Financial Accounting: Information for Decisions - McGraw

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Financial Accounting
Information for Decisions
Over the past ten years, the financial accounting book market has
become somewhat segmented. Departmental decisions between
user-oriented books and traditional procedural-oriented books
have been greatly debated among faculty.While teaching financial
accounting at the University of Wisconsin, John Wild encountered
these same discussions, but found several core aspects of this
course that stood out for advocates of both perspectives.
Everyone agreed, firstly, that students could not relate to the
traditional examples and dry companies integrated throughout
financial accounting books.With John Wild’s passion for bringing his
classroom to life by using examples of exciting new businesses, it
was an obvious choice to use such pedagogy throughout the book.
Second, it was clear that students needed exposure to “real world”
financial statements, giving them experience in analyzing and interpreting business performance. John Wild therefore integrated real
world financial statements throughout the book in a non-intimidating manner. He also formed a relationship with Krispy Kreme and
bundled its 2003 annual report with every book.
Finally, the ability of students to analyze and interpret financial
accounting information seemed crucial to both users and preparers
of accounting information. As a key model, John Wild developed his
Decision Center, a pedagogical tool integrated throughout the book
allowing students to identify where and how business decisions are
made and that draw upon accounting information.
“There is a good balance between accounting from the user perspective and
the preparer perspective. [Wild’s Financial Accounting] is written by an
author who is clearly a classroom teacher.”
— Phillip Stickney, Conchise College
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John J. Wild is a professor of accounting and the Robert and Monica Beyer
Distinguished Professor at the University of Wisconsin at Madison. He previously held appointments at Michigan State University and the University of
Manchester in England. He received his BBA, MS, and PhD from the University
of Wisconsin.
Professor Wild teaches accounting courses at both the undergraduate and
graduate levels. He has received the Mabel W. Chipman Excellence-in-Teaching
Award, the departmental Excellence-in-Teaching Award, and the Teaching
Excellence Award from the 2003 graduation class at the University of
Wisconsin. He also received the Beta Alpha Psi and Roland F. Salmonson
Excellence-in Teaching Award from Michigan State University. Professor Wild is
a past KPMG Peat Marwick National Fellow and is a recipient of fellowships
from the American Accounting Association and the Ernst and Young
Foundation.
Professor Wild is an active member of the American Accounting Association
and its sections. He has served on several committees of these organizations,
including the Outstanding Accounting Educator Award,Wildman Award,
National Program Advisory, Publications, and Research Committees. Professor
Wild is author of Fundamental Accounting Principles and Financial Statement
Analysis, both published by McGraw-Hill/Irwin. His research appears in The
Accounting Review, Journal of Accounting Research, Journal of Accounting and
Economics, Contemporary Accounting Research, Journal of Accounting,
Auditing and Finance, Journal of Accounting and Public Policy, and other journals. He is past associate editor of Contemporary Accounting Research and
has served on several editorial boards including The Accounting Review.
Professor Wild, his wife, and four children enjoy travel, music, sports, and
community activities.
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Achieve New Heights
Financial Accounting ,
Information for Decisions, 3e
The financial accounting course is crucial for accounting
majors and non-majors alike. It is a course that quickly
immerses the student in unfamiliar and challenging new
concepts.
Much of your students’ future success in both accounting
and business is determined by their experiences in the
financial accounting course.Will your students struggle with
this new material? Or will they understand that accounting
is a vital discipline relevant to any career, and use that
knowledge to achieve new heights of success in business
and in their lives?
Financial Accounting: Information for Decisions has always been
dedicated to presenting accounting concepts as key tools
that anyone can learn to successfully use.The 3rd edition
expands on this traditional strength by especially focusing
on three areas: student engagement, technology, and
decision-making. Financial Accounting: Information for
Decisions, 3e portrays accounting as it truly is – a language of
business communication that is crucial to student success.
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New heights in student engagement
Instructors repeatedly raise a common concern: the biggest hurdle they face is getting students
interested and motivated in the materials. Financial Accounting provides solutions. It is more
engaging and student-friendly than any competing book, from the book’s eye-catching design to
its comprehensive and stimulating end-of-chapter material. Each new book includes the actual
shareholders’ report from Krispy Kreme Doughnuts which gets real
financial data in students’ hands. Moreover, engaging chapter-opening
vignettes focus on small businesses and entrepreneurs to show
how accounting knowledge is
a springboard to success.
“[A feature I like best about Wild] is the tie-in
New heights
in technology
to real world situations that are done in every
chapter throughout the book.”
— Jan Mardon, Green River Community College
Compare our technology assets against those of any other book, and we’re confident you’ll agree:
Financial Accounting’s technology is, hands-down, the best in the market.
• Carol Yachts General Ledger and
• Mcgraw-Hill’s Homework Manager
Peachtree Complete Accounting 2004 • Topic Tackler
• ALEKS for Financial Accounting and
• Online Learning Center
ALEKS for the Accounting Cycle
• Interactive Quizzes
To learn more about these and other technology enhancements, see page xii.
New heights in decision-making
Financial Accounting’s Decision Center is a pedagogical tool exclusive to this book. It provides
students with a framework enabling them to better understand why and how businesses make
strategic decisions with accounting information. Decision Icons also make it easy for students to
locate relevant material within the chapter, whether a boxed item or end-of-chapter material.
By addressing students in language that speaks to them, by providing your class with
market-leading technology support, and by ensuring the textbook package is strong in
the areas you rely on most, Financial Accounting: Information for Decisions helps you
achieve new heights of success in the classroom—and beyond.
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What are the pedagogical tools for
success in learning accounting?
Decision Center
Whether we prepare, analyze,
or apply accounting information,
one skill remains essential: decisionmaking. To help develop good
decision-making habits and to illustrate the relevance of accounting,
Financial Accounting: Information for
Decisions uses a unique pedagogical
framework called the Decision
Center. This framework is comprised
of a variety of approaches and
subject areas, giving students
insight into every aspect of business
decision-making. Answers to Decision
Maker and Decision Ethics boxes are
at the end of each chapter.
Decision Feature
Decision Maker
Multiple role-playing scenarios in
each chapter show the relevance
of accounting to internal and
external decision makers.
An opening vignette featuring a
real world entrepreneur launches
each chapter to motivate the study
of accounting. This entrepreneurial
flavor is unique.
DECISION
CENTER
d
Decision Ethics
Role-playing scenarios involving
accounting and business decisions
with ethical consequences.
Decision Analysis
The analysis section in each chapter
focuses on decision-making skills
using one or more tools of analysis
that are applied to an actual
company and its competitors.
Decision Insight
Relevant, interesting, and topical
items from practice that are useful
in preparing, analyzing, and using
accounting information.
“The Decision sidebars are one of the particular strengths of the text. They help the student
stop and think about what he or she has read or can be used by the professor to stimulate
discussion when introducing a topic. They are excellent tools!”
— M. Conway, Kingsborough Community College
CAP Model
The Conceptual/Analytical/Procedural
(CAP) Model allows courses to be
specially designed to meet your
teaching needs or those of a diverse
faculty. This model identifies learning
objectives, textual materials, assignments, and test items by C, A, or P.
This allows different instructors to
teach from the same materials,
yet easily customize their courses
toward a conceptual, analytical, or
procedural approach (or a combination thereof) based on personal
preferences.
Learning Objectives
CAP
Conceptual
Analytical
Procedural
C1
source documents and
C2 Describe
their purpose. (p. 49)
an account and its use in
C3 Describe
recording transactions. (p. 49)
a ledger and a chart of
C4 Describe
accounts. (p. 52)
debits and credits and explain
C5 Define
their role in double-entry
A1
transactions in a journal and
P1 Record
post entries to a ledger. (p. 55)
and explain the use of a trial
P2 Prepare
balance. (p. 62)
financial statements from
P3 Prepare
business transactions. (p. 64)
Explain the steps in processing
transactions. (p. 48)
accounting. (p. 53)
Analyze the impact of transactions
on accounts and financial
statements. (p. 57)
the debt ratio and
A2 Compute
describe its use in analyzing company
performance. (p. 66)
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Chapter Preview
Flow Chart
New to the 3rd edition, this feature
provides a handy textual/visual guide
at the start of every chapter.
Students can now begin their
reading with a clear understanding
of what they will learn and when,
allowing them to stay more focused
and organized along the way.
Chapter Preview
Analyzing and Recording Transactions
Analyzing and
Recording Process
• Source documents
• The account and its
analysis
• Types of accounts
Quick Check
These short question/answer
features reinforce the material
immediately preceding them. They
allow the reader to pause and
reflect on the topics described, then
receive immediate feedback before
going on to new topics. Answers are
provided at the end of each chapter.
FastForward
FastForward is a case that takes
students through the Accounting
Cycle, chapters 1-4. The FastForward
icon is placed in the margin at key
points when this case is discussed.
how they are reflected in financial statements, and how they
impact analysis of financial statements. Debits and credits are
introduced and identified as a tool in helping understand and
process transactions.
Financial statements report on the financial performance and
condition of an organization. Knowledge of their preparation,
organization, and analysis is important. An important goal of
this chapter is to illustrate how transactions are recorded,
Analyzing and
Processing Transactions
•
•
•
•
Trial Balance
• Trial balance
preparation
• Search for and
correction of
errors
• Trial balance use
General ledger
Double-entry accounting
Journalizing and posting
Illustration
Quick Check
8. What types of transactions increase equity? What types decrease equity?
9. Why are accounting systems called double entry?
10. For each transaction, double-entry accounting requires which of the following: (a) Debits
to asset accounts must create credits to liability or equity accounts, (b) a debit to a
liability account must create a credit to an asset account, or (c) total debits must equal
total credits.
11. An owner invests $15,000 cash along with equipment having a market value of $23,000 in a
company in exchange for common stock. Prepare the necessary journal entry.
12. Explain what a compound journal entry is.
13. Why are posting reference numbers entered in the journal when entries are posted to
ledger accounts?
Answers—p. 72
1. Investment by Owner
Cash
(1)
101
30,000
Transaction: Chuck Taylor invests $30,000 cash in FastForward
in exchange for common stock.
Analysis:
Assets
⫽ Liabilities ⫹ Equity
Cash
Common Stock
(1)
307
30,000
⫹30,000
Double entry: (1)
⫽
Cash
Common Stock
0
101
307
⫹
FAST
Forward
Common
Stock
30,000
30,000
30,000
3
Statements affected: BLS and SCF
Marginal Student
Annotations
y cred t sales and are decreased by cus
cord for each customer, but for now, we
s and decreases in receivables in a single
These annotations provide
students with additional hints, tips,
and examples to help them more
fully understand the concepts and
retain what they have learned. The
annotations also include notes on
global implications of accounting and
further examples.
ritten promise of another entity to pay a
o the holder of the note. A company holdas an asset that is recorded in a Note (or
) are assets that represent prepayments of
expenses are later incurred, the amounts
accounts. Common examples of prepaid
Point: A college parking fee is a
prepaid account from the student’s
standpoint. At the beginning of the
term, it represents an asset that entitles
a student to park on or near campus.
The benefits of the parking fee expire
as the term progresses. At term-end,
prepaid parking (asset) equals zero as it
has been entirely recorded as parking
expense.
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How are chapter concepts
reinforced and mastered?
Once a student has finished reading the chapter, how well he or she retains the material can depend
greatly on the questions, exercises, and problems that reinforce it.This book has consistently led the
way in comprehensive, accurate end-of-chapter assignments. Independent survey research shows that
instructors are more satisfied with this book’s end-of-chapter materials than other textbooks.
•
Demonstration
Problems present both a
problem and a complete solution,
allowing students to review the entire
problem-solving process and achieve
success in the introductory course.
Demonstration Problem
Analyze the future transactions to identify the accounts affected and apply debit and credit rules.
Solution to Demonstration Problem
1. General journal entries:
(Note: This problem extends the demonstration problem of Chapter 1.) After several months of planc. Receive
for services
be provided
in the
ning, Sylvia Workman started a haircutting business
called cash
Expressions.
Thetofollowing
events
oc-future.
d. Purchase supplies on account.
curred during its first month:
a. On August 1, Workman invested $3,000 cash and $15,000 of equipment in Expressions in exb.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Aug. 1
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
change for its common stock.
Planning the Solution
Store Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On August 2, Expressions paid $600 cash forAnalyze
furnitureeach
for transaction
the shop. and use the debit and credit rules to prepare a journal entry forCommon
each. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
• rent
On August 3, Expressions paid $500 cash to Post
space
in a strip
mall for
August.
Owner’s investment.
each debit
and each
credit
from journal entries to their ledger accounts and cross-reference
•
On August 4, it purchased $1,200 of equipment each
on credit
for the
(using areference
long-term(PR)
note payable).
amount
in shop
the posting
columns of the journal and ledger. 2 Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On August 5, Expressions opened for business.
Cash received
from services
provided
in accounts
the first with their balances on a trial balance.
each account
balance and
list the
• Calculate
week and a half of business (ended August 15)
is $825.
Purchased furniture for cash.
that total debits in the trial balance equal total credits.
• Verify
3
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On August 15, it provided $100 of haircuttingToservices
prepareon
theaccount.
income statement, identify revenues and expenses. List those items on the state•
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On August 17, it received a $100 check for services
previously
onand
account.
ment, compute
the rendered
difference,
label the result as net income or net loss.
Paid rent for August.
On August 17, it paid $125 to an assistant •forUse
working
duringinthethegrand
opening.
information
ledger
to prepare the statement of retained earnings.
4
Store Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from services provided during
the second
half of
is $930.
information
in August
the ledger
to prepare the balance sheet.
• Use
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On August 31, it paid a $400 installment toward
principal on
noteratio
payable
entered into
August 4.by total assets.
thethe
debt
by dividing
totalonliabilities
• Calculate
Purchased additional equipment on credit.
On August 31, it paid $900 cash for dividends.
• Analyze the future transactions to identify the accounts affected and apply debit and credit rules.
101
165
3,000
15,000
307
18,000
161
101
600
640
101
500
165
240
1,200
600
500
1,200
[continued on next page]
Solution to Demonstration Problem
Key Terms
are bolded in the
text and repeated at the end of the
chapter with page numbers indicating
their location. The 3rd edition now
includes a Glossary of key terms at the
back of the book. Key Terms are also
available as online flash cards at the
book’s Website.
Quick Study
assignments are
short exercises that often focus on one
learning objective. All are also included in
Homework Manager. There are usually
8-10 Quick Study assignments per
chapter.
e
e.com/wild3
hh
provide students with a review organized by learning objectives. Chapter
Summaries are a component of the
CAP model (see page viii), which
recaps each conceptual, analytical,
and procedural objective.
Key Terms
Key Terms are available at the book’s Website for learning and testing in an
m
Chapter Summaries
Account (p. 49)
Account balance (p. 53)
Balance column account (p. 56)
Chart of accounts (p. 52)
Common stock (p. 51)
Compound journal entry (p. 59)
Credit (p. 53)
Creditors (p. 50)
Debit (p. 53)
Debt ratio (p. 67)
Dividends (p. 51)
Double-entry accounting (p. 53)
General journal (p. 54)
Journal (p. 54)
Journalizing (p. 54)
Ledger (p. 49)
Homework Manager
repeats all numerical Quick Study assignments on the book’s Website with
new numbers each time. It can be used in practice, homework, or exam mode.
Identify the items from the following list that are likely to serve as source documents:
a. Bank statement
d. Trial balance
g. Company revenue account
b. Sales ticket
e. Telephone bill
h. Balance sheet
c. Income statement
f. Invoice from supplier
i. Prepaid insurance
QUICK STUDY
QS 2-1
Identifying source documents
C2
Exercises
are one of this book’s
ongoing strengths, and the 3rd edition
again shows its competitive advantage.
There are about 10-15 per chapter and
all are included in Homework Manager.
Homework Manager
repeats all numerical Exercises on the book’s Website with new
numbers each time. It can be used in practice, homework, or exam mode.
For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, (2) enter debit (Dr.) or credit (Cr.) to identify the kind of entry that would increase the account
balance, and (3) identify the normal balance of the account.
a. Unearned Revenue
e. Land
i. Cash
b. Accounts Payable
f. Common Stock
j. Equipment
c. Postage Expense
g. Accounts Receivable
k. Fees Earned
d. Prepaid Insurance
h. Dividends
l. Wages Expense
EXERCISES
Exercise 2-1
Identifying type and normal
balances of accounts
C3 C5
Problem Sets A, B & C
Problem 3-1A
Preparing adjusting and
subsequent journal entries
C1 A1 P1
age
Cost
$3,000
Policy
A
Date of Pu
April 1, 20
PROBLEM SET B
Problem 3-1B
Preparing adjusting and
subsequent journal entries
C1 Adjusting
A1 P1 Accounts and Preparing Financial Statements
145
e
te to further reinforce and
e.com/wild3
hh
PROBLEM SET A
nd unearned revenues in balance sheet
31, 2005. The following information
at date:
$500
balance.
Duringofthe
fiscal year,
Maja Co. follows
the practice
recording
p
to the annual
Office Supplies
account.
accounts.edMaja’s
accounting
periodThe
concerns the adjusting entries to be recorded
hese facts:
a. The Office
Supplies account started the
purchased supplies for $12,400, which w
of supplies available at December 31, 20
s of
b. An analysis
of the company’s insurance
m
are proven problems that can be
assigned as homework or for in-class
projects. Problem Set C is available on
the book’s Website. All problems are
coded according to the CAP model
(see page viii), and many are included
in Homework Manager.
PROBLEM SET C
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Beyond the Numbers
exercises ask students
to use the figures and understand their meaning. Students
also learn how accounting applies to a variety of business
situations. These creative and fun exercises are all new or
updated, and are divided into 10 sections:
• Reporting in Action
• Comparative Analysis
• Ethics Challenge
• Communicating in Practice
• Taking It To The Net
• Teamwork in Action
• Hitting the Road
• Business Week Activity
• Entrepreneurial Decision
• Global Decision
BEYOND THE NUMBERS
Kreme’s financial statements in Appendix A to answer the following:
Krispy Kreme’s business segments.
vities of each of Krispy Kreme’s business segments.
REPORTING IN
ACTION
A1
nual report for fiscal years ending after February 2, 2003, from its
m) or the SEC’s EDGAR database (www.SEC.gov). Has Krispy Kreme
regarding segment information?
Serial Problems use a continuous running
case study to illustrate chapter concepts in a familiar
context. Serial Problems can be followed continuously
from the first chapter or picked up at any later point
in the book; enough information is provided to ensure
students can get right to work.
SERIAL PROBLEM
Success Systems
P2 P3
(This serial problem began in Chapter 1 and c
ter segments were not completed, the serial pro
essary, that you use the Working Papers that ac
The December 31, 2004, adjusted trial balance
October through December of 2004) follows:
No.
Account Tit
101
Cash . . . . . . . . . . . . . . . . . . . . .
106
126
128
Accounts receivable . . . . . . . . . .
Computer supplies . . . . . . . . . . .
Prepaid insurance . . . . . . . . . . . .
“I like the Beyond the Numbers because it gives an instructor options. For example, in certain chapters
you could assign the Ethics Challenge, or Taking It To The Net. This would give students exposure without
overwhelming them.”
— Dawn McKinley, William Rainey Harper College
The End of the Chapter Is Only the Beginning
Our valuable and proven assignments aren’t just confined to the book. From problems that require technological solutions to
materials found exclusively online, this book’s end-of-chapter material is fully integrated with its technology package.
• Quick Studies, Exercises, and Problems available on
Homework Manager (see page xii) are marked with an icon.
• Problems supported by the all-new General Ledger
Application Software or Peachtree are marked with an icon.
e.com/wild3
hh
e
• The Online Learning Center (OLC) includes more Taking It
To The Net exercises, Personal Interactive Quizzes, more
Excel template assignments, and Problem Set C
m
x
e cel
mhhe.com/wild3e
• Problems supported with Microsoft Excel templates
are marked with an icon.
• Material that receives additional coverage (slide shows,
videos, audio, etc.) in Topic Tackler is marked with an icon.
Put Away Your
Red Pen
We’ve always prided ourselves
on the accuracy of this book’s
assignment materials, and the
market confirms this. Independent research reports that
instructors pointed to the
accuracy of this book’s assignment materials as a key factor
in their satisfaction with the
book, much more than did
instructors using competing
books. The 3rd edition continues that tradition of accuracy.
The author extends a special thanks to accuracy checkers Marc Giullian, Montana State University – Bozeman; Suzanne King,
University of Charleston; Barbara Schnathorst, The Write Solution, Inc.; and Jo Lynne Koehn, Central Missouri State University.
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How does technology assist
students in assessment and learning?
In teaching and learning accounting, the book itself is only the beginning. Our comprehensive technology package provides ample opportunity for both assessment and reinforcement,
while offering valuable practice in learning and using the digital tools that are integral to the
modern accounting and business workplace.
McGraw-Hill’s
Homework Manager
This Web-based study and review aid
uses a sophisticated algorithm to generate
“look-a-like” versions of this book’s assignment materials. These new exercises and
problems contain different values but are
structured identically to those in the book,
allowing students to practice and refine
their skills. The algorithm can generate infinite variations of any selected assignments,
which discourages sharing of answers.
Instructors can use Homework Manager to build custom homework assignments, test, or
quizzes that can be completed either online or with pencil and paper. Assignments are graded
automatically and the results stored in a secure online gradebook. Tests and quizzes prepared
from Homework Manager overcome any inconsistencies between “test bank drawn” problems
and the language and approach in the book – now there is complete consistency!
Homework Manager gives you:
• Textbook quick studies, exercises, and problems in electronic format
• Automatically-graded assignments and analysis for instructors (no more collecting homework!)
• Immediate grading and feedback for students
• Algorithmic-generated quick studies, exercises, and problems
• Instructor course management tools
• 100% consistency between test problems and the textbook
Quick Studies, Exercises, and most Problems appearing in the book are
reproduced in Homework Manager and are marked with an icon.
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ALEKS® for the
Accounting Cycle and
ALEKS® for Financial
Accounting
Available from McGraw-Hill over the
World Wide Web, ALEKS (Assessment
and LEarning in Knowledge Spaces) provides precise assessment and individualized instruction in the fundamental skills your students need
to succeed in accounting.
ALEKS motivates your students because ALEKS can tell what a student knows, doesn’t know, and is
most ready to learn next. ALEKS does this using the ALEKS Assessment and Knowledge Space Theory as an artificial intelligence engine to exactly identify a student’s knowledge of accounting. When
students focus on precisely what they are ready to learn, they build the confidence and learning
momentum that fuel success.
To learn more about adding ALEKS to your accounting course, visit www.business.aleks.com.
GradeSummit
The online resource GradeSummit tells your students everything they need to know to study
effectively. GradeSummit provides a series of practice tests written to coincide with this book’s
coverage. Once a student has taken a particular test, GradeSummit returns a detailed results page
showing exactly where the student did well and where he or she needs to improve. They can
compare their results with those of other classmates, or even with those students using the
book nationwide.
With that information, students can plan their studying to focus exclusively on their weak areas,
without wasting effort on material they’ve already mastered. And they can come back to take a
retest on those subjects later, comparing their new score with their previous efforts.
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What technology is available for students?
Carol Yacht’s General Ledger and Peachtree Complete 2004 CD-ROM
Carol Yacht’s General Ledger Software is McGraw-Hill/Irwin’s custom-built general ledger package for this book.
Carol Yacht’s General Ledger can help your students master every aspect of the general ledger, from inputting sales
and cash receipts to calculating ratios for analysis or inventory valuations.
Carol Yacht’s General Ledger allows students to review an entire report, and
then double-click on any single transaction to review or edit it. All reports
immediately reflect the revised figures.
When it comes to learning how an
individual transaction impacts financial
statements no other approach matches
that of Carol Yacht’s General Ledger.
Also on Carol Yacht’s General Ledger CD, students receive the educational version of Peachtree Complete
2004, along with templates containing data for many of
this book’s exercises and problems. Familiarity with
Peachtree Complete is essential for many students entering the job market, and Carol
Yacht’s Peachtree templates ensure
they get plenty of practice.
Students can use Carol Yacht’s General Ledger to solve numerous problems from the book; the data for
these problems are already included
on the General Ledger CD-ROM.
You can even populate the General
Ledger with your own custom data
for your class.
Online Learning Center (OLC) with PowerWeb
www.mhhe.com/wild3e
e.com/wild3
hh
e
m
More students are using online learning aids. That’s why we offer an
Online Learning Center (OLC) that follows this book chapter by chapter. It doesn’t require any building or maintenance on your part; it’s
ready to go the moment your students type in the address.
As your students study and learn from this book, they can visit the
OLC Website and work with a multitude of helpful tools that include:
• Tutorial
• Glossary
• NetTutor
• PowerWeb
• Chapter Objectives
• Chapter Overview
• Text Company Links
• Interactive Quizzes A&B
• Key Term Flashcards
• PowerPoint Presentation
• Additional appendices
• Cogg Hill Practice Set
• Updates
• Mobile Resources
• Audio Narrated PowerPoint
• Excel Template Assignments
• More Taking It To The Net
• Problem Set C
• BusinessWeek Articles
A secured Instructor Resource Center stores your essential course
materials to save you prep time before class. Everything you need to
run a lively classroom and an efficient course is included:
• Sample Syllabi
• Additional chapter materials
• Transition Notes
• Instructors Manual
• Solutions to Excel Template Assignments
• Cogg Hill Solutions Manual
• Updates
• Solutions Manual
• PowerPoint Presentations
• Textbook Company Links
• More Taking It To The Net Solutions
• BusinessWeek Articles
• Problem Set C Solutions
wiL43179_fm_i-xxx.qxd 11/18/03 18:12 Page xv
xv
Topic Tackler—FREE with new book
This software is a complete tutorial focusing on those
areas in the financial accounting course that give
students the most trouble. Providing help on at least 2 key
topics per chapter, this program delves into the
material using the following learning aids:
• Video clips
• PowerPoint slide-shows (many include
animations and/or audio)
• Drag-and-drop, fill-in-the-blank exercises
• Self-test quizzes
This highly engaging presentation will put your students in control of the most fundamental aspects
of financial accounting.
Concepts appearing in this book that receive additional treatment in Topic Tackler are
marked with an icon at the appropriate location in the margin of the page.
NetTutor
NetTutor allows tutors and students to communicate with
each other in a variety of ways:
• The Live Tutor Center via NetTutor’s WWWhiteboard
enables a tutor to hold an interactive on-line tutorial
with several students, whose questions are placed in a
queue and answered sequentially.
• The Q&A Center allows students to submit questions
at any time and retrieve answers within 24 hours.
• The Archive Center allows students to browse for
answers to previously asked questions. They can also search for questions pertinent to a
particular topic. If they encounter an answer they do not understand, they can ask a
follow-up question.
Students are issued 5 hours of free NetTutor time when they purchase a new copy of this book.
Additional time can be purchased in 5-hour increments.
PowerWeb provides high quality, peer-reviewed content including up-to-date
articles from leading periodicals and journals, current news, weekly updates with
assessment, interactive exercises,Web research guide, study tips, and much more.
PowerWeb is free with your adoption of this book.
wiL43179_fm_i-xxx.qxd 11/18/03 18:12 Page xvi
xvi
What technology is available for instructors?
In today’s learning environment, a computer is as indispensible a tool as a blackboard or an
overhead projector. McGraw-Hill/Irwin continues to lead in innovative classroom technology,
and this book’s teaching tools put it far ahead of any other book.
Course Management
PageOut
McGraw-Hill’s Course Management System
PageOut is the easiest way to create a Website for your accounting course.
There’s no need for HTML coding, graphic design, or a thick how-to book. Just fill in a series of boxes with
plain English and click on one of our professional designs. In no time, your course is online with a Website
that contains your syllabus!
Should you need assistance in preparing your Website, we can help you. Our team of specialists is ready
to take your course materials and build a custom Website to your specifications. Simply call a
McGraw-Hill/Irwin PageOut specialist to start the process. (For information on how to do this, see
“Superior Service” on page xvii.) Best of all, PageOut is free when you adopt this book! To learn more,
please visit www.pageout.net.
Third-Party Course Management Systems
For the ambitious instructor, we offer this book’s content for complete online courses. To make this possible, we have joined forces with the most popular delivery platforms currently available. These platforms are
designed for instructors who want complete control over course content and how it is presented to students. You can customize the book’s Online Learning Center content and author your own course materials. It’s entirely up to you.
Products like WebCT, Blackboard, and eCollege all expand the reach of your course. Online discussion and
message boards will now complement your office hours. Thanks to a sophisticated tracking system, you will
know which students need more attention – even if they don’t ask for help. That’s because online testing
scores are recorded and automatically placed in your grade book, and if a student is struggling with coursework, a special alert message lets you know.
Remember, this book’s content is flexible enough to use with any platform currently available. If your
department or school is already using a platform, we can help. For information on McGraw-Hill/Irwin’s course
management supplements, including Instructor Advantage and Knowledge Gateway, see “Superior Service”
on the next page.
wiL43179_fm_i-xxx.qxd 11/18/03 18:12 Page xvii
xvii
Superior Service
No matter which online course solution you choose, you
can count on the highest level of service. That’s what sets
McGraw-Hill apart. Once you choose this book, our specialists
offer free training and will answer any question you have through
the life of your adoption.
Instructor Advantage and Instructor
Advantage Plus
Instructor Advantage is a special level of service McGraw-Hill
offers in conjunction with WebCT and Blackboard. A team of
platform specialists is always available, either by toll-free phone
or e-mail, to ensure everything runs smoothly through the life
of your adoption. Instructor Advantage is available free to all
McGraw-Hill customers.
Instructor Advantage Plus is available to qualifying
McGraw-Hill adopters (see your representative for details).
IA Plus guarantees you a full day of on-site training by a
Blackboard or WebCT specialist, for yourself and up to nine
colleagues. Thereafter, you will enjoy the benefits of unlimited
telephone and e-mail support throughout the life of your
adoption. IA Plus users also have the opportunity to access the
McGraw-Hill Knowledge Gateway.
Knowledge Gateway
Developed with the help of our partner Eduprise, the
McGraw-Hill Knowledge Gateway is an all-purpose service
and resource center for instructors teaching online from this
book.
The First Level of Knowledge Gateway is available to all professors browsing the McGraw-Hill Higher Education Website, and
consists of an introduction to OLC content, access to the first
level of the Resource Library, technical support, and information
on Instructional Design Services available through Eduprise.
The Second Level is password-protected and provides access to
the expanded Resource Library, technical and pedagogical support for WebCT, Blackboard, and TopClass, the online Instructional Design helpdesk and an online discussion forum. The
Knowledge Gateway provides a considerable advantage for
teaching online—and it’s only available through McGraw-Hill.
To see how these platforms can assist your online accounting
course, visit www.mhhe.com/solutions.
wiL43179_fm_i-xxx.qxd 11/22/03 02:37 Page xviii
xviii
What content changes further improve
Financial Accounting 3e?
Revisions for the third edition of Financial Accounting are in response to feedback from both instructors
and students.This feedback reveals that Wild’s Financial Accounting is the book instructors want to teach
from and students want to learn from. Many of the detailed revisions are summarized below, however, some
of the overall revisions include:
• New chapter-opening flowchart
• Serial problems running through nearly all chapters
• Revised assignments throughout
• New Krispy Kreme annual report and comparisons
• Updated ratio analysis and examples
to Tastykake, Grupo Bimbo (Mexican), and the
• New and revised entrepreneurial features
industry
• New assignments using chapter openers
• New Harley-Davidson financial statements
1
Chapter 1
The Chocolate Farm NEW
New, early introduction to
transaction analysis
Transaction analysis uses
expanded accounting equation to aid student learning
Revised, early introduction
to financial statements
New, streamlined presentation of key accounting
principles
Revised section on accounting and related careers
Revised table on compensation
Moved return-risk analysis
and business activities to
appendixes for instructor
flexibility
Chapter 2
York Entertainment NEW
Streamlined and revised
introduction to accounts
Revised discussion on
analyzing and processing
transactions
Revised section on preparing financial statements
Chapter 3
Premier Snowskate NEW
Streamlined discussion on
adjusting accounts
New visual linkages from
adjusting entries to the
accounts
New presentation on
preparing financial
statements from trial
balance
Shortened section on
closing process
Reduced presentation on
operating cycles
Streamlined appendix
discussion of accounting
work sheet
3
Chapter 4
Damani Dada UPDATED
New table summarizing
merchandising entries
Revised description of
credit terms and discounts
Revised and simplified
presentation of income
statement formats
Simplified descriptions
of debit and credit memoranda
5
Chapter 5
FunKo NEW
New discussion on internal
controls and inventory
New introduction to inventory cost flow assumptions
Added simplified journal
entries to inventory
computations
Revised discussion of
“lower of cost or market”
Moved gross profit and
retail inventory methods to
appendix for instructor
flexibility
Chapter 6
Dylan’s Candy Bar NEW
Enhanced discussion on
internal controls
New material on Internet
fraud
Simplified presentation of
voucher system of control
Streamlined discussion of
bank reconciliation
Moved control of purchase
discounts to appendix for
instructor flexibility
6
4
2
wiL43179_fm_i-xxx.qxd 11/18/03 18:12 Page xix
xix
7
12
10
8 13
11 C
9
Chapter 7
Manzi Metals NEW
New material on credit
vs debit cards
Simplified discussion on
disposing of receivables
Streamlined discussion
on estimating bad debts
Deleted section on discounting notes receivable
Moved short-term investments to Appendix C
Chapter 8
Queston Construction
NEW
Simplified discussion of
partial-year depreciation
and changes in estimates
Shortened and simplified
section on “Additional
Expenditures”
Simplified section on
exchange of similar
assets
Revised discussion of
intangible assets per new
standards
Shortened section on
goodwill and its estimation
Chapter 9
EEC NEW
Revised payroll liabilities
for current tax rates
Shortened section on
contingent liabilities
Removed noninterestbearing notes from this
chapter
Revised appendix on
payroll records
Moved “income tax liabilities” to appendix for
instructor flexibility
Chapter 10
Noodles & Company
NEW
New visual linkages from
bond interest computations to amortization
entries
Moved effective interest
amortization to chapter
appendix for instructor
flexibility
Streamlined presentation
on notes payable
Removed materials on
noninterest-bearing
notes
Chapter 11
Get Real Girl, Inc. NEW
Shortened introductory
materials on corporations
Streamlined section on
preferred stock
Shortened section on
stock dividends
Streamlined reporting of
discontinued operations
Simplified section on
“Changes in Accounting
Principles”
Shortened sections on
book value per share and
dividend yield
Chapter 12
Atomic Toys NEW
Simplified preparation of
statement of cash flows
New 3-stage process of
analyzing investing and
financing cash flows
Moved direct method
presentation format to
appendix for instructor
flexibility
Chapter 13
The Motley Fool NEW
Krispy Kreme vs
Tastykake NEW comparative analysis
Streamlined section on
common-size analysis
Appendix C
TradeStation Group
NEW
New, simplified organization for investments
New presentation of
both short-term and
long-term investments
New illustrations on
adjustments for unrealized gains and losses
Included investments in
international operations
in an appendix for
instructor flexibility
wiL43179_fm_i-xxx.qxd 11/18/03 18:12 Page xx
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Instructor Supplements
Instructor’s
Resource CD-ROM
ISBN: 0072868627
This is your all-in-one resource.
It allows you to create custom presentations from your own materials
or from the following text-specific
materials provided in the CD’s asset
library:
•
•
•
•
Instructor’s Resource Manual
Solutions Manual
Test Bank, Computerized Test Bank
PowerPoint® Presentations
Prepared by Jon A. Booker, Charles
W. Caldwell, and Susan C.
Galbreath. Presentations allow for
revision of lecture slides, and
includes a viewer, allowing screens
to be shown with or without the
software.
• Excel Template Assignments
• Link to PageOut
• Video Clips
Instructor’s
Resource Manual
ISBN: 0072868619
Written by Jeannie Folk, College of
DuPage.
This manual contains (for each chapter) a Lecture Outline, a chart linking
all assignment materials to Learning
Objectives, a list of relevant active
learning activities, and additional visuals with transparency masters.An
electronic version is available on the
Website and on the Instructor’s
Resource CD-ROM.
Solutions Manual
ISBN: 0072868570 (Solutions
Transparencies 0072866851)
Written by John J.Wild.
Test Bank
ISBN: 0072868600
Written by Marilyn Sagrillo and
John J.Wild.
Brownstone Diploma
6.2 Computerized
Test Bank
Available for Windows only,
located on the Instructor’s
Resource CD-ROM.
Financial Accounting
Video Library
Financial Videos: 0072376163
These short, action-oriented videos,
developed by Dallas County
Community College for the
Accounting in Action distance-learning course, provide an impetus for
lively classroom discussion.Tied
closely to this book’s pedagogical
framework, these videos avoid dry
talking-head footage in favor of
dynamic, documentary-style
explorations of how businesses
use accounting information.
wiL43179_fm_i-xxx.qxd 11/22/03 02:38 Page xxi
Student Supplements
To p i c Ta c k l e r
(free with new books)
Prepared by Jeannie Folk, College of
DuPage.
See page xv for complete description.
C a r o l Ya c h t ’ s
General Ledger &
Peachtree Complete
2004 CD-ROM
ISBN 007286866X
GL Software developed by Jack E.
Terry, ComSource Associates, Inc.
Peachtree templates prepared by
Carol Yacht.
The CD-ROM includes fully functioning versions of McGraw-Hill’s own
General Ledger Application software
as well as Peachtree Complete 2004.
Problem templates are included that
allow you to assign text problems for
working in either Yacht’s General
Ledger or Peachtree Complete 2004.
Wo r k i n g P a p e r s
ISBN: 0072868562
Written by John J.Wild.
Working Papers are available to help
direct students in solving all assignments. Each chapter also contains one
set of papers that can be used for
either the A or B series of problems.
E x c e l Wo r k i n g
Papers
ISBN: 0072868678
Written by John J.Wild.
Working Papers delivered in Excel
spreadsheets. Excel Working Papers
are available on CD-ROM and can be
bundled with or without the printed
Working Papers; see your representative for information.
Student Learning
To o l s
ISBN 0256255776
Study Guide
ISBN: 0072868597
Prepared by Jeannie Folk, College of
DuPage.
Covers each chapter and appendix
with reviews of the learning objectives, outlines of the chapters, summaries of chapter materials, and additional problems with solutions.
Prepared by Barbara Chiappetta,
Nassau Community College.
This workbook helps students develop and use critical thinking and learning-to-learn skills in a collaborative
team environment. It contains class
activities, writing assignments, and
team presentation assignments.
xxi
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Acknowledgements
John J.Wild and McGraw-Hill/Irwin would like to recognize the following instructors for their valuable feedback and involvement in the development of Financial Accounting: Information for
Decisions, 3e. We are thankful for their suggestions, counsel, and encouragement.
Survey Participants:
Talitha Smith,Auburn University
Focus Group Participants:
Christopher Brandon, Indiana
University-Purdue University
Columbus
Ronald Halsac, Community College of
Alegheny City
Elaine Eikner, Southwest Texas State
University
Bruce Oliver, Rochester Institute of
Technology
Paul Jep Robertson, New Mexico
State University
Joseph Morris, Southeastern
Louisiana University
Angelo Luciano, Columbia College-Chicago
Margaret O’Reilly-Allen, Rider
University
David Weiner, University of San
Francisco
Kathy Horton, College of DuPage
Lawrence Roman, Cuyahoga
Community College
Debra Prendergast, Northwestern
Business College
Jeff Ritter, St. Norbert College
S. Murray Simons, Mount Ida College
John D. Rossi, Moravian College
Lois Mahoney, University of Central
Florida
Marguerite Savage, Elgin Community
College
Florence McGovern, Bergen
Community College
Kathleen A. Simons, Bryant College
Kim Tarantino, California State
University–Fullerton
Brandi Roberts, Southeastern
Louisiana University
Angelo Luciano, Columbia College-Chicago
Sheri Henson,Western Kentucky
University
David P.Weiner, University of San
Francisco
Catherine Collins,Waubonsee
Community College
John Karayan, California State
Polytechnic University--Pomona
Leon J. Hanouille, Syracuse University
Pamela Stuerke, Case Western
Reserve
Linda Christiansen, Indiana
University--Southeast
Carolyn Jean Craig, Ivy Tech State
College
Linda Benz, Jefferson Community
College
Angela Sandberg, Jacksonville State
University
Jeffry Haber, Iona College
John Rossi, Moravian College
Review Participants:
Linda Kropp, Modesto Junior College
Ernest Marquez, Columbia College-Jacksonville
Philip Stickney, Conchise College
Kay Carnes, Gonzaga University
Jan Mardon, Green River Community
College
Rafik Z. Elias, Cameron University
Dawn Hukai, University of Wisconsin
–River Falls
Steven Lafave,Augsburg College
Ed Blocher, University of North
Carolina--Chapel Hill
Daniel Gibbons, Columbia College-Crystal Lake
Jan Mardon, Green River Community
College
Myra Bruegger, Southeastern
Community College
Donald Boone, Lebanon Valley
College
Staci Kolb, Samford University
Meg Pollard,American River College-Los Rios
Bill Alexander, Indian Hills
Community College
Peter Margaritas, Franklin University
John Roberts, St. John’s River
Community College
Pat Bouker, North Seattle Community
College
Chris Bjornson, Indiana University
Southeast
Scott Steinkamp, College of Lake
County (IL)
Dawn McKinley,William Rainey
Harper College
Laura D. Delaune, Louisiana State
University
Janice R. Holmes, Louisiana State
University
wiL43179_fm_i-xxx.qxd 11/18/03 18:13 Page xxiii
About the Contributors
Jo Lynne Koehn received her Ph.D. and Master’s of Accountancy from the University of
Wisconsin at Madison and is an associate professor at Central Missouri State University. Her
scholarly articles have been published in a variety of journals including Issues in Accounting
Education,The CPA Journal,The Tax Advisor, and Accounting Enquiries. Professor Koehn is a
member of the American Accounting Association and the American Institute of CPAs. She also
holds a Certified Financial Planning license and is active in promoting a financial planning curriculum at Central Missouri State University.
Jeannie M. Folk teaches financial and managerial accounting at the College of DuPage and
mentors accounting students working in cooperative education positions. In addition, she is
active in the area of online, distance education. Professor Folk serves on the board of directors and the Scholarship Committee of TACTYC (Teachers of Accounting at Two-Year
Colleges) as well as the Illinois CPA Society’s Outstanding Educator Award Committee. She is
also a member of the American Accounting Association and the American Institute of Certified
Public Accountants. She was honored with the Illinois CPA Society’s Outstanding Educator
Award and was a recipient of the Women in Management, Inc., Charlotte Danstrom Woman of
Achievement Award. Before entering academe, Professor Folk was a general practice auditor
with Coopers & Lybrand (now PriceWaterhouseCoopers). She received her BBA from Loyola
University Chicago and MAS in Accountancy from Northern Illinois University. Professor Folk
enjoys travel, camping, hiking, and community activities with her three children.
Carol Yacht is a textbook author and educator with a teaching career spanning more than
three decades. Carol has taught at Yavapai College;West Los Angeles Community College;
California State University, L.A.; and Beverly Hills High School and Adult School. She has
worked for IBM Corporation as an educational instruction specialist and currently serves on
the Computer Education Task Force for the National Business Education Association. Carol is a
frequent speaker at state, regional, and national conventions; teaches school consortium meetings; and is active in Department of Education conferences. Carol earned her AS degree from
Temple University, BS degree from the University of New Mexico, and MA degree from
California State University, L.A.
In addition to the helpful and generous colleagues listed above, I thank the
entire McGraw-Hill/Irwin Financial Accounting team, including Brent Gordon,
Stewart Mattson, Steve Schuetz, Kelly Odom, Lori Koetters, Matthew Baldwin,
Sesha Bolisetty, Matthew Perry, and Edward Przyzycki. I also thank the great
marketing and sales support staff, including Rich Kolasa and Jackie Powers; and
I thank the accuracy checker Barbara Schnathorst, CPA, of The Write Solution
Inc. Many talented educators and professionals worked hard to create the
supplements for this book, and for their efforts I’m grateful. Finally, many
more people I either did not meet or whose efforts I did not personally
witness nevertheless helped to make this book everything that it is, and
I thank them all.
John J.Wild
xxiii