Accounting Principles , Tenth Edition

1339 Pages·2011·43.29 MB·English

by  Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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FMTOC_SE.qxd 12/3/10 12:09 PM Page ii

Jerry J. Weygandt PhD, CPA
University of Wisconsin—Madison

Madison, Wisconsin

Paul D. Kimmel PhD, CPA

University of Wisconsin—Milwaukee

Milwaukee, Wisconsin

Donald E. Kieso PhD, CPA
Northern Illinois University

DeKalb, Illinois

10
ACCOUNTING
P R I N C I P L E S

John Wiley & Sons, Inc.

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ISBN-13 978-0-470-53479-3 (main textbook)
ISBN-13 978-1-118-00929-1 (BRV edition)

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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v

From the
Authors

Dear Student,

Why This Course? Remember your biology course in high school? Did you have
one of those “invisible man” models (or maybe something more high-tech than that)
that gave you the opportunity to look “inside” the human body? This accounting
course offers something similar: To understand a business, you have to understand the
financial insides of a business organization. An accounting course will help you under-
stand the essential financial components of businesses. Whether you are looking at a
large multinational company like Microsoft or Starbucks or a single-owner software
consulting business or coffee shop, knowing the fundamentals of accounting will help
you understand what is happening. As an employee, a manager, an investor, a business
owner, or a director of your own personal finances—any of which roles you will have at
some point in your life—you will be much the wiser for having taken this course.

Why This Book? Hundreds of thousands of students have used this textbook. Your
instructor has chosen it for you because of its trusted reputation. The authors have
worked hard to keep the book fresh, timely, and accurate.

This textbook contains features to help you learn best, whatever your learning style. To
understand what your learning style is, spend about ten minutes to take the learning
style quiz at the book’s companion website. Then, look at page vii for how you can
apply an understanding of your learning style to this course. When you know more
about your own learning style, browse through the Student Owner’s Manual on pages
viii–xi. It shows you the main features you will find in this textbook and explains their
purpose.

How To Succeed? We’ve asked many students and many instructors whether there
is a secret for success in this course. The nearly unanimous answer turns out to be not
much of a secret: “Do the homework.” This is one course where doing is learning, and
the more time you spend on the homework assignments—using the various tools
that this textbook provides—the more likely you are to learn the essential concepts,
techniques, and methods of accounting. Besides the textbook itself, the book’s
companion website offers various support resources.

Good luck in this course. We hope you enjoy the experience and that you put to good
use throughout a lifetime of success the knowledge you obtain in this course. We are
sure you will not be disappointed.

Jerry J. Weygandt

Paul D. Kimmel
Donald E. Kieso

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Jerry Weygandt

Jerry J. Weygandt, PhD, CPA, is Arthur
Andersen Alumni Emeritus Professor of
Accounting at the University of Wisconsin—
Madison. He holds a Ph.D. in accounting
from the University of Illinois. Articles by
Professor Weygandt have appeared in the
Accounting Review. Journal of Accounting
Research, Accounting Horizons, Journal of
Accountancy, and other academic and
professional journals. These articles have
examined such financial reporting issues
as accounting for price-level adjustments,
pensions, convertible securities, stock option
contracts, and interim reports. Professor
Weygandt is author of other accounting and
financial reporting books and is a member
of the American Accounting Association,
the American Institute of Certified Public
Accountants, and the Wisconsin Society of
Certified Public Accountants. He has served
on numerous committees of the American
Accounting Association and as a member
of the editorial board of the Accounting
Review; he also has served as President
and Secretary-Treasurer of the American
Accounting Association. In addition, he has
been actively involved with the American
Institute of Certified Public Accountants
and has been a member of the Accounting
Standards Executive Committee (AcSEC) of
that organization. He has served on the FASB
task force that examined the reporting issues
related to accounting for income taxes
and served as a trustee of the Financial
Accounting Foundation. Professor Weygandt
has received the Chancellor’s Award for
Excellence in Teaching and the Beta Gamma
Sigma Dean’s Teaching Award. He is on the
board of directors of M & I Bank of Southern
Wisconsin. He is the recipient of the
Wisconsin Institute of CPA’s Outstanding
Educator’s Award and the Lifetime
Achievement Award. In 2001 he received
the American Accounting Association’s
Outstanding Educator Award.

Paul Kimmel

Paul D. Kimmel, PhD, CPA, received his
bachelor’s degree from the University of
Minnesota and his doctorate in accounting
from the University of Wisconsin. He is an
Associate Professor at the University of
Wisconsin—Milwaukee, and has
public accounting experience with Deloitte
& Touche (Minneapolis). He was the recipient
of the UWM School of Business Advisory
Council Teaching Award, the Reggie
Taite Excellence in Teaching Award and a
three-time winner of the Outstanding
Teaching Assistant Award at the University
of Wisconsin. He is also a recipient of the
Elijah Watts Sells Award for Honorary
Distinction for his results on the CPA exam.
He is a member of the American Accounting
Association and the Institute of Management
Accountants and has published articles in
Accounting Review, Accounting Horizons,
Advances in Management Accounting,
Managerial Finance, Issues in Accounting
Education, Journal of Accounting Education,
as well as other journals. His research
interests include accounting for financial
instruments and innovation in accounting
education. He has published papers and
given numerous talks on incorporating
critical thinking into accounting education,
and helped prepare a catalog of critical
thinking resources for the Federated Schools
of Accountancy.

Don Kieso

Donald E. Kieso, PhD, CPA, received his
bachelor’s degree from Aurora University
and his doctorate in accounting from the
University of Illinois. He has served as
chairman of the Department of Accountancy
and is currently the KPMG Emeritus Professor
of Accountancy at Northern Illinois University.
He has public accounting experience with
Price Waterhouse & Co. (San Francisco and
Chicago) and Arthur Andersen & Co.
(Chicago) and research experience with the
Research Division of the American Institute of
Certified Public Accountants (New York). He
has done post doctorate work as a Visiting
Scholar at the University of California at
Berkeley and is a recipient of NIU’s Teaching
Excellence Award and four Golden Apple
Teaching Awards. Professor Kieso is the
author of other accounting and business
books and is a member of the American
Accounting Association, the American
Institute of Certified Public Accountants, and
the Illinois CPA Society. He has served as a
member of the Board of Directors of the
Illinois CPA Society, then AACSB’s Accounting
Accreditation Committees, the State of
Illinois Comptroller’s Commission, as
Secretary-Treasurer of the Federation
of Schools of Accountancy, and as
Secretary-Treasurer of the American
Accounting Association. Professor Kieso is
currently serving on the Board of Trustees
and Executive Committee of Aurora
University, as a member of the Board of
Directors of Kishwaukee Community
Hospital, and as Treasurer and Director of
Valley West Community Hospital. From 1989
to 1993 he served as a charter member of
the national Accounting Education Change
Commission. He is the recipient of the
Outstanding Accounting Educator Award
from the Illinois CPA Society, the FSA’s Joseph
A. Silvoso Award of Merit, the NIU
Foundation’s Humanitarian Award for Service
to Higher Education, a Distinguished Service
Award from the Illinois CPA Society, and
in 2003 an honorary doctorate from
Aurora University.

About

the

Authors

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WhatTYPEof learner are you?

VISUAL
AURAL

READING/

WRITING
KINESTHETIC

• Pay close attention to charts,

drawings, and handouts
your instructors use.

• Underline.
• Use different colors.
• Use symbols, flow charts,
graphs, different

arrangements on the page,
white spaces.

Convert your lecture notes into
“page pictures.”

To do this:
• Use the “Intake” strategies.
• Reconstruct images in

different ways.

• Redraw pages from memory.
• Replace words with symbols

and initials.

• Look at your pages.

The Navigator/Feature
Story/Preview
Infographics/Illustrations
Accounting Equation Analyses
Highlighted words
Demonstration Problem/

Action Plan

Questions/Exercises/Problems
Financial Reporting Problem
Comparative Analysis Problem
On the Web
Tutorials, video, iPod apps

• Recall your “page pictures.”
• Draw diagrams where

appropriate.

• Practice turning your visuals
back into words.

• Attend lectures and tutorials.
• Discuss topics with students

and instructors.

• Explain new ideas to

other people.

• Use a tape recorder.
• Leave spaces in your lecture

notes for later recall.

• Describe overheads, pictures,

and visuals to somebody
who was not in class.

You may take poor notes
because you prefer to listen.
Therefore:
• Expand your notes by talking

with others and with
information from
your textbook.

• Tape-record summarized

notes and listen.

• Read summarized notes

out loud.

• Explain your notes to

another “aural” person.

Preview
Insight Boxes
Review It/Do it!/Action Plan
Summary of Study Objectives
Glossary
Demonstration Problem/Action

Plan

Self-Test Questions
Questions/Exercises/Problems
Financial Reporting Problem
Comparative Analysis Problem
On the Web
Decision Making Across the

Organization

Tutorials, video

Communication Activity
Ethics Case
• Talk with the instructor.
• Spend time in quiet places

recalling the ideas.

• Practice writing answers

to old exam questions.

• Say your answers out loud.

• Use lists and headings.
• Use dictionaries, glossaries,

and definitions.

• Read handouts, textbooks,

and supplementary
library readings.

• Use lecture notes.

• Write out words again

and again.

• Reread notes silently.
• Rewrite ideas and principles

into other words.

• Turn charts, diagrams,

and other illustrations
into statements.

The Navigator/Feature
Story/Study
Objectives/Preview
Review It/Do it!/Action Plan
Summary of Study Objectives
Glossary/Self-Test Questions
Questions/Exercises/Problems
Writing Problems
Financial Reporting Problem
Comparative Analysis Problem
“All About You” Activity
On the Web
Decision Making Across

the Organization

Communication Activity
Flashcards

• Write exam answers.
• Practice with multiple-choice

questions.

• Write paragraphs, beginnings

and endings.

• Write your lists in

outline form.

• Arrange your words into

hierarchies and points.

• Use all your senses.
• Go to labs, take field trips.
• Listen to real-life examples.
• Pay attention to applications.
• Use hands-on approaches.
• Use trial-and-error methods.

You may take poor notes
because topics do not seem
concrete or relevant.
Therefore:
• Put examples in

your summaries.

• Use case studies and

applications to help with
principles and abstract
concepts.

• Talk about your notes with

another “kinesthetic” person.

• Use pictures and

photographs that
illustrate an idea.

The Navigator/Feature
Story/Preview
Infographics/Illustrations
Review It/Do it!/Action Plan
Summary of Study Objectives
Demonstration Problem/

Action Plan

Self-Test Questions
Questions/Exercises/Problems
Financial Reporting Problem
Comparative Analysis Problem
On the Web
Decision Making Across

the Organization

Communication Activity
“All About You” Activity

• Write practice answers.
• Role-play the exam situation.

Intake:
To take in the information
To make a study package

Text features that may
help you the most

Output:
To do well on exams

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Accrued Revenues

Asset
Revenue

Debit
Adjusting
Entry (+)

Credit
Adjusting
Entry (+)

Illustration 3-13
Adjusting entries for accrued
revenues

Helpful Hint

For accruals, there may
have been no prior entry,
and the accounts requiring
adjustment may both have
zero balances prior to
adjustment.

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Student Owner’s Manual

Using Your Textbook Effectively

Helpful Hints in the margins further clarify
concepts being discussed. They are like
having an instructor with you as you read.

Insight examples give you more glimpses
into how actual companies make decisions
using accounting information. These high-
interest boxes focus on various themes—
ethics, international, and investor concerns.

A critical thinking question asks you to
apply your accounting learning to the
story in the example. Guideline Answers
appear at the end of the chapter.

Ethics Notes and International Notes

point out ethical and international points

related to the nearby text discussion.

Accounting Across the Organization

examples show the use of accounting by

people in non-accounting functions—such

as finance, marketing, or management.
Guideline Answers appear at the end of

the chapter.

●
Scan Study Objectives
●

●
Read Feature Story
●

●
Read Preview
●

●
Read text and answer Do it! p. 102 ●
p. 110 ● p. 116 ● p. 121 ●

●
Work Comprehensive Do it! p. 122
●

●
Review Summary of Study Objectives
●

●
Answer Self-Test Questions
●

●
Complete Assignments
●

●
Go to WileyPLUS for practice and tutorials
●

Read A Look at IFRS p. 148
●

●
[The Navigator]
✔

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Ethics Note

A report released by Fannie Mae’s
board of directors stated that
improper adjusting entries at the
mortgage-fi nance company
resulted in delayed recognition of
expenses caused by interest-rate
changes. The motivation for such
accounting apparently was the
desire to hit earnings estimates.

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International Note

Rules for accounting for specifi c
events sometimes differ across
countries. For example, European
companies rely less on historical
cost and more on fair value than
U.S. companies. Despite the
differences, the double-entry
accounting system is the basis of
accounting systems worldwide.

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I
S O
NVESTORI S G
NSIGHT

How to Read Stock Quotes

Organized exchanges trade the stock of publicly held companies at dollar prices per share
established by the interaction between buyers and sellers. For each listed security, the fi nan-

cial press reports the high and low prices of the stock during the year, the total volume of stock
traded on a given day, the high and low prices for the day, and the closing market price, with the net
change for the day. Nike is listed on the New York Stock Exchange. Here is a recent listing for Nike:

52 Weeks

Stock
High
Low
Volume
High
Low
Close
Net Change

Nike
78.55
48.76
5,375,651
72.44
69.78
70.61
21.69

These numbers indicate the following: The high and low market prices for the last 52 weeks have
been $78.55 and $48.76. The trading volume for the day was 5,375,651 shares. The high, low, and
closing prices for that date were $72.44, $69.78, and $70.61, respectively. The net change for the
day was a decrease of $1.69 per share.

For stocks traded on organized exchanges, how are the dollar prices per share established?
What factors might influence the price of shares in the marketplace? (See page 629.)
?

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ACCOU
G
CCOUNTINGAC OSS
CROSS THEO G
O
RGANIZATION

Wall Street No Friend of Facebook

In the 1990s, it was the dream of every young technology entrepreneur to start a
company and do an initial public offering (IPO), that is, list company shares on a
stock exchange. It seemed like there was a never-ending supply of 20-something

year-old technology entrepreneurs that made millions doing IPOs of companies that never made
a profit and eventually failed. In sharp contrast to this is Mark Zuckerberg, the 25-year-old
founder and CEO of Facebook. If Facebook did an IPO, he would make billions of dollars. But, he
is in no hurry to go public. Because his company doesn’t need to invest in factories, distribution
systems, or even marketing, it doesn’t need to raise a lot of cash. Also, by not going public,
Zuckerberg has more control over the direction of the company. Right now, he and the other
founders don’t have to answer to outside shareholders, who might be more concerned about short-
term investment horizons rather than long-term goals. In addition, publicly traded companies
face many more financial reporting disclosure requirements.

Source: Jessica E. Vascellaro, “Facebook CEO in No Rush to ‘Friend’ Wall Street,” Wall Street Journal Online
(March 4, 2010).

Why has Mark Zuckerberg, the CEO and founder of Facebook, delayed taking his
company’s shares public through an initial public offering (IPO)? (See page 629.)
?

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viii

The Navigator guides you through each chapter by

pulling learning tools together into one learning system.
Throughout the chapter, The Navigator prompts you to

use listed learning aids and to set priorities as you study.

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ix

Brief Do it! exercises ask you to put to
work your newly acquired knowledge.
They outline an Action Plan necessary
to complete the exercise, and
they show a Solution.

Accounting equation analyses appear next to key
journal entries. They will help you understand the
impact of an accounting transaction on the
components of the accounting equation, on the
stockholders’ equity accounts, and on the company’s
cash flows.

Comprehensive Do it! problem

with Action Plan gives you an

opportunity to see a detailed solution to a

representative problem before you do

your homework. Coincides with the Do it!

problems within the chapter.

Do it! Review problems appear in the

homework material and provide another

way for you to determine whether

you have mastered the content in the

chapters.

The ledger of Hammond Company, on March 31, 2012, includes these selected
accounts before adjusting entries are prepared.

Debit
Credit

Prepaid Insurance
$ 3,600

Supplies
2,800

Equipment
25,000

Accumulated Depreciation—Equipment
$5,000

Unearned Service Revenue
9,200

An analysis of the accounts shows the following.

1. Insurance expires at the rate of $100 per month.
2. Supplies on hand total $800.

Do it!

Adjusting Entries
for Deferrals

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Bernie Ebbers was the founder and CEO of the phone company WorldCom. The
company engaged in a series of increasingly large, debt-financed acquisitions of
other companies. These acquisitions made the company grow quickly, which made
the stock price increase dramatically. However, because the acquired companies all
had different accounting systems, WorldCom’s financial records were a mess. When
WorldCom’s performance started to flatten out, Bernie coerced WorldCom’s
accountants to engage in a number of fraudulent activities to make net income
look better than it really was and thus prop up the stock price. One of these frauds
involved treating $7 billion of line costs as capital expenditures. The line costs, which
were rental fees paid to other phone companies to use their phone lines, had
always been properly expensed in previous years. Capitalization delayed expense
recognition to future periods and thus boosted current-period profi ts.

Total take: $7 billion

THE MISSING CONTROLS

Documentation procedures. The company’s accounting system was a disorganized
collection of non-integrated systems, which resulted from a series of corporate
acquisitions. Top management took advantage of this disorganization to conceal its
fraudulent activities.

Independent internal verifi cation. A fraud of this size should have been detected
by a routine comparison of the actual physical assets with the list of physical assets
shown in the accounting records.

ANATOMY OF A FRAUD

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Terry Thomas opens the Green Thumb Lawn Care Company on April 1.At April 30,
the trial balance shows the following balances for selected accounts.

Prepaid Insurance
$ 3,600

Equipment
28,000

Notes Payable
20,000

Unearned Service Revenue
4,200

Service Revenue
1,800

Do it!

C O M P R E H E N S I V E

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Do it! Review

Do it! 3-1
Numerous timing concepts are discussed on pages 100–102. A list of concepts is

provided below in the left column, with a description of the concept in the right column.There are
more descriptions provided than concepts. Match the description of the concept to the concept.
1. ____ Cash-basis accounting.
2. ____ Fiscal year.
3. ____ Revenue recognition principle.
4. ____ Expense recognition principle.

(a) Monthly and quarterly time periods.
(b) Accountants divide the economic life of a business

into artificial time periods.

(c) Efforts (expenses) should be matched with ac-

complishments (revenues).

Identify timing concepts.

(SO 1, 2)

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p
p
p
q
y

What happens when no-par stock does not have a stated value? In that case,

the corporation credits the entire proceeds to Common Stock.Thus, if Hydro-Slide
does not assign a stated value to its no-par stock, it records the issuance of the 5,000
shares at $8 per share for cash as follows.

Cash
40,000

Common Stock
40,000

(To record issue of 5,000 shares of no-par stock)

140,000

140,000 CS

Cash Flows
140,000

SE
A
L
5
1

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Student Owner’s Manual

Anatomy of a Fraud boxes illustrate how

a lack of specific internal controls

resulted in real-world frauds.

Financial statements appear regularly.

Those from actual companies are identified

by a company logo or a photo.

Illustration 14-11
Disclosure of restriction
Tektronix Inc.

Notes to the Financial Statements

Certain of the Company’s debt agreements require compliance with debt covenants.
Management believes that the Company is in compliance with such requirements.
The Company had unrestricted retained earnings of $223.8 million after meeting
those requirements.

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x

An additional parallel set of C Problems
appears at the book’s companion website.

Problems: Set C

Visit the book’s companion website, at www.wiley.com/college/weygandt, and choose the Student
Companion site to access Problem Set C.

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(Note: This is a continuation of the Cookie Chronicle from Chapters 1 and 2. Use the infor-
mation from the previous chapters and follow the instructions below using the general ledger
accounts you have already prepared.)

Continuing Cookie Chronicle

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Those exercises and problems that focus on

accounting situations faced by service companies

are identified by the icon shown here.

Comprehensive Problems combine material
from the current chapter with previous
chapters so that you understand how “it all
fits together.”

The Continuing Cookie Chronicle exercise

follows the continuing saga of accounting

for a small business begun by an

entrepreneurial student.

The Waterways Continuing Problem uses the business
activities of a fictional company, to help you apply
managerial accounting topics to a realistic entrepreneurial
situation.

h
bl

Waterways Continuing Problem

(Note: The Waterways Problem begins in Chapter 19 and continues in the remaining chapters.
You can also find this problem at the book’s Student Companion site.)

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Exercises: Set B

Visit the book’s companion website, at www.wiley.com/college/weygandt, and choose the Student
Companion site to access Exercise Set B.

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P3-5A
On September 1, 2012, the account balances of Moore Equipment Repair were as

follows.

Journalize transactions and
follow through accounting
cycle to preparation of fi nancial
statements.
(SO 5, 6, 7)

No.
Debits
No.
Credits

101
Cash
$ 4,880
154
Accumulated Depreciation—Equipment $ 1,500

112
Accounts Receivable
3,520
201
Accounts Payable
3,400

126
Supplies
2,000
209
Unearned Service Revenue
1,400

153
Equipment
15,000
212
Salaries and Wages Payable
500

301
Owner’s Capital
18,600

$25,400
$25,400

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Exercises: Set B are available online at

www.wiley.com/college/weygandt.

In the textbook, two similar sets of

Problems—A and B—are keyed

to the same study objectives.

Selected problems, identified by this

icon, can be solved using the General

Ledger Software (GLS) package.

An icon identifies Exercises and
Problems that can be solved using
Excel templates at the student website.

E3-10
The income statement of Brandon Co. for the month of July shows net income of $1,400

based on Service Revenue $5,500, Salaries and Wages Expense $2,300, Supplies Expense $1,200,
and Utilities Expense $600. In reviewing the statement, you discover the following.
1. Insurance expired during July of $400 was omitted.
2. Supplies expense includes $250 of supplies that are still on hand at July 31.

Prepare correct income
statement.

(SO 2, 5, 6, 7)

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The Broadening Your Perspective

section helps to pull together

concepts from the chapter and apply

them to real-world business situations.

The Financial Reporting Problem

focuses on reading and understanding

the financial statements of PepsiCo,

which are available in Appendix A.

BROADENING
BROADENING
BROADENINGYOURPERSPECTIVE
PERSPECTIVE
PERSPECTIVE

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Financial Reporting and Analysis

Financial Reporting Problem: PepsiCo, Inc.

BYP3-1 The financial statements of PepsiCo, Inc. are presented in Appendix A at the end of this textbook.

Instructions
(a) Using the consolidated financial statements and related information, identify items that may result in

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Comparative Analysis Problem: PepsiCo, Inc.
vs. The Coca-Cola Company

BYP3-2
PepsiCo’s financial statements are presented in Appendix A. Financial statements for

The Coca-Cola Company are presented in Appendix B.

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A Comparative Analysis Problem compares
and contrasts the financial reporting of
PepsiCo and The Coca-Cola Company.

E20-12
Alma Ortiz and Associates, a CPA firm, uses job order costing to capture the costs of

its audit jobs. There were no audit jobs in process at the beginning of November. Listed below
are data concerning the three audit jobs conducted during November.

Perez
Rivera
Sota

Direct materials
$600
$400
$200

Auditor labor costs
$5,400
$6,600
$3,375

Auditor hours
72
88
45

Determine cost of jobs and
ending balance in work in
process and overhead accounts.
(SO 3, 4, 6)

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Comprehensive Problem: Chapters 3 to 7

CP7
Packard Company has the following opening account balances in its general and subsidiary

ledgers on January 1 and uses the periodic inventory system.All accounts have normal debit and
credit balances.

General Ledger

Account
January 1

Number
Account Title
Opening Balance

101
Cash
$33,750

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Ethics Cases ask you to reflect

on typical ethical dilemmas, analyze the

stakeholders and the issues involved, and

decide on an appropriate

course of action.

Decision Making Across the
Organization cases help you

build decision-making skills by analyzing

accounting information in a less
structured situation. These cases

require you to work in teams.

A Look at IFRS provides an overview
of the International Financial Reporting
Standards (IFRS) that relate to
the chapter topics, highlights the
differences between GAAP and IFRS,
discusses IFRS/GAAP convergence
efforts, and tests your understanding
through IFRS Self-Test Questions and
IFRS Concepts and Application.

Decision Making Across the Organization

BYP20-1
Burgio Parts Company uses a job order cost system. For a number of months, there has been

an ongoing rift between the sales department and the production department concerning a special-order
product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at
cost plus a markup of 40% of cost.

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Ethics Case

BYP3-6
Bluestem Company is a pesticide manufacturer. Its sales declined greatly this year due to the

passage of legislation outlawing the sale of several of Bluestem’s chemical pesticides. In the coming year,
Bluestem will have environmentally safe and competitive chemicals to replace these discontinued prod-
ucts. Sales in the next year are expected to greatly exceed any prior year’s.The decline in sales and profi ts
appears to be a one-year aberration. But even so, the company president fears a large dip in the current
year’s profits. He believes that such a dip could cause a significant drop in the market price of Bluestem’s
stock and make the company a takeover target.

T
id hi
ibili
h
id
ll i
C
hi B ll
ll
di
hi
i d’

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FASB Codification Activity offers you the

opportunity to use this online system,

which contains all the authoritative literature

related to a particular topic.

FASB Codifi cation Activity

BYP3-8
If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/asclogin.cfm

to log in and prepare responses to the following.

Instructions
Access the glossary (“Master Glossary”) to answer the following.
(a) What is the definition of revenue?
(b) What is the definition of compensation?

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Real World Focus problems require you to

apply techniques and concepts learned in
the chapter to specific situations faced by

actual companies.

Real-World Focus

BYP19-3
Anchor Glass Container Corporation, the third largest manufacturer of glass containers in the

United States, supplies beverage and food producers and consumer products manufacturers nationwide.
Parent company Consumers Packaging Inc. (Toronto Stock Exchange: CGC) is a leading international
designer and manufacturer of glass containers.

The following management discussion appeared in a recent annual report of Anchor Glass.

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Communication Activity problems
help you to apply and practice business
communication skills.

Communication Activity

BYP3-5
In reviewing the accounts of Keri Ann Co. at the end of the year, you discover that adjusting

entries have not been made.

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All About You activities are designed to
get you thinking and talking about how
accounting impacts your personal life.

“All About You” Activity

BYP3-7
Companies must report or disclose in their financial statements information about all liabilities,

including potential liabilities related to environmental clean-up. There are many situations in which you
will be asked to provide personal financial information about your assets, liabilities, revenue, and expenses.
Sometimes you will face difficult decisions regarding what to disclose and how to disclose it.

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Managerial Analysis assignments build
analytical and decision-making skills in
situations required by managers.

Managerial Analysis

BYP19-2
B.J. King is a fairly large manufacturing company located in the southern United States. The

company manufactures tennis rackets, tennis balls, tennis clothing, and tennis shoes, all bearing the com-
pany’s distinctive logo, a large green question mark on a white-flocked tennis ball. The company’s sales
have been increasing over the past 10 years.

The tennis racket division has recently implemented several advanced manufacturing techniques.

Robot arms hold the tennis rackets in place while glue dries, and machine vision systems check for defects.
The engineering and design team uses computerized drafting and testing of new products. The following
managers work in the tennis racket division.

(
)

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It is often difficult for companies to determine in what time period they should report particular
revenues and expenses. Both the IASB and FASB are working on a joint project to develop a
common conceptual framework, as well as a revenue recognition project, that will enable com-
panies to better use the same principles to record transactions consistently over time.

IFRS A Look at IFRS

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Student Owner’s Manual

xi

On the Web exercises guide you to
websites where you can find and analyze
information related to the chapter topic.

On the Web

BYP3-3 No financial decision maker should ever rely solely on the financial information reported in the
annual report to make decisions. It is important to keep abreast of financial news. This activity demon-
strates how to search for financial news on the Web.

Address: http://biz.yahoo.com/i, or go to www.wiley.com/college/weygandt

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Acknowledgments

Prior Editions

Thanks to the following reviewers and focus group
participants of prior editions of Accounting Principles:

John Ahmad, Northern Virginia Community College—Annandale;
Sylvia Allen, Los Angeles Valley College; Matt Anderson, Michigan
State University; Alan Applebaum, Broward Community College;
Juanita Ardovany, Los Angeles Valley College; Yvonne Baker,
Cincinnati State Tech Community College; Peter Battelle, University
of Vermont; Colin Battle, Broward Community College; Jim
Benedum; Beverly Beatty, Anne Arundel Community College;
Milwaukee Area Technical College; Jaswinder Bhangal, Chabot
College; Bernard Bieg, Bucks County College; Michael Blackett,
National American University; Barry Bomboy, J. Sargeant Reynolds
Community College; Kent D. Bowen, Butler County Community
College; David Boyd, Arkansas State University; Greg Brookins,
Santa Monica College; Kurt H. Buerger, Angelo State University;
Leroy Bugger, Edison Community College; Leon Button, Scottsdale
Community College.

Ann Cardozo, Broward Community College; Steve Carlson,
University of North Dakota; Fatma Cebenoyan, Hunter College;
Kimberly Charland, Kansas State University; Trudy Chiaravelli,
Lansing Community College; Shifei Chung, Rowan University; Siu
Chung, Los Angeles Valley College; Lisa Cole, Johnson County
Community College; Kenneth Couvillion, San Joaquin Delta
College; Alan B. Czyzewski, Indiana State University; Thomas
Davies, University of South Dakota; Peggy DeJong, Kirkwood
Community College; John Delaney, Augustana College; Tony
Dellarte, Luzerne Community College; Kevin Dooley, Kapi’olani
Community College; Pam Donahue, Northern Essex Community
College; Edmond Douville, Indiana University Northwest; Pamela
Druger, Augustana College; Russell Dunn, Broward Community
College; John Eagan, Erie Community College; Richard Ellison,
Middlesex Community College; Dora Estes, Volunteer State
Community College; Mary Falkey, Prince Georges Community
College.

Raymond Gardner, Ocean County College; Lori Grady, Bucks
County Community College; Richard Ghio, San Joaquin Delta
College; Joyce Griffin, Kansas City Community College; Amy Haas,
Kingsborough Community College, CUNY; Lester Hall, Danville
Community College; Becky Hancock, El Paso Community College;
Jeannie Harrington, Middle Tennessee State University; Bonnie
Harrison, College of Southern Maryland; William Harvey, Henry
Ford Community College; Michelle Heard, Metropolitan
Community College; Ruth Henderson, Union Community College;
Ed Hess, Butler County Community College; Kathy Hill, Leeward
Community College; Patty Holmes, Des Moines Area Community
College; Zach Holmes, Oakland Community College; Paul Holt,
Texas A&M—Kingsville; Audrey Hunter, Broward Community
College; Verne Ingram, Red Rocks Community College; Joanne
Johnson, Caldwell Community College; Naomi Karolinski, Monroe
Community College; Anil Khatri, Bowie State University; Shirley
Kleiner, Johnson County Community College; Jo Koehn, Central
Missouri State University; Ken Koerber, Bucks County Community
College; Adriana Kulakowski, Mynderse Academy.

Sandra Lang, McKendree College; Cathy Xanthaky Larsen,
Middlesex Community College; David Laurel, South Texas
Community College; Robert Laycock, Montgomery College;
Natasha Librizzi, Madison Area Technical College; William P. Lovell,
Cayuga Community College; Melanie Mackey, Ocean County
College; Jerry Martens, Community College of Aurora; Maureen
McBeth, College of DuPage; Francis McCloskey, Community
College of Philadelphia; Chris McNamara, Finger Lakes Community
College; Lori Major, Luzerne County Community College; Edwin
Mah, University of Maryland, University College; Thomas Marsh,
Northern Virginia Community College—Annandale; Jim Martin,
University of Montevallo; Suneel Maheshwari, Marshall University;
Shea Mears, Des Moines Area Community College; Pam Meyer,
University of Louisiana—Lafayette; Cathy Montesarchio, Broward
Community College.

Robin Nelson, Community College of Southern Nevada; Joseph M.
Nicassio, Westmoreland County Community College; Michael
O’Neill, Seattle Central Community College; Mike Palma, Gwinnett
Tech; George Palz, Erie Community College; Michael Papke,
Kellogg Community College; Ruth Parks, Kellogg Community
College; Al Partington, Los Angeles Pierce College; Jennifer Patty,
Des Moines Area Community College; Yvonne Phang, Borough of
Manhattan Community College; Jan Pitera, Broome Community
College; Mike Prockton, Finger Lakes Community College; Laura M.
Prosser, Black Hills State University; Bill Rencher, Seminole
Community College; Jenny Resnick, Santa Monica College; Renee
Rigoni, Monroe Community College; Kathie Rogers, SUNY Suffolk;
Al Ruggiero, SUNY Suffolk; Jill Russell, Camden County College.

Roger Sands, Milwaukee Area Technical College; Marcia Sandvold,
Des Moines Area Community College; Richard Sarkisian, Camden
Community College; Kent Schneider, East Tennessee State
University; Karen Searle, Paul J. Shinal, Cayuga Community
College; Beth Secrest, Walsh University; Kevin Sinclair, Lehigh
University; Alice Sineath, Forsyth Tech Community College; Leon
Singleton, Santa Monica College; Michael S. Skaff, College of the
Sequoias; Jeff Slater, North Shore Community College; Lois Slutsky,
Broward Community College; Dan Small, J. Sargeant Reynolds
Community College; Lee Smart, Southwest Tennessee Community
College; James Smith, Ivy Tech State College; Carol Springer,
Georgia State University; Jeff Spoelman, Grand Rapids Community
College; Norman Sunderman, Angelo State University.

Donald Terpstra, Jefferson Community College; Lynda Thompson,
Massasoit Community College; Shafi Ullah, Broward Community
College; Sue Van Boven, Paradise Valley Community College;
Christian Widmer, Tidewater Community College; Wanda Wong,
Chabot College; Pat Walczak, Lansing Community College; Kenton
Walker, University of Wyoming; Patricia Wall, Middle Tennessee
State University; Carol N. Welsh, Rowan University; Idalene
Williams, Metropolitan Community College; Gloria Worthy,
Southwest Tennessee Community College.

Thanks also to “perpetual reviewers” Robert Benjamin, Taylor
University; Charles Malone, Tammy Wend, and Carol Wysocki, all
of Columbia Basin College; and William Gregg of Montgomery
College. We appreciate their continuing interest in the textbook
and their regular contributions of ideas to improve it.

Accounting Principles has benefited greatly from the input of focus group participants, manuscript reviewers,
those who have sent comments by letter or e-mail, ancillary authors, and proofers. We greatly appreciate
the constructive suggestions and innovative ideas of reviewers and the creativity and accuracy of the
ancillary authors and checkers.

FMTOC_SE.qxd 12/3/10 12:10 PM Page xii

Tenth Edition

Thanks to the following reviewers, focus group participants,
and others who provided suggestions for the Tenth Edition:

Sylvia Allen
Los Angeles Valley College

Juanita Ardavany
Los Angeles Valley College

Shele Bannon
Queensborough Community College

Amy Bentley
Tallahassee Community College

Timothy Bergsma
Davenport University

Teri Bernstein
Santa Monica College

Patrick Borja
Citrus College

Stanley Carroll
New York City College of Technology

Siu Chung
Los Angeles Valley College

Carol Collinsworth
University of Texas—Brownsville

Kelly Cranford
Hinds Community College—Raymond

Liz Diers
Black Hills State University

Samuel A. Duah
Bowie State University

Carle Essig
Montgomery County Community College

Annette Fisher
Glendale Community College

Kelly Ford
Queensborough Community College

Lori Grady
Bucks County Community College

Mary Halford
Prince Georges Community College

Thomas Kam
Hawaii Pacific University

Naomi Karolinski
Monroe Community College

Lynn Krausse
Bakersfield College

David Krug
Johnson County Community College

Cathy X. Larson
Middlesex Community College

David Laurel
South Texas College

Christina Manzo
Queensborough Community College

Beverly Mason
Front Range Community College

Robert Maxwell
College of the Canyons

Jill Mitchell
Northern Virginia Community College—

Annandale

Ronald O’Brien
Fayetteville Technical Community College

Michael Motes
University of Maryland University College

Gregory L. Prescott
University of South Alabama

Jan Pitera
Broome Community College

Debra A. Sills Porter
Tidewater Community College

William Prosser
Cuyuga County Community College

Ada Rodriguez
Lehman College, The City University of

New York

Eric Rothenburg
Kingsborough Community College, The City

University of New York

Al Ruggiero
Suffolk County Community College

Marcia Sandvold
Des Moines Area Community College

Mary Jane Sauceda
University of Texas—Brownsville

Paul J. Shinal
Cayauga Community College

Bradley Smith
Des Moines Area Community College

Scott Stroher
Glendale Community College

Geoffrey Tickell
Indiana University of Pennsylvania

Pat Walczak
Lansing Community College

Wanda Wong
Chabot College

Jack Wiehler
San Joaquin Delta College

Ancillary Authors,
Contributors, and Proofers

We sincerely thank the following individuals for their hard work
in preparing the content that accompanies this textbook:

LuAnn Bean
Florida Institute of Technology

John C. Borke
University of Wisconsin—Platteville

Richard Campbell
Rio Grande College

Siu Chung
Los Angeles Valley College

Mel Coe
DeVry Institute of Technology, Atlanta

Chris Cole
Cole Creative Group

Joan Cook
Milwaukee Area T...