Fundamentals of Financial Accounting, Seventh Edition
By Fred Phillips, Shana Clor-Proell, Robert Libby and Patricia A. Libby
Contents:
CHAPTER 1
Business Decisions and Financial Accounting 2
NOODLECAKE STUDIOS, INC. 3
Understand the Business 4
Organizational Forms 4
Accounting for Business Decisions 5
Study the Accounting Methods 8
The Basic Accounting Equation 8
Financial Statements 10
Evaluate the Results 17
Using Financial Statements 17
Useful Financial Information 17
Supplement: 1A Careers That Depend on Accounting
Knowledge 20
Supplement: 1B Public Companies 21
Review the Chapter 23
Practice Material 27
CHAPTER 2
The Balance Sheet 46
NOODLECAKE STUDIOS, INC. 47
Understand the Business 48
Building a Balance Sheet from Business Activities 48
Transactions and Other Activities 50
The Accounting Cycle 51
Step 1: Analyze Transactions 51
Steps 2 and 3: Record and Summarize 57
The Debit/Credit Framework 58
Preparing a Trial Balance and Balance Sheet 66
Evaluate the Results 67
Assessing the Ability to Pay 67
Balance Sheet Concepts and Values 68
Supplement: 2A Accounting Careers 70
Review the Chapter 71
Practice Material 75
CHAPTER 3
The Income Statement 96
NOODLECAKE STUDIOS, INC. 97
Understand the Business 98
Operating Activities 98
Income Statement Accounts 99
Study the Accounting Methods 101
Cash Basis Accounting 101
Accrual Basis Accounting 102
The Expanded Accounting Equation 107
Unadjusted Trial Balance 114
Review of Revenues and Expenses 116
Evaluate the Results 117
Net Profit Margin 117
Income Statement Limitations 118
Review the Chapter 119
Practice Material 125
CHAPTER 4
Adjustments, Financial Statements, and
Financial Results 150
NOODLECAKE STUDIOS, INC. 151
Understand the Business 152
Why Adjustments Are Needed 152
Study the Accounting Methods 154
Making Required Adjustments 154
Preparing an Adjusted Trial Balance and the Financial
Statements 166
Closing Temporary Accounts 170
Evaluate the Results 173
Adjusted Financial Results 173
Review the Chapter 174
Practice Material 181
CHAPTER 5
Fraud, Internal Control, and Cash 212
KOSS CORPORATION 213
Fraud and Internal Control 214
Fraud 214
The Sarbanes-Oxley Act (SOX) 216
Internal Control 217
Internal Control for Cash 221
Controls for Cash Receipts 221
Controls for Cash Payments 224
Controls from Bank Procedures 227
Cash Reporting 227
Bank Statement 227
Bank Reconciliation 228
Reporting Cash 232
Restricted Cash 233
Supplement: 5A Petty Cash Systems 233
Review the Chapter 235
Practice Material 237
CHAPTER 6
Merchandising Operations and the Multistep Income
Statement 258
WALMART 259
Understand the Business 260
Operating Cycles 260
Inventory Systems 261
Study the Accounting Methods 264
Recording Inventory Purchases 264
Recording Inventory Sales 268
Evaluate the Results 274
Multistep Income Statement 274
Gross Profit Analysis 275
Supplement: 6A Recording Early Payment (“Cash”)
Discounts on Purchases and Sales 276
Supplement: 6B Recording Inventory Transactions in a
Periodic System 277
Review the Chapter 279
Practice Material 284
CHAPTER 7
Inventory and Cost of Goods Sold 306
AMERICAN EAGLE OUTFITTERS 307
Understand the Business 308
Types of Inventory 308
Inventory Management Decisions 308
Study the Accounting Methods 309
Balance Sheet and Income Statement Reporting 309
Inventory Costing Methods 310
Lower of Cost or Market/Net Realizable Value 315
Evaluate Inventory Management 317
Inventory Turnover Analysis 317
Supplement: 7A FIFO, LIFO, and Weighted Average in
a Perpetual Inventory System 320
Supplement: 7B The Effects of Errors in Ending
Inventory 322
Review the Chapter 323
Practice Material 327
CHAPTER 8
Receivables, Bad Debt Expense, and Interest
Revenue 350
VF CORPORATION (VFC) 351
Understand the Business 352
Pros and Cons of Extending Credit 352
Accounting for Accounts Receivable 353
Accounts Receivable and Bad Debts 353
Methods for Estimating Bad Debts 357
Accounting for Notes Receivable 360
Notes Receivable and Interest Revenue 360
Recording Notes Receivable and Interest Revenue 361
Evaluate Receivables Management 364
Receivables Turnover Analysis 364
Supplement: 8A Direct Write-Off Method 367
Review the Chapter 368
Practice Material 372
CHAPTER 9
Long-Lived Tangible and Intangible Assets 394
CEDAR FAIR 395
Understand the Business 396
Definition and Classification 396
Study the Accounting Methods 397
Tangible Assets 397
Intangible Assets 411
Evaluate the Results 414
Turnover Analysis 414
Impact of Depreciation Differences 415
Supplement: 9A Natural Resources 417
Supplement: 9B Changes in Depreciation 418
Review the Chapter 419
Practice Material 424
CHAPTER 10
Liabilities 442
GENERAL MILLS 443
Understand the Business 444
The Role of Liabilities 444
Study the Accounting Methods 445
Measuring Liabilities 445
Current Liabilities 445
Long-Term Liabilities 453
Contingent Liabilities 461
Evaluate the Results 462
Debt-to-Assets Ratio 462
Times Interest Earned Ratio 463
Supplement: 10A Straight-Line Method of
Amortization 463
Supplement: 10B Effective-Interest Method of
Amortization 465
Supplement: 10C Simplified Effective-Interest
Amortization 469
Supplement: 10D Installment Notes Payable 473
Review the Chapter 477
Practice Material 484
CHAPTER 11
Stockholders’ Equity 506
NATIONAL BEVERAGE CORP. 507
Understand the Business 508
Corporate Ownership 508
Equity versus Debt Financing 509
Study the Accounting Methods 510
Common Stock Transactions 510
Stock Dividends and Stock Splits 517
Preferred Stock 520
Retained Earnings 522
Statement of Stockholders’ Equity 522
Evaluate the Results 523
Earnings per Share (EPS) 523
Return on Equity (ROE) 524
Price/Earnings (P/E) Ratio 525
Supplement: 11A Owners’ Equity for Other
Forms of Business 525
Supplement: 11B Recording Stock Dividends 529
Review the Chapter 530
Practice Material 534
CHAPTER 12
Statement of Cash Flows 554
DAVE & BUSTER’S ENTERTAINMENT, INC. 555
Understand the Business 556
Business Activities and Cash Flows 556
Classifying Cash Flows 557
Study the Accounting Methods 560
Relationship to Other Financial Statements 560
Preparing the Statement of Cash Flows 561
Evaluate the Results 570
Evaluating Cash Flows 571
Operating Cash Flows Revisited (Direct Method) 573
Supplement: 12A Reporting Disposals of Property, Plant, and Equipment (Indirect Method) 577
Supplement: 12B T-Account Approach (Indirect Method) 578
Review the Chapter 580
Practice Material 584
CHAPTER 13
Measuring and Evaluating Financial Performance 612
LOWE’S 613
Understand the Business 614
Horizontal, Vertical, and Ratio Analyses 614
Study the Accounting Methods 615
Horizontal (Trend) Computations 615
Vertical (Common Size) Computations 617
Ratio Computations 618
Evaluate the Results 620
Interpreting Horizontal and Vertical Analyses 620
Interpreting Ratio Analyses 621
Underlying Accounting Decisions and Concepts 625
Supplement: 13A Discontinued Operations and
Comprehensive Income 628
Supplement: 13B Reviewing and Contrasting IFRS and
GAAP 629
Review the Chapter 630
Practice Material 633
APPENDIX A
Excerpts from the Fiscal 2019 10-K Annual Report of
The Home Depot, Inc. A1
Management’s Report on Internal Control Over
Financial Reporting A2
Report of Independent Registered Public
Accounting Firm A3
Report of Independent Registered Public
Accounting Firm A4
The Home Depot, Inc. Notes to Consolidated
Financial Statements A11
APPENDIX B
Excerpts from the Fiscal 2019 10-K Annual Report of
Lowe’s Companies, Inc. B1
Management’s Report on Internal Control Over Financial
Reporting B2
Report of Independent Registered Public Accounting
Firm B2
Report of Independent Registered Public Accounting
Firm B4
Notes to Consolidated Financial Statements B9
APPENDIX C
Present and Future Value Concepts C1
Future Value of a Single Amount C1
Using Tables C2
Using Excel C2
Using a Financial Calculator App C3
Present Value of a Single Amount C4
Using Tables C5
Using Excel C5
Using a Financial Calculator App C5
Future Value of an Annuity C6
Using Tables C7
Using Excel C7
Using a Financial Calculator App C7
The Power of Compounding and Regular Saving C8
Present Value of an Annuity C8
Using Tables C9
Using Excel C9
Using a Financial Calculator App C10
Interest Rates and Interest Periods C10
Accounting Applications of Present Values C10
Case A—Present Value of a Single Amount C10
Case B—Present Value of an Annuity C12
Case C—Present Value of a Single Amount and an Annuity
(Bond Pricing) C14
Practice Material C21
APPENDIX D (Available in Connect)
Investments in Other Corporations D1
Solutions to Multiple-Choice Questions Q1
Chart of Accounts CA1
Glossary G1
Company Index IND1
Subject Index IND5