgage Notes Payable	688	(1)
Section 3 Reporting and Analysis of Long-Term Debt	689	(1)
Off-Balance-Sheet Financing	689	(2)
Different Forms	690	(1)
Rationale	690	(1)
Presentation and Analysis of Long-Term Debt	691	(3)
Presentation of Long-Term Debt	691	(1)
Analysis of Long-Term Debt	691	(2)
Summary of Learning Objectives, Key Terms	693	(1)
APPENDIX 14A Accounting for Troubled Debt	694	(1)
Accounting Issues	695	(1)
Impairments	696	(3)
Illustration of Loss on Impairment	696	(3)
Troubled Debt Restructurings	699	(24)
Settlement of Debt	699	(1)
Modification of Terms	700	(4)
Summary of Learning Objective for Appendix 14A, Key Terms	704	(1)
Questions	705	(1)
Brief Exercises	706	(1)
Exercises	707	(5)
Problems	712	(4)
Conceptual Case	716	(3)
Using Your Judgment: Financial Reporting Problem	719	(1)
Financial Statement Analysis Cases	719	(1)
Comparative Analysis Case	720	(1)
Research Cases	721	(1)
Professional Simulation	722	(1)
Stockholders' Equity	723	(50)
Learning Objectives	723	(1)
Vignette: Stocking Up	723	(1)
Preview of Chapter 15
The Corporate Form	724	(3)
State Corporate Law	724	(1)
Capital Stock or Share System	725	(1)
Variety of Ownership Interests	726	(1)
Corporate Capital	727	(9)
Issuance of Stock	727	(5)
Reacquisition of Shares	732	(4)
Preferred Stock	736	(2)
Features of Preferred Stock	736	(1)
Accounting for and Reporting of Preferred Stock	737	(1)
Dividend Policy	738	(9)
Financial Condition and Dividend Distributions	738	(1)
Types of Dividends	739	(4)
Stock Splits	743	(4)
Disclosure of Restrictions on Retained Earnings	747	(1)
Presentation and Analysis of Stockholders' Equity	747	(5)
Presentation	747	(2)
Analysis	749	(2)
Summary of Learning Objectives, Key Terms	751	(1)
APPENDIX 15A Dividend Preferences and Book Value per Share	752	(1)
Dividend Preferences	752	(2)
Book Value Per Share	754	(19)
Summary of Learning Objective for Appendix 15A	755	(1)
Questions	755	(1)
Brief Exercises	756	(1)
Exercises	757	(7)
Problems	764	(4)
Conceptual Cases	768	(2)
Using Your Judgment: Financial Reporting Problem	770	(1)
Financial Statement Analysis Cases	770	(1)
Comparative Analysis Case	771	(1)
Research Case	772	(1)
Professional Simulation	772	(1)
Dilutive Securities and Earnings per Share	773	(62)
Learning Objectives	773	(1)
Vignette: Just Like Candy Kisses	773	(1)
Preview of Chapter 16
Section 1 Dilutive Securities and Compensation Plans	774	(1)
Accounting for Convertible Debt	774	(2)
At Time of Issuance	775	(1)
At Time of Conversion	775	(1)
Induced Conversions	775	(1)
Retirement of Convertible Debt	776	(1)
Convertible Preferred Stock	776	(1)
Stock Warrants	777	(4)
Stock Warrants Issued with Other Securities	778	(1)
Conceptual Questions	779	(1)
Rights to Subscribe to Additional Shares	780	(1)
Stock Compensation Plans	781	(7)
The Major Reporting Issue	781	(1)
Accounting for Stock Compensation	782	(3)
Types of Plans	785	(1)
Noncompensatory Plans	786	(1)
Disclosure of Compensation Plans	786	(1)
Debate over Stock Option Accounting	787	(1)
Section 2 Computing Earnings Per Share	788	(1)
Earnings Per Share---Simple Capital Structure	789	(4)
Preferred Stock Dividends	789	(1)
Weighted Average Number of Shares Outstanding	790	(2)
Comprehensive Illustration	792	(1)
Earnings Per Share---Complex Capital Structure	793	(10)
Diluted EPS---Convertible Securities	794	(2)
Diluted EPS---Options and Warrants	796	(1)
Contingent Issue Agreement	797	(1)
Antidilution Revisited	798	(1)
EPS Presentation and Disclosure	799	(2)
Summary	801	(1)
Summary of Learning Objectives, Key Terms	802	(1)
APPENDIX 16A Stock Options---Additional Complications	803	(1)
Determining Compensation Expense	803	(6)
Stock Option Plans	804	(1)
Stock Appreciation Rights	805	(2)
Performance-Type Plans	807	(1)
Summary of Compensation Plans	808	(1)
Summary of Learning Objective for Appendix 16A, Key Terms	809	(1)
APPENDIX 16B Comprehensive Earnings per Share Illustration	809	(1)
Diluted Earnings Per Share	810	(25)
Summary of Learning Objective for Appendix 16B, Key Terms	814	(1)
Questions	814	(1)
Brief Exercises	815	(1)
Exercises	816	(6)
Problems	822	(4)
Conceptual Cases	826	(3)
Using Your Judgment: Financial Reporting Problem	829	(1)
Financial Statement Analysis Case	830	(1)
Comparative Analysis Case	830	(1)
Research Cases	830	(1)
International Reporting Case	831	(2)
Professional Simulation	833	(2)
Investments	835	(66)
Learning Objectives	835	(1)
Vignette: Who's in Control Here?	835	(2)
Preview of Chapter 17
Section 1 Investments in Debt Securities	837	(1)
Held-to-Maturity Securities	838	(2)
Available-for-Sale Securities	840	(4)
Illustration: Single Security	840	(1)
Illustration: Portfolio of Securities	841	(1)
Sale of Available-for-Sale Securities	842	(1)
Financial Statement Presentation	843	(1)
Trading Securities	844	(1)
Section 2 Investments in Equity Securities	845	(1)
Holdings of Less Than 20%	846	(2)
Available-for-Sale Securities	846	(2)
Trading Securities	848	(1)
Holdings Between 20% and 50%	848	(3)
Equity Method	849	(2)
Holdings of More Than 50%	851	(1)
Section 3 Other Reporting Issues	852	(1)
Financial Statement Presentation of Investments	852	(4)
Disclosures Required Under the Equity Method	852	(1)
Reclassification Adjustments	853	(2)
Comprehensive Illustration	855	(1)
Impairment of Value	856	(1)
Transfers between Categories	857	(1)
Fair Value Controversy	857	(2)
Measurement Based on Intent	857	(1)
Gains Trading	857	(1)
Liabilities Not Fairly Valued	858	(1)
Subjectivity of Fair Values	859	(1)
Summary	859	(2)
Summary of Learning Objectives, Key Terms	859	(2)
APPENDIX 17A Accounting for Derivative Instruments	861	(1)
Understanding Derivatives	861	(2)
Who Uses Derivatives, and Why?	862	(1)
Basic Principles in Accounting for Derivatives	863	(3)
Illustration of Derivative Financial Instrument---Speculation	864	(2)
Differences Between Traditional and Derivative Financial Instruments	866	(1)
Derivatives Used for Hedging	866	(7)
Fair Value Hedge	868	(1)
Interest Rate Swap---A Fair Value Hedge	868	(3)
Cash Flow Hedge	871	(2)
Other Reporting Issues	873	(4)
Embedded Derivatives	873	(1)
Qualifying Hedge Criteria	874	(1)
Disclosure Provisions	875	(2)
Comprehensive Hedge Accounting Example	877	(2)
Controversy and Concluding Remarks	879	(22)
Summary of Learning Objectives for Appendix 17A, Key Terms	880	(1)
Questions	881	(1)
Brief Exercises	882	(1)
Exercises	882	(6)
Problems	888	(7)
Conceptual Cases	895	(2)
Using Your Judgment: Financial Reporting Problem	897	(1)
Financial Statement Analysis Case	897	(1)
Comparative Analysis Case	898	(1)
Research Cases	898	(1)
Professional Simulation	899	(2)
Revenue Recognition	901	(58)
Learning Objectives	901	(1)
Vignette: Cyberspace Trading for Revenues	901	(1)
Preview of Chapter 18
The Current Environment	902	(3)
Guidelines for Revenue Recognition	903	(2)
Departures from the Sale Basis	905	(1)
Revenue Recognition at Point of Sale (Delivery)	905	(3)
Sales with Buyback Agreements	906	(1)
Sales When Right of Return Exists	906	(1)
Trade Loading and Channel Stuffing	907	(1)
Revenue Recognition Before Delivery	908	(11)
Percentage-of-Completion Method	909	(4)
Completed-Contract Method	913	(2)
Long-Term Contract Losses	915	(2)
Disclosures in Financial Statements	917	(1)
Completion-of-Production Basis	918	(1)
Revenue Recognition After Delivery	919	(10)
Installment-Sales Accounting Method	919	(8)
Cost-Recovery Method	927	(1)
Deposit Method	928	(1)
Summary of Product Revenue Recognition Bases	929	(1)
Concluding Remarks	929	(2)
Summary of Learning Objectives, Key Terms	930	(1)
APPENDIX 18A Revenue Recognition for Special Sales Transactions	931	(1)
Franchises	931	(3)
Initial Franchise Fees	932	(1)
Continuing Franchise Fees	933	(1)
Bargain Purchases	934	(1)
Options to Purchase	934	(1)
Franchisor's Costs	934	(1)
Disclosures of Franchisors	934	(1)
Consignments	934	(25)
Summary of Learning Objective for Appendix 18A, Key Terms	936	(1)
Questions	936	(1)
Brief Exercises	937	(1)
Exercises	938	(5)
Problems	943	(8)
Conceptual Cases	951	(4)
Using Your Judgment: Financial Reporting Problem	955	(1)
Financial Statement Analysis Case	955	(1)
Comparative Analysis Case	956	(1)
Research Cases	956	(1)
Professional Simulation	957	(2)
Accounting for Income Taxes	959	(58)
Learning Objectives	959	(1)
Vignette: Use It, But Don't Abuse It	959	(1)
Preview of Chapter 19
Fundamentals of Accounting for Income Taxes	960	(14)
Future Taxable Amounts and Deferred Taxes	962	(4)
Future Deductible Amounts and Deferred Taxes	966	(3)
Income Statement Presentation	969	(1)
Specific Differences	970	(3)
Tax Rate Considerations	973	(1)
Accounting for Net Operating Losses	974	(6)
Loss Carryback	974	(1)
Loss Carryforward	975	(1)
Loss Carryback Illustrated	975	(1)
Loss Carryforward Illustrated	976	(4)
Financial Statement Presentation	980	(4)
Balance Sheet Presentation	980	(2)
Income Statement Presentation	982	(2)
Review of the Asset-Liability Method	984	(5)
Summary of Learning Objectives, Key Terms	987	(2)
APPENDIX 19A Comprehensive Illustration of Interperiod Tax Allocation	989	(1)
First Year---2003	989	(4)
Taxable Income and Income Tax Payable---2003	990	(1)
Computing Deferred Income Taxes---End of 2003	990	(1)
Deferred Tax Expense (Benefit) and the Journal Entry to Record Income Taxes---2003	991	(1)
Financial Statement Presentation---2003	992	(1)
Second Year---2004	993	(24)
Taxable Income and Income Tax Payable---2004	994	(1)
Computing Deferred Income Taxes---End of 2004	994	(1)
Deferred Tax Expense (Benefit) and the Journal Entry to Record Income Taxes---2004	995	(1)
Financial Statement Presentation---2004	995	(1)
Summary of Learning Objective for Appendix 19A	996	(1)
Questions	996	(1)
Brief Exercises	997	(1)
Exercises	998	(8)
Problems	1006	(4)
Conceptual Cases	1010	(2)
Using Your Judgment: Financial Reporting Problem	1012	(1)
Financial Statement Analysis Case	1012	(1)
Comparative Analysis Case	1013	(1)
Research Cases	1013	(1)
International Reporting Case	1013	(2)
Professional Simulation	1015	(2)
Accounting for Pensions and Postretirement Benefits	1017	(68)
Learning Objectives	1017	(1)
Vignette: Pension Fund a Likely Drain	1017	(1)
Preview of Chapter 20
Nature of Pension Plans	1018	(4)
Defined Contribution Plan	1020	(1)
Defined Benefit Plan	1021	(1)
The Role of Actuaries in Pension Accounting	1021	(1)
Accounting for Pensions	1022	(5)
Alternative Measures of the Liability	1022	(1)
Capitalization versus Noncapitalization	1023	(1)
Components of Pension Expense	1024	(3)
Using a Pension Work Sheet	1027	(11)
2003 Entries and Work Sheet	1028	(1)
Amortization of Unrecognized Prior Service Cost (PSC)	1029	(2)
2004 Entries and Work Sheet	1031	(1)
Gain or Loss	1032	(4)
2005 Entries and Work Sheet	1036	(2)
Minimum Liability	1038	(4)
Minimum Liability Computation	1038	(1)
Financial Statement Presentation	1039	(2)
Work Sheet Illustration	1041	(1)
Reporting Pension Plans in Financial Statements	1042	(11)
Within the Financial Statements	1042	(1)
Within the Notes to the Financial Statements	1042	(1)
Illustration of Pension Note Disclosure	1043	(3)
2006 Entries and Work Sheet---A Comprehensive Illustration	1046	(3)
Special Issues	1049	(3)
Summary of Learning Objectives, Key Terms	1052	(1)
APPENDIX 20A Accounting for Postretirement Benefits	1053	(1)
Accounting Guidance	1053	(1)
Differences between Pension Benefits and Health-Care Benefits	1054	(1)
Postretirement Benefits Accounting Provisions	1055	(3)
Obligations under Postretirement Benefits	1056	(1)
Postretirement Expense	1057	(1)
The Transition Amount	1057	(1)
Illustrative Accounting Entries	1058	(4)
2003 Entries and Work Sheet	1059	(1)
Recognition of Gains and Losses	1060	(1)
2004 Entries and Work Sheet	1061	(1)
Amortization of Unrecognized Net Gain or Loss in 2005	1062	(1)
Disclosures in Notes to the Financial Statements	1062	(1)
Actuarial Assumptions and Conceptual Issues	1063	(22)
Summary of Learning Objectives for Appendix 20A, Key Terms	1063	(1)
Questions	1064	(1)
Brief Exercises	1065	(1)
Exercises	1066	(7)
Problems	1073	(4)
Conceptual Cases	1077	(4)
Using Your Judgment: Financial Reporting Problem	1081	(1)
Financial Statement Analysis Cases	1081	(1)
Comparative Analysis Case	1081	(1)
Research Cases	1081	(1)
International Reporting Case	1082	(1)
Professional Simulations	1083	(2)
Accounting for Leases	1085	(64)
Learning Objectives	1085	(1)
Vignette: More Companies Ask, ``Why Buy?''	1085	(1)
Preview of Chapter 21
Basics of Leasing	1086	(3)
Advantages of Leasing	1087	(1)
Conceptual Nature of a Lease	1088	(1)
Accounting by Lessee	1089	(9)
Capitalization Criteria	1090	(3)
Asset and Liability Accounted for Differently	1093	(1)
Capital Lease Method (Lessee)	1094	(2)
Operating Method (Lessee)	1096	(1)
Comparison of Capital Lease with Operating Lease	1097	(1)
Accounting by Lessor	1098	(6)
Economics of Leasing	1099	(1)
Classification of Leases by the Lessor	1099	(2)
Direct-Financing Method (Lessor)	1101	(2)
Operating Method (Lessor)	1103	(1)
Special Accounting Problems	1104	(13)
Residual Values	1104	(6)
Sales-Type Leases (Lessor)	1110	(2)
Bargain Purchase Option (Lessee)	1112	(1)
Initial Direct Costs (Lessor)	1112	(1)
Current versus Noncurrent	1113	(1)
Disclosing Lease Data	1114	(3)
Lease Accounting---Unsolved Problems	1117	(4)
Summary of Learning Objectives, Key Terms	1119	(2)
APPENDIX 21A Illustrations of Different Lease Arrangements	1121	(1)
Harmon, Inc.	1122	(1)
Arden's Oven Co.	1122	(1)
Mendota Truck Co.	1123	(1)
Appleland Computer	1123	(2)
Summary of Learning Objective for Appendix 21A	1124	(1)
APPENDIX 21B Sale-Leasebacks	1125	(1)
Determining Asset Use	1125	(1)
Lessee	1125	(1)
Lessor	1126	(1)
Sale-Leaseback Illustration	1126	(23)
Summary of Learning Objective for Appendix 21B, Key Terms	1127	(1)
Questions	1128	(1)
Brief Exercises	1129	(1)
Exercises	1130	(4)
Problems	1134	(6)
Conceptual Cases	1140	(4)
Using Your Judgment: Financial Reporting Problem	1144	(1)
Financial Statement Analysis Case	1144	(1)
Comparative Analysis Case	1144	(1)
Research Cases	1145	(1)
International Reporting Case	1145	(1)
Professional Simulations	1146	(3)
Accounting Changes and Error Analysis	1149	(54)
Learning Objectives	1149	(1)
Vignette: Can I Get My Money Back?	1149	(1)
Preview of Chapter 22
Section 1 Accounting Changes	1150	(1)
Changes in Accounting Principle	1151	(9)
Cumulative-Effect Accounting Change	1152	(3)
Retroactive-Effect Accounting Change	1155	(4)
Change to LIFO Method	1159	(1)
Changes in Accounting Estimate	1160	(2)
Reporting a Change in Entity	1162	(1)
Reporting a Correction of an Error	1162	(3)
Illustration	1163	(2)
Summary of Accounting Changes and Corrections of Errors	1165	(1)
Motivations for Change	1166	(2)
Section 2 Error Analysis	1168	(1)
Balance Sheet Errors	1169	(1)
Income Statement Errors	1169	(1)
Balance Sheet and Income Statement Effects	1169	(3)
Counterbalancing Errors	1170	(1)
Noncounterbalancing Errors	1171	(1)
Comprehensive Illustration: Numerous Errors	1172	(2)
Preparation of Financial Statements with Error Corrections	1174	(3)
Summary of Learning Objectives, Key Terms	1176	(1)
APPENDIX 22A Changing from and to the Equity Method	1177	(1)
Change from the Equity Method	1177	(1)
Dividends in Excess of Earnings	1177	(1)
Change to the Equity Method	1178	(25)
Summary of Learning Objective for Appendix 22A	1180	(1)
Questions	1181	(1)
Brief Exercises	1182	(1)
Exercises	1183	(6)
Problems	1189	(8)
Conceptual Cases	1197	(3)
Using Your Judgment: Financial Reporting Problem	1200	(1)
Comparative Analysis Case	1201	(1)
Research Cases	1201	(1)
Professional Simulation	1202	(1)
Statement of Cash Flows	1203	(68)
Learning Objectives	1203	(1)
Vignette: Don't Take Cash Flow for Granted	1203	(1)
Preview of Chapter 23
Section 1 Preparation of the Statement of Cash Flows	1204	(1)
Usefulness of the Statement of Cash Flows	1204	(1)
Classification of Cash Flows	1205	(2)
Format of the Statement of Cash Flows	1207	(1)
Steps in Preparation	1207	(2)
First Illustration---2003	1209	(4)
Step 1: Determine the Change in Cash	1209	(1)
Step 2: Determine Net Cash Flow from Operating Activities	1209	(3)
Step 3: Determine Net Cash Flows From Investing and Financing Activities	1212	(1)
Statement of Cash Flows---2003	1212	(1)
Second Illustration---2004	1213	(3)
Step 1: Determine the Change in Cash	1213	(1)
Step 2: Determine Net Cash Flow from Operating Activities---Indirect Method	1214	(1)
Step 3: Determine Net Cash Flows from Investing and Financing Activities	1214	(1)
Statement of Cash Flows---2004	1215	(1)
Third Illustration---2005	1216	(3)
Step 1: Determine the Change in Cash	1217	(1)
Step 2: Determine Net Cash Flow from Operating Activities---Indirect Method	1217	(1)
Step 3: Determine Cash Flows from Investing and Financing Activities	1218	(1)
Statement of Cash Flows---2005	1219	(1)
Sources of Information for the Statement of Cash Flows	1219	(1)
Net Cash Flow From Operating Activities---Indirect Versus Direct Method	1220	(7)
Indirect Method	1220	(1)
Direct Method---An Illustration	1220	(5)
Direct Versus Indirect Controversy	1225	(2)
Special Problems in Statement Preparation	1227	(6)
Adjustments Similar to Depreciation	1227	(1)
Accounts Receivable (Net)	1228	(1)
Other Working Capital Changes	1229	(1)
Net Losses	1230	(1)
Gains	1230	(1)
Stock Options	1231	(1)
Postretirement Benefit Costs	1231	(1)
Extraordinary Items	1231	(1)
Significant Noncash Transactions	1232	(1)
Section 2 Use of a Work Sheet	1233	(1)
Preparation of the Work Sheet	1234	(3)
Analysis of Transactions	1237	(5)
Change in Retained Earnings	1237	(1)
Accounts Receivable (Net)	1237	(1)
Inventories	1237	(1)
Prepaid Expense	1237	(1)
Investment in Stock	1238	(1)
Land	1238	(1)
Equipment and Accumulated Depreciation	1238	(1)
Building Depreciation and Amortization of Goodwill	1239	(1)
Other Noncash Charges or Credits	1239	(1)
Common Stock and Related Accounts	1239	(1)
Final Reconciling Entry	1240	(2)
Preparation of Final Statement	1242	(29)
Summary of Learning Objectives, Key Terms	1242	(2)
Questions	1244	(1)
Brief Exercises	1245	(2)
Exercises	1247	(8)
Problems	1255	(8)
Conceptual Cases	1263	(3)
Using Your Judgment: Financial Reporting Problem	1266	(1)
Financial Statement Analysis Case	1267	(1)
Comparative Analysis Case	1267	(1)
Research Case	1268	(1)
International Reporting Case	1268	(2)
Professional Simulation	1270	(1)
Full Disclosure in Financial Reporting	1271
Learning Objectives	1271	(1)
Vignette: High-Quality Financial Reporting---It's a Necessity	1271	(1)
Preview of Chapter 24
Full Disclosure Principle	1272	(2)
Increase in Reporting Requirements	1273	(1)
Differential Disclosure	1274	(1)
Notes to the Financial Statements	1274	(4)
Accounting Policies	1275	(2)
Common Notes	1277	(1)
Disclosure Issues	1278	(15)
Disclosure of Special Transactions or Events	1278	(2)
Post-Balance-Sheet Events (Subsequent Events)	1280	(2)
Reporting for Diversified (Conglomerate) Companies	1282	(5)
Interim Reports	1287	(6)
Auditor's and Management's Reports	1293	(5)
Auditor's Report	1293	(3)
Management's Reports	1296	(2)
Current Reporting Issues	1298	(7)
Reporting on Financial Forecasts and Projections	1298	(3)
Internet Financial Reporting	1301	(1)
Fraudulent Financial Reporting	1301	(2)
Criteria for Making Accounting and Reporting Choices	1303	(1)
Summary of Learning Objectives, Key Terms	1303	(2)
APPENDIX 24A Basic Financial Statement Analysis	1305	(1)
Perspective on Financial Statement Analysis	1305	(1)
Ratio Analysis	1306	(3)
Limitations of Ratio Analysis	1308	(1)
Comparative Analysis	1309	(1)
Percentage (Common-Size) Analysis	1310
Summary of Learning Objectives for Appendix 24A, Key Terms	1311	(1)
Questions	1312	(1)
Brief Exercises	1313	(1)
Exercises	1314	(3)
Problems	1317	(3)
Conceptual Cases	1320	(7)
Using Your Judgment: Financial Reporting Problem	1327	(1)
Financial Statement Analysis Case	1327	(2)
Comparative Analysis Case	1329	(1)
Research Cases	1330	(1)
Professional Simulation	1331
Logo Credits	1	(1)
Index	1	(1)
Official Accounting Pronouncements	1