Preface - McGraw Hill Higher Education

Preface
During the past decade, the effects of technology, globalization, and the concentration of
power have acted to create a new business environment. This environment is characterized by
rapid change and fierce competition. Managers are under extreme pressure to produce consistent earnings growth and employees are expected to make meaningful contributions to profitability early in their careers. To be able to succeed in this environment, students must
develop critical thinking, communication, and computer skills as well as an understanding of
accounting procedures and practices. The goal of this text is to better prepare students for entry into the new business environment by providing an appropriate balance between skill development and technical competence.
Traditionally, accounting education has emphasized a content-based approach. Specifically,
skill development has been held at a relatively low level (focused primarily on comprehension
and recall skills) and rigor has been measured by the quantity of content covered. More and
more topics have been added to the curricula and textbooks grow ever larger. Unfortunately,
this model provides little opportunity for professors to help students develop the skills that the
new business environment demands. The number of classroom hours available is limited.
With so much material to cover, there just is not time available to work on skill development.
This text offers you an opportunity to shift the traditional educational paradigm. Content is
focused on essential concepts, thereby reducing the quantity of material that must be covered.
As a result, you have more time to work on skill development. Indeed, the Instructors’ Resource Manual provides step-by-step instructions for the implementation of innovative teaching methodologies such as active learning and group dynamics. It offers a rich set of short
discovery learning cases which provide a forum for class-opening experiences that are highly
effective in stimulating interest and developing critical thinking skills. In addition, the text itself contains many innovative features to better prepare students to face the challenges of a
new business environment. These features are discussed next.
■ End-of-Chapter Materials
The balance between technical competence and other essential business skills is a delicate one
that is best left to individual instructors. We offer an opportunity to shift the balance, the degree of which is up to you. The text offers a rich set of end-of-chapter materials that includes
separate sections for conventional and innovative resources.
Conventional End-of-Chapter Materials
Conventional exercises and problems are presented in Set A and Set B series. The Set B represents a conceptual mirror image of the Set A exercises and problems. Names and numbers
are changed and the context sometimes differs. However, if you have demonstrated concepts
with Set A exercises or problems, you can rest assured that your students will be adequately
prepared to work the mirror image Set B exercises or problems as a reinforcement experience.
Instructors who choose to emphasize technical competence will find an abundant supply of
conventional end-of-chapter materials.
Innovative End-of-Chapter Materials
An innovative activities section entitled Analyze, Think, Communicate, (ATC) is included in
the end-of-chapter materials for each chapter. The ATC section includes business application
cases, group exercises, research and writing assignments, and ethical dilemmas. Furthermore,
each ATC section contains two Excel spreadsheet applications. The text is not designed to
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explain spreadsheet technicalities, but the Excel problems do include teaching tips that facilitate the student’s ability to use spreadsheet software. The depth and diversity of the end-ofchapter materials allow you to select the degree of emphasis to place on business skill
development (critical thinking, communication, research, writing, ethics, group dynamics, and
computer technology) that you deem to be appropriate in the new business environment. Examples of the ATC materials are provided for your review.
d. How does cost shifting increase the cost of medical services?
ATC 5–4
WRITING ASSIGNMENT Selection of the Appropriate Cost Driver
Bullions Enterprises, Inc. (BEI), makes gold, silver, and bronze medals used to recognize outstanding
athletic performance in regional and national sporting events. The per unit direct costs of producing the
medals follows.
Direct materials
Labor
Gold
Silver
Bronze
$300
120
$130
120
$ 35
120
During 2002, BEI made 1,200 units of each type of medal for a total of 3,600 (1,200 3) medals. All
medals are created through the same production process, and they are packaged and shipped in identical
containers. Indirect overhead costs amounted to $324,000. BEI currently uses the number of units as the
cost driver for the allocation of overhead cost. As a result, BEI allocated $90 ($324,000 3,600 units)
of overhead cost to each unit
of produced.
medal produced.
medal
Required
The president of the company has questioned the wisdom of assigning the same amount of overhead to
each type of medal. He believes that overhead should be assigned on the basis of the cost to produce the
medals. In other words, more overhead should be charged to expensive gold medals, less to silver, and
even less to bronze. Assume that you are BEI’s chief financial officer. Write a memo responding to the
president’s suggestion.
ATC 8–5
ETHICAL DILEMMA Budget Games
Melody Lovelady is the most highly rewarded sales representative at Swift Corporation. Her secret to
success is always to understate your abilities. Ms. Lovelady is assigned to a territory in which her customer base is increasing at approximately 25 percent per year. Each year she estimates that her budgeted
sales will be 10 percent higher than her previous year’s sales. With little effort, she is able to double her
budgeted sales growth. At Swift’s annual sales meeting, she receives an award and a large bonus. Of
course, Ms. Lovelady does not disclose her secret to her colleagues. Indeed, she always talks about how
hard it is to continue to top her previous performance. She tells herself if they are dumb enough to fall
for this rubbish, I’ll milk it for all it’s worth.
Required
a. What is the name commonly given to the budget game Ms. Lovelady is playing?
b. Does Ms. Lovelady’s behavior violate any of the standards of ethical conduct shown in Exhibit 1–13
of Chapter 1?
c. Recommend how Ms. Lovelady’s budget game could be stopped.
SPREADSHEET ASSIGNMENT U i
E
l
ATC 8 6
Preface
p
,
p y
decline in operating income? Explain your answer.
y
p
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g
GROUP ASSIGNMENT Operating Leverage
The Parent Teacher Association (PTA) of Meadow High School is planning a fund-raising campaign.
The PTA is considering the possibility of hiring Eric Logan, a world-renowned investment counselor, to
address the public. Tickets would sell for $28 each. The school has agreed to let the PTA use Harville
Auditorium at no cost. Mr. Logan is willing to accept one of two compensation arrangements. He will
sign an agreement to receive a fixed fee of $10,000 regardless of the number of tickets sold. Alternatively, he will accept payment of $20 per ticket sold. In communities similar to that in which Meadow is
located, Mr. Logan has drawn an audience of approximately 500 people.
Required
a. In front of the class, present a statement showing the expected net income assuming 500 people buy
tickets.
b. The instructor will divide the class into groups and then organize the groups into four sections. The
instructor will assign one of the following tasks to each section of groups.
Group Tasks
(1) Assume the PTA pays Mr. Logan a fixed fee of $10,000. Determine the amount of net income
that the PTA will earn if ticket sales are 10 percent higher than expected. Calculate the percentage change in net income.
(2) Assume that the PTA pays Mr. Logan a fixed fee of $10,000. Determine the amount of net
income that the PTA will earn if ticket sales are 10 percent lower than expected. Calculate the
percentage change in net income.
(3) Assume that the PTA pays Mr. Logan $20 per ticket sold. Determine the amount of net income
that the PTA will earn if ticket sales are 10 percent higher than expected. Calculate the percentage change in net income.
(4) Assume that the PTA pays Mr. Logan $20 per ticket sold. Determine the amount of net income
that the PTA will earn if ticket sales are 10 percent lower than expected. Calculate the percentage
change in net income.
c. Have each group select a spokesperson. Have one of the spokespersons in each section of groups go
to the board and present the results of the analysis conducted in Part b. Resolve any discrepancies in
the computations presented at the board and those developed by the other groups.
d. Draw conclusions regarding the risks and rewards associated with operating leverage. At a minimum,
answer the following questions.
(1) Which type of cost structure (fixed or variable) produces the higher growth potential in profitability for a company?
(2) Which type of cost structure (fixed or variable) faces the higher risk of declining profitability for
a company?
(3) Under what circumstances should a company seek to establish a fixed cost structure?
(4) Under what circumstances should a company seek to establish a variable cost structure?
ATC 2–2
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y
features of ethical misconduct that were outlined in Chapter 1.
ATC 4–6
SPREADSHEET ASSIGNMENT Using Excel
Dorina Company makes cases of canned dog food in batches of 1,000 cases and sells each case for $15.
The plant capacity is 50,000 cases; the company currently makes 40,000 cases. DoggieMart has offered
to buy 1,500 cases for $12 per case. Because product-level and facility-level costs are unaffected by a
special order, they are omitted.
Required
a. Prepare a spreadsheet like the following one to calculate the contribution to income if the special order is accepted. Construct formulas so that the number of cases or the price could be changed and the
new contribution would be automatically calculated.
b. Try different order sizes (such as 2,000) or different prices to see the effect on contribution to profit.
Spreadsheet Tips
1. The numbers in cells F7 to F9 should be formulas that refer to F5. This allows the number of cases to
be changed in cell F5 with the other cells changing automatically.
2. The formula in cell F10 uses a function named ROUNDUP to calculate the even number of batches.
The formula should be ROUNDUP(F5/1000,0) where the zero refers to rounding up to the nearest
whole number.
A variety of writing, group, technology, ethics, and Internet assignments is included. These
problems are marked appropriately for easy identification.
Writing
Group
Technology
Ethics
Internet
Preface
■ Emphasis on Decision-Making
Concepts
Traditional texts have emphasized accounting practices for manufacturing companies. The
new business environment has resulted in a shift toward service companies, especially in the
United States. The text recognizes this critical shift by emphasizing decision-making concepts
applicable to both service and manufacturing companies. An examination of our brief table of
contents (see page xxiv) shows that we introduce the topics such as operating leverage, costvolume-profit analysis, relevance, and cost allocation early. We cover traditional topics such
as manufacturing cost flow, job-order and process costing toward the end of the text. This
placement is significant because it reflects the emphasis that we place on decision-making
concepts throughout the text.
■ Isolating Concepts
How do you promote the understanding of concepts? We believe that concepts should be isolated and discussed within a decision-making context. The implementation of this strategy has
caused us to deviate from the traditional approach in many respects. For example, notice that
the traditional chapter covering cost terminology (i.e., usually Chapter 2) has been eliminated
from this textbook. We believe that introducing a plethora of detached cost terms in a single
chapter is an ineffective teaching strategy. At best, students tend to memorize a few definitions. Indeed, the primary theme of a terms chapter seems to be: “Here are some definitions.
Memorize them now and you will use them later.” This sets a bad precedent. The appropriate
educational expectation is comprehension, not memorization.
In contrast, we isolate concepts and introduce them singly. For example, we separate the
concept of product costing from the related issues of manufacturing cost flow and the corresponding recording procedures. We assume that all materials purchased are used during the
accounting period and that all products started are completed during the accounting period.
Accordingly, the only inventory account used is a finished goods account. Within this context,
students can clearly see how depreciation on manufacturing equipment is accumulated in an
inventory account while depreciation on administrative equipment is expensed. Similarly, differences between administrative salaries and production wages are readily apparent. We use a
financial statements model to highlight these critical comparisons (See Exhibit 5 in Chapter 1
as an example). Manufacturing cost flow is discussed in a separate chapter after students have
had time to digest the distinction between a product cost versus a general, selling, and administrative expense.
■ Interrelationships between Concepts
While isolating concepts facilitates the learning process, students must ultimately understand
how the concepts are interrelated in business practice. The text has been written so that knowledge builds in a stepwise fashion to the point of full integration. For example, notice how the
definitions of relevant costs are compared to those of cost behavior on page 141 of Chapter 4
and how the definitions of direct costs are contrasted to those of cost behavior and cost relevance on page 192 of Chapter 5. The commitment to integrated learning is evident not only in
the text material but also in exercises and problems. The aim of this text is to develop a pedagogical format that facilitates the students’ ability to apply accounting concepts to increasingly
complex organizational environments.
■ Avoid Logical Inconsistencies
What is a period cost and how does it differ from a product cost? Traditionally, a period cost
is defined as a cost that is expensed in the period in which it is incurred. This definition fails
to distinguish period costs from product costs because product costs are also expensed in the
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period in which they are incurred (sold). Indeed, both period and product costs are accumulated in asset accounts until such time that the assets are used. More specifically, there is no
conceptual difference in the way prepaids, supplies, depreciable assets, and inventory are
treated in the financial statements. The fact is, the term “period” cost is a false identifier. We
avoid this inconsistency by focusing on the true distinction, which is between product costs
versus general, selling, and administrative costs. This is not an isolated incident but an
example of a consistent commitment to avoid logical inconsistencies that thwart the comprehension of concepts.
■ Avoid Inconsistent Terminology
It is highly confusing when the same term is used to identify different concepts. Even so,
many textbook authors have been careless in the use of terminology. For example, the term
fixed cost is generally used to mean that a cost stays the same regardless of the volume of activity. However, within the context of a special order decision, the term fixed is used to imply
that the cost stays the same regardless of whether the special order is accepted or rejected.
Similarly, the term direct cost is frequently used interchangeably with the term variable cost.
For example, books frequently compare “direct or variable” costing with full absorption costing. This terminology implies that direct and variable costing are the same thing. We have
made every effort to avoid the use of conflicting terminology in this text.
■ Context-Sensitive Nature of
Terminology
Students are frequently confused by the fact that the same exact cost can be classified as fixed,
variable, direct, indirect, relevant, or not relevant. For example, the salary of a store manager
is fixed regardless of the number of customers that enter the store. However, the same salary
is variable relative to the number of stores operated by a company. The salary is directly traceable to a particular store but not to particular sales made in the store. The salary is relevant to
a decision regarding whether to eliminate the store but not relevant to a decision as to whether
a department within the store should be eliminated. Students must learn to identify the
circumstances that determine the classification of costs. The chapter material, exercises,
and problems in this text are designed to encourage students to analyze the decision-making
EXERCISES—SERIES A
EXERCISE 2–1A Identifying Cost Behavior
Sally’s Kitchen, a fast-food restaurant company, operates a chain of restaurants across the nation. Each
restaurant employs eight people; one is a manager paid a salary plus a bonus equal to 3 percent of sales.
Other employees, two cooks, one dishwasher, and four waitresses, are paid salaries. Each manager is
budgeted $2,000 per month for advertising cost.
Required
Classify each of the following costs incurred by Sally’s Kitchen as fixed, variable, or mixed.
a. Manager’s compensation relative to the number of customers.
b. Waitresses’ salaries relative to the number of restaurants.
c. Advertising costs relative to the number of customers for a particular restaurant.
d. Rental costs relative to the number of restaurants.
e. Cooks’ salaries at a particular location relative to the number of customers.
f. Cost of supplies (cups, plates, spoons, etc.) relative to the number of customers.
L.O. 1
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context rather than to memorize definitions. Exercise 2–1A in Chapter 2 provides an example
of how the text teaches students to make appropriate interpretations of differential decisionmaking environments.
■ Excel Applications
Spreadsheet applications are an essential component of contemporary accounting practice.
Students must be aware of the power of spreadsheet software and know how accounting data
are presented in spreadsheet format. Toward this end, we have included a discussion of Microsoft Excel spreadsheet applications wherever appropriate in the text. In most instances, actual spreadsheets are shown in the text. Refer to Exhibit 1 in Chapter 8 and Exhibit 6 in
Chapter 10 for examples. These exhibits are shown on the following pages for your review.
Also, end-of-chapter materials include problems that can be completed with spreadsheet
software. These are indicated by an Excel logo, a sample of which is shown below.
y
py g
p
Exhibit 8–1 Static and Flexible Budgets in Excel Spreadsheet
Prepare an income statement, balance sheet, and statement of cash flows.
PROBLEM 1–20A Service Versus Manufacturing Companies
Decker Company began operations on January 1, 2005, by issuing common stock for $30,000 cash. During 2005, Decker received $40,000 cash from revenue and incurred costs that required $60,000 of cash
payments.
Required
Prepare an income statement, balance sheet, and statement of cash flows for Decker Company for 2005,
under each of the following independent scenarios.
L.O. 2, 3, 4, 5
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Exhibit 10–6 Microsoft Excel Spreadsheet Internal Rate of Return Function
3
■ Interesting and Lively Writing Style
The text frequently conveys information through scenarios that permit students to view managers in action. In Chapter 3, a management team uses cost-volume-profit (CVP) analysis to
evaluate the potential profitability of a new product. Along the way, the team confronts an ethical dilemma. Should substandard materials be used to accomplish a target-costing objective?
In Chapter 5, a group of department heads advocates the use of allocation bases that serve
their self-interests. Tempers fly and anger prevents one participant from reaching a compromise that would benefit his unit. The importance of the human side of the decision process becomes readily apparent. Interesting vignettes such as these are interspersed throughout the
text. While this is not a novel, neither is it your typical dull textbook. Managerial accounting
tools are introduced in a fashion that arouses and maintains student interest.
■ Real-World Applications
Student interest is further piqued through the use of real-world illustrations. Each chapter
opens with a feature titled The Curious Accountant. This feature poses an interesting question
that relates to the general content of the chapter. The questions involve real-world companies
and include pictures that stimulate student interest. The question is answered in a text box located a few pages after the page containing the question. Real-world applications that relate to
specific topics covered within each chapter are introduced through a feature titled Reality
Bytes. This feature may contain survey results, graphics, quotes from business leaders, and
other information that relates the text material to accounting practice. The objective here is to
stimulate student interest by demonstrating the usefulness of managerial accounting tools in
the management of real-world organizations. Examples of The Curious Accountant and Reality Bytes are shown on the following page for your review.
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the
curious
accountant
M
ost people would expect an increase in a company’s revenues to cause an increase in
its profits, but they may be surprised that a
small percentage of change in revenue can generate a dramatic difference in profits.
Consider the following data for Texaco.
Year
Revenues
(in millions)
Percentage
Increase From
Previous Year
Operating Income
Before Taxes
(in millions)
Percentage
Increase From
Previous Year
2000
1999
1998
$50,100
34,925
30,910
43.5
13.0
N/A
$4,218
1,779
701
137.1
153.8
N/A
Note that the profitability numbers shown are for operating income before taxes;
they do not include any unusual items that may have occurred at Texaco. Considering this, what could possibly explain how a relatively small increase in revenue
(13%) could result in such a large increase in operating income (153.8%)?
bytes
reality
D
o real-world companies use target pricing? According
to C. Michael Armstrong, CEO of AT&T, target costing
is a very real business practice. Indeed, Mr. Armstrong
suggests that an unreasonable target price is the chief cause
of AT&T’s decision to delay the widespread deployment of a
new local phone service technology. The new “Project
Angel” system uses radio technology to bypass the wires of
the Baby Bell phone companies. Unfortunately, the cost of
deploying the technology in a test site in Chicago averaged
$1,100 per home. Although this cost is prohibitive, AT&T
still plans to continue testing the project. According to Mr.
Armstrong, “it’ll probably take two more cycles of
technology” before costs drop to a level that will enable
AT&T to offer the system at a competitive price.
Source: Peter Elstrom, “AT&T’s Fallen Angel,” Business Week, April 13, 1998, p. 4.
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■ Managerial Orientation
This is not your typical cost accounting textbook approach. Service, financial, and not-forprofit entities are placed on equal footing with manufacturing companies. For example, a retail sales company is used as the background for the introduction of the budgeting chapter. A
quick view of the table of contents reveals an early emphasis on decision making. In the first
chapter, product costing is related to financing opportunities, managerial incentives, and income tax considerations. More traditional topics such as manufacturing cost flow and recording procedures are presented at the end of the text rather than at the beginning. Technical
terminology is introduced within a decision-making context. For instance in Chapter 2, cost
behavior is related to operating leverage through an example in which fixed cost structure is
used to provide a competitive operating advantage. The interpretation rather than the computation of variances is emphasized in Chapter 8. The overall theme of the text is to introduce
concepts in the context of decision making.
■ Information Overload
The proposed table of contents reflects our efforts to address the information overload problem. We believe that existing managerial textbooks contain significantly more material than
can be digested by the typical student. Education research suggests that information overload
leads to memorization. Very little is accomplished when students are exposed to such a volume of material that they are unable to comprehend the basic concepts. This text seeks to emphasize the comprehension of concepts by reducing the volume of content. You will notice
that we have limited the number of chapters to 14. This contrasts with traditional texts that
normally contain between 18 and 20 chapters.
■ Flexibility in Sequencing of Material
The arrangement of material in the table of contents represents only one of many alternatives for
the sequence in which material can be covered. For example, after establishing a conceptual
foundation by covering Chapters 1, 2, 4, and 5, you could proceed with coverage of Chapter 11
(product cost flow) followed by Chapter 12 (job-order and process costing). With the exception
of the foundation chapters (1, 2, 4, and 5), all chapters stand alone. More specifically, you can
skip around or omit Chapters 3 and 6 through 14 as you deem appropriate. Indeed, Chapters 7,
13, and 14 can be covered prior to Chapter 1. If your students do not cover cash flow concepts
in their financial accounting course, we recommend that you begin your course by covering
Chapter 14, Statement of Cash Flows. Several of the chapters in this text assume that students
have had an exposure to cash flow concepts. Accordingly, it will be necessary to skip cash flow
topics in certain chapters or to establish a foundation that will enable your students to identify
cash flow concepts. Incidentally, we emphasize the direct method with the primary objective of
having students identify events as financing, investing, or operating. Accordingly, gaining the
exposure needed to cover the cash flow applications presented in the text is not a difficult task.
Even so, if you choose to skip cash flow coverage, rest assured that you can do so without negative consequences. The text is designed to permit the maximum level of instructor flexibility.
Some instructors believe that management accounting begins with the budgeting process.
Furthermore, they recognize the logical link between the coverage of financial statements in
the financial accounting course and the coverage of pro forma statements in the budgeting
chapter. Since our budgeting chapter is explained within the context of a retail establishment,
you can start your managerial accounting course with Chapter 7 (planning for profit and cost
control) if you are inclined to do so.
Preface
■ Supplemental Materials
The text is supported by a complete package of supplements. Members of the author team have
been heavily involved in the development of the supplement package. Accordingly, you can rest
assured that the supplements match the text. The package includes the following items:
For Instructors
Instructor’s Resource Manual: Prepared by Thomas P. Edmonds and Nancy Schneider
(ISBN 0-07-247325-8) The text is suitable to new teaching approaches such as group dynamics and active pedagogy. The instructors’ guide provides step-by-step explicit instructions
as to how the text can be used to accomplish the implementation of these alternative teaching
methodologies. Guidance is also provided for instructors who choose to use the traditional lecture method. The guide includes lesson plans, demonstration problems, student work papers
for those problems, and solutions to the demonstration problems.
Solutions Manual: Prepared by Bor-Yi Tsay (ISBN 0-07-247324-X) The solutions
manual has been prepared by the authors and contains complete answers to all questions,
exercises, problems, and cases. The manual has been tested using a variety of quality control procedures to ensure accuracy. After the initial preparation of the solutions, the problems and exercises were reworked “blind.” The second set of answers was then compared
with the previous solutions by an independent reviewer. Any differences were reconciled.
After this process, the solutions manual was again proofed and checked for accuracy by J.
Russell Madray of Clemson University and the Madray Group, Inc. and Jed Ashley of
Grossmont Community College. While the author team retains the responsibility for any errors that may occur, we express our appreciation for the individuals who have exhibited a
zero tolerance attitude that is required to maintain the highest standards of excellence.
Solutions Transparencies (ISBN 0-07-247330-4): Prepared by Bor-Yi Tsay Transparencies are prepared in easy-to-read 14 point bold type. They are mirror images of the answers
provided in the solutions manual and consistent with the forms contained in the working papers. This ensures congruence between your in-class presentations and the follow-up exposure
that students attain when they view the solutions manual or use the working papers.
Test Bank: Prepared by J. Lowell Mooney (ISBN 0-07-247328-2) The test bank includes
an expansive array of true/false, multiple-choice, short discussion questions, and open-ended
problems.
Computest A computerized version of the test bank for more efficient use is available in a
Windows platform available on the Presentation Manager CD-ROM.
Presentation Manager CD-ROM (ISBN 0-07-247333-9) This integrated CD allows instructors to customize their own classroom presentations. It contains key supplements such as
PowerPoint slides, Test Bank, Instructor’s Resource Manual, Solutions Manual, and videos.
The Presentation Manager makes it easy for instructors to create multimedia presentations.
Managerial Accounting Video Library (ISBN 0-07-237617-1) These short videos developed by Dallas County Community College provide the impetus for lively classroom discussion. The focus is on the preparation, analysis, and use of accounting information for business
decision making.
Web Page (http://www.mhhe.com/edmonds2003) Our Web page was created for both students and instructors. It includes the Online Learning Center that follows the text chapter by
chapter. Students will find learning objectives and their explanations, key terms, Excel Templates, PowerPoint slides, and self-assessment quizzes. A secured Instructor Center includes
text updates, sample syllabi, downloadable supplements, and much more.
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For Students
Topic Tackler CD-ROM A new key feature of this edition is our free Topic Tackler CD
with the text. This software is a complete student tutorial focusing on those areas in the managerial accounting course that give students the most trouble. It offers help on two key topics
for every chapter in the book, using video clips, PowerPoint slide shows, interactive exercises,
and self-test quizzes. The key concepts are indicated in the text by a Topic Tackler logo that
tells students they can refer to the CD for additional instruction.
Study Guide: Prepared by Cindy D. Edmonds (ISBN 0-07-247341-X) Each chapter of
the study guide includes a review and explanation of the chapter learning objectives as well as
multiple-choice problems and short exercises. Completion of the study guide will enable the
students to (1) review their comprehension of the text material, (2) prepare for examinations,
and (3) obtain an additional perspective of the course material. The guide contains approximately 200 pages and includes appropriate work papers and a complete set of solutions.
Working Papers: Prepared by Bor-Yi Tsay (ISBN 0-07-247326-6) The working papers
provide forms that are useful in the completion of both exercises and problems. Working papers for the exercises provide headings and prerecorded example transactions that enable students to get started quickly and to work in an efficient manner. The forms provided for the
problems can be used with either series A or B problems.
Excel Templates This software is provided for use with selected problems in the text. The
templates gradually become more complex, requiring students to build a variety of formulas.
“What-if ” questions are added to show the power of spreadsheets, and a simple tutorial is included. These templates were prepared by Jack Terry of ComSource Associates, Inc. and are
available on the text Website.
Ramblewood Manufacturing, Inc., Windows-Based Practice Set on CD-ROM (Student
ISBN 0072348151) Instructor’s Manual (ISBN 0072346426) This computerized practice
set was prepared by Leland Mansuetti and Keith Weidkamp of Sierra College. It presents a
simulation of business transactions for a corporation that manufactures metal fencing. It can
be used to show job-order costing systems with JIT inventory in a realistic setting and takes
about 10 to 14 hours to complete.
NetTutor NetTutor is a live, online tutor that guides students through their accounting problems step-by-step. It allows students to communicate with live tutors in a variety of ways:
through a Live Tutor Center, a Q&A Center, and an Archive Center. NetTutor is free with all
new texts.
PowerWeb Keeping your accounting course timely can be a job in itself, and now McGrawHill does that job for you. PowerWeb is a site from which you can access all of the latest news
and developments pertinent to your course without all the clutter and dead links of a typical
online search. Students can visit PowerWeb to take a self-grading quiz or check a daily news
feed analyzed by an expert in management accounting.
■ Acknowledgments
Why do geese fly in a V-shape? Because the effort of the lead goose provides an uplifting draft
that eases the burden of flight for the birds that follow. We are deeply indebted to the class
testers and users of the first edition who have selflessly contributed their time and effort to the
development of this book. Like the lead goose, their work has made the road of progress easier
to travel for all who follow. We extend our deepest gratitude to those who have shared with us
the frustrations and excitement associated with the development of innovative teaching materials. We are especially indebted to Tim Nygaard of Madisonville Community College, Bob
Smith of Florida State University, Phil Olds of Virginia Commonwealth University, Mark
Lawrence of the University of Alabama at Birmingham, Nancy Schneider of Lynchburg College, Walt Doehring and Bruce Lindsey of Genesee Community College, Jeffrey Galbreath of
Preface
®
Greenfield Community College, Leonard Stokes of Siena College, Dorcas Berg of Wingate College, Pat McMahon of Palm Beach Community College, and Jed Ashley of Grossmont College.
The text underwent an extensive review process that included a diverse group of instructors located at schools across the country. The comments and suggestions of the reviewers
have significantly influenced the writing of the text. Our efforts to establish a meaningful but
manageable level of content was greatly influenced not only by their suggestions regarding
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what to include, but also by their opinions regarding what to leave out. Our grateful appreciation is extended to the following members of our review team:
We once again thank those individuals whose input over the last edition helped the book
evolve to its present form:
James Bates,
Mountain Empire Community College
Frank Beigbeder,
Rancho Santiago College
Ashton Bishop,
James Madison University
Amy Bourne,
Tarrant County College
Eric Carlsen,
Kean University
Sue Counte,
Jefferson College
Jill D’Aquila,
Iona College
Patricia Douglas,
Loyola Marymount University
Dean Edmiston,
Emporia State University
Robert Elmore,
Tennessee Technological University
William Geary,
College of William and Mary
Dinah Gottschalk,
James Madison University
Donald Gribbin,
Southern Illinois University
Larry Hegstad,
Pacific Lutheran University
Fred Jex,
Macomb Community College
Robert Landry,
Massassoit Community College
Philip Little,
Western Carolina University
Irvin Nelson,
Utah State University
Bruce Neumann,
University of Colorado
Hossein Nouri,
College of New Jersey
Ashton Oravetz,
Tyler Junior College
Thomas Phillips,
Louisiana Tech University
Marjorie Platt,
Northeastern University
Jane Reimers,
Florida State University
Diane Riordan,
James Madison University
Tom Robinson,
University of Alaska
Kathryn Savage,
Northern Arizona University
Nancy Schneider,
Lynchburg College
Leonard Stokes,
Siena College
Suneel Udpa,
St. Mary’s College
Sean Wright,
DeVry Institute of Technology, Phoenix
Allan Young,
DeVry Institute of Technology, Atlanta
Many others have contributed directly or indirectly to the development of the text. Participants in workshops and focus groups have provided useful feedback. Colleagues and friends
have extended encouragement and support. Among these individuals our sincere appreciation
is extended to Lowell Broom, University of Alabama at Birmingham; Bill Schwartz and Ed
Spede of Virginia Commonwealth University; Doug Cloud, Pepperdine University—Malibu;
Charles Bailey, University of Central Florida; Bob Holtfreter, Central Washington University;
Kimberly Temme, Maryville University; Beth Vogel, Mount Mary College; Celia Renner, The
University of Northern Iowa; Robert Minnear, Emory University; Larry Hegstad, Pacific
Lutheran University; Shirish Seth, California State University at Fullerton; Richard Emery,
Linfield College; Gail Hoover, Rockhurst; Bruce Robertson, Lock Haven University; Jeannie
Folk, College of Dupage; Marvelyn Burnette, Wichita State University; Ron Mannino, University of Massachusetts; John Reisch, Florida Atlantic University; Rosalie Hallbaurer,
Florida International University; Lynne H. Shoaf, Belmont Abbey College; Jayne Maas, Towson University; Ahmed Goma, Manhattan College; John Rude, Bloomsburg University; Jack
Paul, Lehigh University; Terri Gutierrez, University of Northern Colorado; Khondkar Karim,
Monmouth University; Carol Lawrence, University of Richmond; Jeffrey Power, Saint Mary’s
University; Joanne Sheridan, Montana State University; and George Dow, Valencia Community College.
Preface
We are deeply indebted to our editor Melody Marcus. Her direction and guidance have
added clarity and quality to the text. We are especially indebted to our developmental editor Gail Korosa. Gail has coordinated the exchange of ideas between our class testers, reviewers, copyeditor, and error checkers. She has done far more than simply pass along
ideas. She has contributed numerous original suggestions that have enhanced the quality of
the text. Our editors have certainly facilitated our efforts to prepare a book that will facilitate a meaningful understanding of accounting. Even so, their contributions are to no avail
unless the text reaches its intended audience. We are most grateful to Rich Kolasa, Melissa
Larmon, and the sales staff for providing the informative advertising that has so accurately
communicated the unique features of the concepts approach to accounting educators. There
are many others at McGraw-Hill/Irwin who at a moment’s notice redirected their attention
so as to focus their efforts on the development of this text. We extend our sincere appreciation to Kimberly Hooker, Debra Sylvester, Ed Przyzycki, David Barrick, Laurie Entringer,
Jeremy Cheshareck, and Cathy Tepper. We deeply appreciate the long hours that you committed to the formation of a high-quality text.
Thomas P. Edmonds
Cindy D. Edmonds
Bor-Yi Tsay
xxiii