(eBook PDF) Fundamental Managerial

Accounting Concepts 8th Edition

Visit to download the full and correct content document:
https://ebooksecure.com/download/ebook-pdf-fundamental-managerial-accounting-co
ncepts-8th-edition/
 Fundamental
Managerial Accounting
Concepts 8e

Edmonds Edmonds Tsay Olds

Prerecorded video lectures solve this problem by allowing students to access lectures
on demand. Until now the only way to provide video coverage was for the instructor to
make personal recordings. Anyone who has tried this knows it is a time-consuming
activity. We offer a standardized turn-key course that is composed of prerecorded in-
structional videos, student directed self-assessment quizzes, and instructor generated
evaluative exams. The instructor simply selects the learning objectives to be covered.
There is no simpler way to develop a distance learning course.

Mass Section Courses

Many schools deliver live lectures to mass section classes. Students then break into
small groups that are led by teaching assistants or adjunct faculty. While this approach
is cost effective, it frequently results in dissatisfaction. Students often find it difficult to
see and hear in large lecture halls. Also, the lecture must be set at an average pace
which by its nature is too fast for many students and too slow for others. Prerecorded
video lectures resolve these issues. They enable students to study the lecture before
class. They can then bring questions about the lecture to the breakout sessions. Since
videos eliminate the need for mass lectures, there is more time for students to meet in
small groups where they are able to receive more individualized attention.

Competency-Based Learning Courses

Video instruction enables the implementation of a competency-based grading system.
Since learning is self-paced, grades can be assigned on the basis of how far students
go into the content as opposed to an averaging approach. For example, content could
be divided into modules. Grades could be assigned based on the number of modules
completed successfully. Weaker students could repeat lower level modules while
stronger students move on to more advanced topics. When you are no longer forced
to move students through your class in a lock step fashion, the potential for improving
the learning environment is virtually limitless.
There are many different competency-based models that can be applied to intro-
ductory accounting. At this point our objective is to introduce the general possibilities
for improving learning. If you are interested in developing a specific competency-
based approach for your classroom, you can speak directly with a member of the au-
thor team who has used videos in a variety of settings (contact information is provided
below). Standardized lesson plans that can be adapted for use in your individual class-
room are available upon request.
These are only a few opportunities made possible by video lectures. If you would
like to discuss these or other possible applications please contact Chris Edmonds at
cedmonds@gmail.com.

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds vii

ABOUT THE AUTHORS
Thomas P. Edmonds
Thomas P. Edmonds, PhD, is professor emeritus in the Department of Accounting at the University
of Alabama at Birmingham (UAB). He has been actively involved in teaching accounting principles
throughout his academic career. Dr. Edmonds has coordinated the accounting principles courses at
the University of Houston and UAB. He has taught introductory accounting in mass sections and in
distance learning programs. He has received five prestigious teaching awards, including the
Alabama Society of CPAs Outstanding Educator Award, the UAB President’s Excellence in Teaching
Award, and the distinguished Ellen Gregg Ingalls Award for excellence in classroom teaching. He
has written numerous articles that have appeared in many publications, including Issues in
Accounting, the Journal of Accounting Education, Advances in Accounting Education, Accounting
Education: A Journal of Theory, Practice and Research, the Accounting Review, Advances in
Accounting, the Journal of Accountancy, Management Accounting, the Journal of Commercial
Bank Lending, the Banker’s Magazine, and the Journal of Accounting, Auditing, and Finance.
Dr. Edmonds has served as a member of the editorial board for Advances in Accounting: Teaching and
Curriculum Innovations and Issues in Accounting Education. He has published five textbooks, five
practice problems (including two computerized problems), and a variety of supplemental materials
including study guides, work papers, and solutions manuals. Dr. Edmonds’ writing is influenced by
a wide range of business experience. He is a successful entrepreneur. He has worked as a
management accountant for Refrigerated Transport, a trucking company. Dr. Edmonds also worked
in the not-for-profit sector as a commercial lending officer for the Federal Home Loan Bank. In
addition, he has acted as a consultant to major corporations, including First City Bank of Houston
(now Citi Bank), AmSouth Bank in Birmingham (now Regions Bank), Texaco, and Cortland
Chemicals. Dr. Edmonds began his academic training at Young Harris Community College in Young
Harris, Georgia. He received a BBA degree with a major in finance from Georgia State University in
Atlanta, Georgia. He obtained an MBA degree with a concentration in finance from St. Mary’s
University in San Antonio, Texas. His PhD degree with a major in accounting was awarded by
Georgia State University. Dr. Edmonds’ work experience and academic training have enabled him
to bring a unique user perspective to this textbook.

Christopher T. Edmonds
Christopher T. Edmonds is an associate professor in the Department of Accounting and Finance at
the University of Alabama at Birmingham. He coordinates the mass section face-to-face and online
Principles of Accounting courses. He specializes in developing online and flipped accounting
courses and is a frequent speaker at universities and teaching conferences. Dr. Edmonds has
received four prestigious teaching awards and published three textbooks where he is the lead
video author. He has written numerous articles that have appeared in publications including
Accounting Review, Issues in Accounting Education, Advances in Accounting Education, AIS
Educators Journal, Advances in Accounting, Research in Accounting Regulation, and Review of
Quantitative Finance and Accounting. Dr. Edmonds began his academic training at Colorado State
University. He obtained an MBA degree from UAB. His PhD degree with a major in accounting was
awarded by Virginia Polytechnic Institute and State University.

viii Fundamental Managerial Accounting Concepts

Bor-Yi Tsay
Bor-Yi Tsay, PhD, CPA, is professor of accounting at Kennesaw State University (KSU). He has
taught principles of accounting courses at the University of Houston, the University of Alabama
at Birmingham, and Kennesaw State University. Dr. Tsay received the 1996 Loudell Ellis Robinson
Excellence in Teaching Award. He has also received numerous awards for his writing and
publications, including the John L. Rhoads Manuscripts Award, John Pugsley Manuscripts
Award, Van Pelt Manuscripts Award, and three certificates of merit from the Institute of
Management Accountants. His articles have appeared in Journal of Accounting Education,
Management Accounting, Journal of Managerial Issues, CPA Journal, CMA Magazine, Journal
of Systems Management, and Journal of Medical Systems. Dr. Tsay received a BS degree in
agricultural economics from National Taiwan University, an MBA degree with a concentration in
accounting from Eastern Washington University, and a PhD degree in accounting from the
University of Houston.

Philip R. Olds
Philip R. Olds is associate professor of accounting at Virginia Commonwealth University (VCU). He
has served as the coordinator of the introduction to accounting courses at VCU. Dr. Olds has also
received the Distinguished Service Award and the Distinguished Teaching Award from VCU School
of Business. Dr. Olds received his AS degree from Brunswick Junior College in Brunswick, Georgia (now
Costal Georgia—Community College). He received a BBA in accounting from Georgia Southern
College (now Georgia Southern University) and his MPA and PhD degrees from Georgia State
University. After graduating from Georgia Southern, he worked as an auditor with the U.S.
Department of Labor in Atlanta, Georgia, and is a former CPA in Virginia. Dr. Olds has published
articles in various academic and professional journals and presented papers at national and
regional conferences. He also served as the faculty adviser to the VCU chapter of Beta Alpha Psi
for five years and was recognized with an Outstanding Faculty Vice-President Award by the
national Beta Alpha Psi organization. Most recently he received the university’s award for
maintaining “High Ethical and Academic Standards While Advocating for Student-Athletes and
Their Quest Towards a Degree.”

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds ix

HOW DOES EDMONDS HELP

“Crisp chapters that

cover the material without
● PRINCIPAL FEATURES
wasted pages. [Also, the
text emphasizes] decision Our goal in writing this text is to teach students
making and includes cov-
erage of accountability.” managerial accounting concepts that will improve their
ANNE WILLIAMS, ability to make sound business decisions. The text
GATEWAY COMMUNITY
COLLEGE differs from traditional managerial accounting books in
“This book is excellent the following ways.
for the non-accounting
major because it is
user-oriented. This book
Decision-Making Skills Emphasized
actually interests
Notice that the table of contents places decision making up front. Procedural topics
non-accounting majors. I
like manufacturing cost flow, job order, and process costing are placed at the end of
have seen many students
our text, while traditional books discuss these topics early. We put decision making
actually get excited
front and center because we believe it is important. Beyond placement, we introduce
about what they are
topics within a decision-making context. For example, in Chapter 2 we introduce “cost
learning because they
behavior” within the context of operating leverage. We focus on how cost behavior
can relate the information
affects decisions such as “Am I sure enough that volume will be high that I want to
to the real world.”
employ a fixed cost structure or do I want to reduce operating leverage risk by build-
JACQUELINE BURKE, ing a variable cost structure?” Further, notice that Chapter 3 is written around a realis-
HOFSTRA UNIVERSITY tic business scenario where a management team is using CVP data to evaluate

x Fundamental Managerial Accounting Concepts

STUDENTS SEE THE BIG PICTURE?
decision alternatives. Indeed, all chapters are written in a narrative style with content “A great book that covers
focused on decision-making scenarios. This makes the text easy to read and interest- all the fundamentals but
ing as well as informative. doesn’t overwhelm the
non-accounting major.
Students really like the
Service Companies Emphasized course and much of the
For example, our budgeting chapter uses a merchandising business while most tradi- credit goes to the quality
tional texts use a manufacturing company. Using a service company is not only more of your book.”
relevant but also simplifies the learning environment, thereby making it easier for stu-
WALTER AUSTIN,
dents to focus on budgeting concepts rather than procedural details. This is only one
MERCER UNIVERSITY
example of our efforts to place greater emphasis on service companies.
“I like that the authors
used service companies
Isolating Concepts for the budgeting
How do you promote student understanding of concepts? We believe new con- process.”
cepts should be isolated and introduced individually in decision-making contexts.
For example, we do not include a chapter covering cost terminology (usually Chap- ALANA FERGUSON,
ter 2 in traditional approaches). We believe introducing a plethora of detached cost MOTT COMMUNITY
terms in a single chapter is ineffective, as students have no conceptual framework COLLEGE
for the new vocabulary.
“I think Edmonds’
­approach to introducing
concepts, and his flow of
Interrelationships between Concepts topics is the best of any
Although introducing concepts in isolation enhances student comprehension of accounting textbook I
them, students must ultimately understand how business concepts interrelate. The have used. His approach
text is designed to build knowledge progressively, leading students to integrate the allows me to emphasize
concepts they have learned independently. For example, see how the concept of a piece of the puzzle at a
relevance is compared on page 259 of Chapter 6 to the concept of cost behavior time [while] building to
(which is explained in Chapter 2) and how the definitions of direct costs are con- the whole picture.”
trasted on page 160 of Chapter 4 with the earlier introduced concepts of cost behav-
ior. Also, Chapters 1 through 12 include a comprehensive problem designed to GARY REYNOLDS,
integrate concepts across chapters. The problem builds in each successive chapter OZARK TECHNICAL
with the same company experiencing new conditions that require the application of COMMUNITY COLLEGE
concepts across chapters.
“This is an informative
and accessible text that
Context-Sensitive Nature of Terminology addresses both the
Students can be confused when they discover the exact same cost can be classified students’ need for
as fixed, variable, direct, indirect, relevant, or not relevant. For example, the cost of a relevant coverage and
store manager’s salary is fixed regardless of the number of customers that shop in instructors’ need for
the store. The cost of store manager salaries, however, is variable relative to the efficient delivery. A truly
number of stores a company operates. The salary costs are directly traceable to user-friendly text.”
particular stores but not to particular sales made in a store. The salary cost is rele-
vant when deciding whether to eliminate a given store but not relevant when decid- CHIAO CHANG,
ing whether to eliminate a department within a store. Students must learn to identify MONTCLAIR STATE
the circumstances that determine the classification of costs. The chapter material, UNIVERSITY

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds xi

 Appendix
LO 4-6 Problem 4-26B Allocating service center costs—step method and direct method
Garza Corporation has three production departments: forming, assembly, and packaging. The mainte-
nance department supports only the production departments; the computer services department
supports all departments, including maintenance. Other relevant information follows:

Computer
Forming Assembly Packaging Maintenance Services

Machine hours 3,000 1,250 750 400 0

Number of computers 14 20 11 15 8
Annual cost* $450,000 $800,000 $225,000 $100,000 $90,000
*This is the annual operating cost before allocating service department costs.

Required
a. Allocate service department costs to operating departments, assuming that Garza adopts the step
method. The company uses the number of computers as the base for allocating the computer ser-
exercises, and problems in this textandare
vices costs designed
machine toforencourage
hours as the base students
allocating the maintenance costs. to analyze
the decision-making context rather
b. Use machinethan tothememorize
hours as definitions.
base for allocating ATC 4-1
maintenance department costsin
andChapter
the number of4
computers as the base for allocating computer services cost. Allocate service department costs to
illustrates how the text teaches students to interpret different
operating departments, assuming that Garza adopts the direct method.decision-making
­environments. c. Compute the total allocated cost of service centers for each operating department using each
allocation method.

ANALYZE, THINK, COMMUNICATE

ATC 4-1 Business Applications Case Allocating fixed costs at HealthSouth

Corporation
HealthSouth Corporation claims to be “the nation’s largest owner and operator of inpatient
rehabilitation hospitals in terms of revenues, number of hospitals, and patients treated and
discharged.” As of December 31, 2014, the company derived 94.5 percent of its revenues from
inpatient services. During 2014 it treated and discharged 134,515 patients, and the average length of
a patient’s stay was 13.2 days. If one patient occupying one bed for one day represents a “patient-
day,” then HealthSouth produced 1,775,598 patient-days of output during 2014 (134,515 × 13.2 =
1,775,598). During this period, HealthSouth incurred depreciation costs of $107,700,000. For the
purpose of this problem, assume that all of this depreciation related to the property, plant, and
equipment of inpatient hospitals.
Required
a. Indicate whether the depreciation cost is a:
(1) Product (i.e., patient) cost or a general, selling, and administrative cost.
(2) Fixed or variable cost relative to the volume of production.
(3) Direct or indirect cost if the cost object is the cost of patient services provided in 2014.
b. Assume that HealthSouth incurred depreciation of $8,975,000 during each month of the
2014 fiscal year, but that it produced 160,000 patient-days of service during February and
135,000 patient-days of service during March. Based on monthly costs and service levels,
what was the average amount of depreciation cost per patient-day of service provided during
each of these two months, assuming each patient-day of service was charged the same amount
of depreciation?

“Given the current eco- Corporate Governance

nomic environment, Accountants have always recognized the importance of ethical conduct. However, the
edm69195_ch04_156-205.indd 200 6/22/16 1:25 PM

[Edmonds’] extensive enactment of Sarbanes–Oxley (SOX) has signaled the need for educators to expand
coverage of corporate the subject of ethics to a broader concept of corporate governance. We focus our
governance is critical ­expanded coverage on four specific areas, including:
to accounting.”
• Quality of Earnings—We explain how financial statements can be manipulated.
PATRICK STEGMAN, • The Statement of Ethical Professional Practice for Management Accountants—Our
COLLEGE OF LAKE coverage focuses on the policies and practices promulgated by the Institute of Man-
COUNTY agement Accountants.
• The Fraud Triangle—We discuss the three common features of criminal and ethical
misconduct, including opportunity, pressure, and rationalization.
• Specified Features of Sarbanes–Oxley (SOX)—We cover four key provisions of SOX
that are applicable to managerial accountants.
Corporate governance is introduced in Chapter 1. This chapter includes four exercises,
two problems, and one case that relate to the subject. Thereafter, a corporate gover-
nance case is included in every chapter, thereby enabling continuing coverage of this
critically important topic.

xii Fundamental Managerial Accounting Concepts

 Management Accounting and Corporate Governance 39

Problem 1-23A Upstream, midstream, and downstream costs LO 1-4

Excel Spreadsheets
Power-To-Spare, Inc. makes a smartphone case that includes a battery that extends the operating life CHECK FIGURES
“[The text is] easy to
of an iPhone. The manufacturing costs per unit include $15 direct materials, $17 direct labor and $8 b. $70,000
Spreadsheet applications read and it is innovative
manufacturing overhead. These costs are are
based essential
on a productiontoandcontemporary
sales volume of 4,000 accounting practice. Students
units. e. Net loss: $40,000
Advertising costs amounted to $25,000. Research and development cost for the materials used in the
must recognize the power of spreadsheet software and know how accounting data for including Excel
phone cases amounted $30,000. Companywide administrative costs amounted to $45,000. Fashion
are presented
design in$20,000.
costs amounted to spreadsheets. We discuss
Power-To-Spare’s management Microsoft
team established the salesExcel
price at spreadsheet applications
spreadsheets and the
150 percent of GAAP-defined product cost.
where appropriate throughout the text. In most instances, the text illustrates actual accounting template.”
Required
spreadsheets. End-of-chapter materials include problems students can complete us-
a. Determine the total amount of upstream costs. WEDE ELLIOTT-
ing spreadsheet software.
b. Determine the total amount A cost.
of downstream sample of the logo used to identify problems suitable for BROWNELL, SOUTHERN
c. Determine
Excel the total amountsolutions
spreadsheet of midstream cost.
is shown here.
d. Determine the sales price per unit. UNIVERSITY/A&M
e. Prepare a GAAP-based income statement. COLLEGE
f. Provide a plausible explanation as to why the company incurred the loss shown on the income
statement prepared to satisfy Requirement e. (Hint: Calculate the full cost of making and selling
the cases.)

Problem 1-24A Service versus manufacturing companies LO 1-4

Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash.
During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of
cash payments.
Required
Prepare a GAAP-based income statement and balance sheet for Wang Company for 2018, under each
of the following independent scenarios: CHECK FIGURES
a. Net income: $23,000
a. Wang is a promoter of rock concerts. The $65,000 was paid to provide a rock concert that pro-
b. Total assets: $145,000
duced the revenue.
c. Net income: $54,500
b. Wang is in the car rental business. The $65,000 was paid to purchase automobiles. The automo-
biles were purchased on January 1, 2018, and have five-year useful lives, with no expected sal-
vage value. Wang uses straight-line depreciation. The revenue was generated by leasing the
automobiles.
c. Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to
make products. It had a three-year life and a $6,000 salvage value. The company uses straight-
line depreciation.
(5) During 2018, Wang started and completed 2,000 units of product. The revenue was earned
when Wang sold 1,500 units of product to its customers.
d. Refer to Requirement c. Could Wang determine the actual cost of making the 500th unit of prod-
uct? How likely is it that the actual cost of the 500th unit of product was exactly the same as the
cost of producing the 501st unit of product? Explain why management may be more interested in
average cost than in actual cost.

Problem 1-25A Using JIT to reduce inventory holding costs LO 1-5

Kenta Manufacturing Company obtains its raw materials from a variety of suppliers. Kenta’s strat- CHECK FIGURE
egy is to obtain the best price by letting the suppliers know that it buys from the lowest bidder. a. $216,000
Approximately four years ago, unexpected increases in demand resulted in materials shortages.
Kenta was unable to find the materials it needed even though it was willing to pay premium prices.
Because of the lack of raw materials, Kenta was forced to close its manufacturing facility for two
weeks. Its president vowed that her company would never again be at the mercy of its suppliers.

edm69195_ch01_002-059.indd 39 6/22/16 11:16 AM

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds xiii

HOW DOES EDMONDS
12 Chapter 1

EXHIBIT 1.10
Cost Allocation
Do Intel’s historically based financial statements contain the information Mr. Grove needs? No.
Financial accounting is not designed to satisfy all the information needs of business manag-
$15 3 2 hours $30
ers. Its scope is limited to the needs of external users such as investors and creditors. The field
Allocation rate
$120 4 8 5 $15
of accounting designed to meet the needs ofper
internal users is called managerial accounting.
labor hour

$15 3 6 hours $90

Real-World Examples
The Edmonds’ text provides a variety of
The Curious Accountant
Since indirect costs cannot be effectively traced to products, they are normally as- thought-provoking, real-world examples
signed to products using cost allocation, a process of dividing a total cost into parts and
assigning the parts
In the first course of accounting, you learned howto re-
relevant cost objects. To illustrate, suppose that production workers
spend an eight-hour day making a chair and a table. The chair requires two hours to com-
of managerial accounting as an essential
tailers, such as Walmart, account forand
plete
during
thethe
cost of equip-
table requires six hours. Now suppose that $120 of utilities cost is consumed part of the management process.
ment that lasts more than one year.the day. How
Recall that much
the of the $120 should be assigned to each piece of furniture? The
utility cost cannot be directly traced to each specific piece of furniture, but the piece of
equipment was recorded as anfurniture
asset whenthatpurchased,
required more labor also likely consumed more of the utility cost. Using this
and then it was depreciated over
line its expected useful
of reasoning, it is rational to allocate the utility cost to the two pieces of furniture
based on the
life. The depreciation charge reduced direct labor hours at a rate of $15 per hour ($120 ÷ 8 hours). The chair would be
company’s
assigned $30 ($15 per hour × 2 hours) of the utility cost and the table would be assigned
assets and increased its expenses. This approach
the remaining was × 6 hours) of utility cost. The allocation of the utility cost is
$90 ($15
shown inwhich
justified under the matching principle, Exhibit 1.10.to
seeks
We discuss the details of cost allocation in a later chapter. For now, recognize that over-
recognize costs as expenses in the same period that
head costs are normally allocated to products rather than traced directly to them.
the cost (resource) is used to generate revenue.
Is depreciation always shown as an expense onProduct
Manufacturing the Cost Summary The Curious Accountant
income statement? The answerAs may surprisethe
explained, you. Con-
cost of a product made by a manufacturing company is normally composed
sider the following scenario. Fitbitof three
Inc.categories:
manufacturesdirect materials, direct labor, and manufacturing overhead. Relevant Each chapter opens with a short vignette
the Fitbit Charge HR fitness information
device thatabout these three cost components is summarized in Exhibit 1.11.
it sells to that sets the stage and helps pique student
Walmart. Assume that in order to produce the Charge
HR, Fitbit had to purchase a robotic machine that it ex- © Haiyin Wang/Alamy
interest. These vignettes pose a question
pects can be used to produce 10,000,000 fitness devices. about a real-world accounting issue related
Do you think Fitbit should account for depreciation on its manufacturing equipment
As you theaccounting
have seen, same wayfor depre-
Answers to The Curious Accountant
Walmart accounts for depreciation on its registers at the checkout counters? If not, howrelated
ciation shouldtoFitbit account assets
manufacturing
to the topic of the chapter. The answer to
for isitsdifferent
depreciation? Remember the matching principle when thinking of your answer. (Answer on page 12.)
from accounting for depreciation for nonmanufacturing assets. Depreciation on the checkout equipment at the question appears in a separate sidebar
Walmart is recorded as depreciation expense. Depreciation on manufacturing equipment at Fitbit is considered a prod- a few pages further into the chapter.
uct cost. It is included first as part of the cost of inventory and eventually as part of the expense, cost of goods sold. Re-
cording depreciation on manufacturing equipment as an inventory cost is simply another example of the matching
Management
Management Accounting Accounting
and Corporate and Corporate25Governance
Governance 7
principle, because the cost does not become an expense until revenue from the product sale is recognized.
EXHIBIT 1.3
FOCUS ON INTERNATIONAL ISSUES
Transforming
FINANCIAL ACCOUNTING the Asset
VERSUS Cash into the Asset Finished Goods Inventory
MANAGERIAL
ACCOUNTING—ANFinancial
edm69195_ch01_002-059.indd 3 INTERNATIONAL
assets PERSPECTIVE
Manufacturing process Physical assets 6/22/16 11:16 AM

This chapter has already explained some of the conceptual differences

between financial and managerial accounting, but these differences
have implications for international businesses as well. With respect to
$390 materials
Focus on International Issues
financial accounting, publicly traded companies in most countries
edm69195_ch01_002-059.indd 12
must follow the generally accepted accounting principles (GAAP) for 6/22/16 11:16 AM These boxed inserts expose students
their country, but these rules can vary from country to country. Gener-
Converted Converted
ally, companies that are audited under the auditing standards of the to international issues in accounting.
United States follow the $1,000
standards
of
established by the Financial
$470 labor
Accounting Standards Board (FASB). Most companies located outside
cash
the United States follow the standards established by the International
Accounting Standards Board (IASB). For example, the United States is
one of very few countries whose GAAP allow the use of the LIFO © Adam Roundtree/Bloomberg via Getty Images $1,000 of
inventory cost flow assumption. finished goods
Conversely, most of the managerial accounting concepts$140introduced in this course can be used by businesses in any country. For ex-
tools (overhead)
ample, activity-based costing (ABC) is a topic addressed in Chapter 5 and is used by many companies in the United States. Additionally, while
accrual-based earnings can differ depending on whether a company uses U.S. GAAP or IFRS, cash flow will not. As you will learn in this

Check Yourself
course, managerial accounting decisions often focus on cash flow versus accrual-based income. Therefore, managerial accounting concepts
are more universal than financial accounting rules.

CHECK YOURSELF 1.1

These short question/answer features
All boxes of General Mills’ Total Raisin Bran cereal are priced at exactly the same amount in your local
■ SOX requires management to establish a code of ethics and to file reports on the code in
grocery store. Does this mean that the actual cost of making each box of cereal was exactly the same?
the company’s annual 10-K report filed with the Securities and Exchange Commission.
occur at the end of each main topic and
■ SOX demands Answer
ymous reporting
No, making
that management
of fraudulent
contain
each boxa would
establish
activities.
slightly more
hotlinenotand
Further,
or less cereal
costother
SOXboxes.
than other
exactly
prohibits
the same amount.
mechanisms
companies
Accordingly,
for the For
some from
example, some boxes
anon-
boxes pun-
cost slightly more or less
ask students to stop and think about the
ishing whistleblowers, employees
to make than
strategy.
who
others do. legally
General report
Mills uses corporate
average cost misconduct.
rather than actual cost to develop its pricing
material just covered. The answer is then
The accounting profession and government authorities are becoming increasingly intolerant
of unethical conduct and illegal activity. A single mistake can jeopardize an accountant’s given to provide immediate feedback
career. A person guilty of white-collar crime loses the opportunity for white-collar employ-
ment. Second chances are rarely granted. before students go on to a new topic.
Costs Can Be Assets or Expenses
“I especially like theItofmight
Check seem odd that wages paid to production workers are recorded as inventory instead
being expensed.Yourself and that
Remember, however, A expenses
LookareBack/A assets A Look
usedLook
in Forward
Back
the process of << features because they help students to review
earning revenue. The cash paid to production workers is not used to produce revenue. In-
and refreshManagerial
topicsaccounting
as
stead,they
the cash progress
focuses is
onused
through
to produce needs
the information inventory. Revenue
of internal
the chapter.”
willwhile
users, be earned when the inventory is
financial
usedon(sold).
accounting focuses So long as
the information the inventory
needs of externalremains on hand, all
users. Managerial product uses
accounting costs (materials, labor,
and overhead)
economic, operating, remain inasanwell
and nonfinancial, inventory account.
as financial, data. Managerial accounting
ANNA L. LUSHER, SLIPPERY ROCK UNIVERSITY When a table is sold, the average cost of the table is
information is local (pertains to the company’s subunits), is limited by cost/benefit consider-transferred from the Inventory ac-
count to the
ations, is more concerned Cost
with of Goods
relevance andSold (expense)
timeliness, andaccount. If some tables
is future-oriented. remain unsold at the end
Financial
of the accounting
accounting information, on the otherperiod,
hand, is part
more of global
the product cost is reported
than managerial as aninfor-
accounting asset (inventory) on the
balance
mation. It supplies sheet while
information the other
that applies partwhole
to the is reported
company. as an expenseaccounting
Financial (cost of goods
is sold) on the in-
come statement.
“The Curious Accountant, the real-world examples, and the Check Yourself boxes are unique features.”
regulated by numerous authorities, is characterized by objectivity, is focused on reliability
Costs thatinare
and accuracy, and is historical not classified as product costs are normally expensed in the period in
nature.
which
Both managerial andthey are incurred.
financial accounting Theseare costs include
concerned with productoperating
general costing. Financial
costs, selling and adminis-
accountants needtrative
productcosts,
cost information to determine
interest costs, the amount
and the cost of incomeof inventory
taxes. reported on the
RONALD REED, UNIVERSITY OF NORTHERN COLORADO
balance sheet and the To
amount
rial accountants tables
need toatknow
of costreturn
illustrate, of goods
the costcost
soldTabor
to the
of products
reported on the incomeexample.
Manufacturing
for$250.
pricingAssume
decisions
statement.Recall
and pays
Manage-
for control
that Tabor made four
and
an average per unit of Tabor an employee who sells three
evaluation purposes. When
of the tablesdetermining
a $200 sales unitcommission.
product costs,The managers use the average
sales commission cost per immediately. The
is expensed
total product cost for the three tables (3 tables × $250 each = $750) is expensed on the
“This is a strong textbook, well-written and [the] illustrations are strong. Use of colors adds to the presentation.”
income statement as cost of goods sold. The portion of the total product cost remaining in

CHERYL CORKE, GENESEE COMMUNITY COLLEGE

edm69195_ch01_002-059.indd 25 6/22/16 11:16 AM

edm69195_ch01_002-059.indd 7 6/22/16 11:16 AM

xiv Fundamental Managerial Accounting Concepts

MOTIVATE STUDENTS?
24 Chapter 1

Reality Bytes REALITY BYTES

Real-world applications related to specific chapter Unethical behavior occurs in most large organizations, but some organizations seem to have fewer ethics
problems than others. In its 2015 report, The State of Ethics in Large Companies, the Ethics Resource Cen-

­topics are introduced through this feature. Reality Bytes
may offer survey results, graphics, quotations from
business leaders, and other supplemental topics that
enhance opportunities for students to connect the text
material to actual accounting practice.
ter reported its findings of the occurrences and reporting of unethical behavior in large American corpora-
tions, based on a survey it conducts every two years.
Forty-five percent of those surveyed reported having observed unethical conduct during the past year.
This was the lowest level reported in the 17 years the survey has been conducted. Sixty-five percent of
those who said they had observed misconduct went on to report it to their employer. However, fear of re-
taliation for reporting misconduct was a concern. Of respondents who said they had reported misconduct
at their companies, 22 percent said they had experienced some form of retaliation, such as being excluded
from decision making.
Overall, 51 percent of individuals surveyed reported having observed unethical conduct at their com-
pany. However, in companies that had an effective ethics program, only 33 percent reported seeing
misconduct, while 61 percent of those in companies without such programs reported seeing misconduct.
Employees in companies with effective programs were also much more likely to report what they saw © Purestock/SuperStock
than those in other companies, 87 percent versus 32 percent. Additionally, when misconduct was re-
ported, only 4 percent of employees in companies with effective programs reported retaliation, com-
pared to 59 percent of those in other companies.
The definition of ethical misconduct used in the study was quite broad, and included misuse of company time, abusive behavior, abusing
company resources, lying to employees, and violating the company’s policies for using the Internet.

For more information go to www.ethics.org.

Name and Type of Company
best indicator
Chapter Focus Company Chapter Title
protect themselves from unscrupulous characters? The answer lies in personal integrity. The
Used
as Main
of personal Chapter
integrity Example Accordingly, companies must exer-
is past performance.
cise due care in performing appropriate background investigations before hiring people to
fill positionsCompany
of trust.Used as
Main Chapter Example
Company Logo Type of Company

Each chapter introduces important managerial 1. Management Accounting and

Sarbanes–Oxley Act
Manufactures ceramic pottery
In spitePatillo Manufacturing
of ethics trainingCompany
and accounting controls, fraud and its devastating consequences
­accounting topics within the context of a realistic Corporate Governance
persist. Enron, WorldCom, and HealthSouth are examples of massive scandals that
destroyed or crippled major U.S. corporations in recent years. These high-profile cases
­company. Students see the impact of managerial 2. Cost Behavior, Operating Leverage,
and Profitability Analysis
led government
Star Productions,officials
Inc. (SPI) to conclude that the forcePromotes
of lawrock would
and maintain confidence in the capital markets. The Sarbanes–Oxley (SOX) Act, which
be necessary to restore
concerts

­accounting decisions on the company as they work became effective July 30, 2002, provides the muscle that Congress hopes will deter fu-
ture fiascos. SOX affects four groups including management, boards of directors, exter-
3. Analysis of Cost, Volume, and Bright Day Distributors Sells nonprescription health
through the chapter. When the Focus Company is Pricing to Increase Profitability nal auditors, and the Public Company Accounting foodOversight
supplements Board (PCAOB). In this
text, we focus on how SOX affects corporate management. While extensive coverage of
­presented in the chapter, its logo is shown so the SOX is beyond the scope of this text, all management accountants should be aware of the
4. Cost Accumulation,Tracing, and following: In Style, Inc. (ISI) Retail clothing store
Allocation
­students see its application to the text topics. ■SOX holds the chief executive officer (CEO) and the chief financial officer (CFO) re-
sponsible for the establishment and enforcement of a strong set of internal controls.
5. Cost Management in an Automated Unterman Shirt Produces todress and casual shirtseffectiveness of
Along with itsCompany
annual report, companies are required report on the
Business Environment: ABC, ABM,
and TQM their internal controls. Also, the company’s external auditors are required to attest to the
accuracy of the internal controls report.
6. Relevant Information for Special ■ SOX Premier Office Products
charges the CEO and the CFO with the ultimate Manufactures printers
responsibility for the accuracy of
“By following one company through Decisions
80 Chapter 2 the company’s financial statements and the accompanying notes. Even though lower-
level managers will likely prepare the annual report, the CEO and CFO are required to
several situations as the chapter affectthat
certify
and
a dependent
variable
they have variable.
coststatements
Multiple
reviewed
estimates. or
A trial
regression
the report
and error
analysis
and that,
process
can improve
to their
using
knowledge,
multiple
the accuracy of fixed
the report
regression
does
analysis is
7. Planning for Profit and Cost Control notHampton
containHamsfalse
(HH) significant omissions. Anhams
Sells cured intentional
nationwide misrepresentation
progresses, more of a ‘real world’ frequently used
is punishable by atofine
assess the to
of up relative importance
$5 million of a variety
and imprisonment
through of of
independent
retail outlets variables. The
up to 20 years.
regression analysis is performed repeatedly, dropping and adding independent variables, until
decision-making process is an acceptable level of accuracy is achieved.

8. Performance Evaluation Melrose Manufacturing Company Makes small, high-quality statues

­obtained.” << A Look Back used in award ceremonies

ALEECIA HIBBETS, UNIVERSITY OF
To plan and control business operations effectively, managers need to understand how dif-
edm69195_ch01_002-059.indd 24
9. Responsibility Accounting Panther Holding Company Furniture Manufacturing Division
ferent costs behave in relation to changes in the volume of activity. Total fixed cost remains
6/22/16 11:16 AM

constant when activity changes. Fixed cost per unit decreases with increases in activity and
LOUISIANA AT MONROE increases with decreases in activity. In contrast, total variable cost increases proportionately
with increases in activity and decreases proportionately with decreases
10. Planning for Capital Investments EZ Rentals Rents computers, monitors, in
andactivity. Variable
cost per unit remains constant regardless of activity levels.equipment
projection The definitions of fixed and vari-
able costs have meaning only within the context of a specified range of activity (the relevant
“I like the different approaches to 11. Product Costing in Service and
range) for a defined period of time. In addition, cost behavior depends on the relevant vol-
Constructs
Ventra Manufacturing
ume measure Company
(a store manager’s salary is fixed relative to mahogany
the number jewelry
of customers visiting
have real-world examples and the Manufacturing Entities a particular store but is variable relative to the number
both fixed and variable cost components.
boxes of stores operated). A mixed cost has

problems within the chapter that 12. Job-Order, Process, and Hybrid
Costing Systems
Fixed costs allow companies to take advantage
Benchmore Boat Company
of operating leverage. With operating
Manufactures boats
leverage, each additional sale decreases the cost per unit. This principle allows a small
percentage change in volume of revenue to cause a significantly larger percentage change
show how to do things.” in profits.
Janis The magnitude of operating leverageMakes
Juice Company can befruitdetermined
juice by dividing the con-
tribution margin by net income. When all costs are fixed and revenues have covered fixed
costs, each additional dollar of revenue represents pure profit. Having a fixed cost struc-
CHRISTINA WILLIAMS, 80 Chapter 2
ture (employing operating leverage) offers a company both risks and rewards. If sales
volume increases, costs do not increase, allowing profits to soar. Alternatively, if sales
volume decreases, costs do not decrease and profits decline significantly more than rev-
NORTHEASTERN UNIVERSITY edm69195_ndx_704-716.indd 716 affect a dependent
enues.
and variable cost
variable.
Companies Multiple
withregression
high variableanalysis
costscan
in improve
relation tothefixed
accuracy
costsofdofixed
not09/07/16
experience
7:27 AM
as
greatestimates.
a level of A trial and error
operating processTheir
leverage. usingcosts
multiple regression
increase analysisinis proportion to
or decrease
frequently used to assess
changes in the relativeThese
revenue. importance of a variety
companies of independent
face less risk but failvariables. The
to reap disproportionately
regression analysis
higher is profits
performed whenrepeatedly,
volume dropping
soars. and adding independent variables, until
an acceptable levelUnder
of accuracy is achieved.margin approach, variable costs are subtracted from revenue
the contribution
to determine the contribution margin. Fixed costs are then subtracted from the contribu-
A Look Back/A Look Forward << A Look Back
tion margin to determine net income. The contribution margin represents the amount
available to pay fixed costs and provide a profit. Although not permitted by GAAP for
external reporting, many companies use the contribution margin format for internal re-
Students need a roadmap to make sense of porting purposes.
To plan and control business
Cost per unit operations effectively,
is an average managers
cost that is easierneed to understand
to compute howactual
than the dif- cost of each
ferent costs behave in relation
is moreto changestoindecision
the volume of activity. Totalcost. cost remainsmust use judg-
fixedAccountants
where the chapter topics fit into the “whole” unit and
constant whenmentactivity changes.
when
relevant
choosing Fixedthecost
time perspan
making
unit from
decreases
than actual
which with increases
to draw datainfor activity and the average
computing
increases withcost
decreases
per unit.in activity.
DistortionsIn contrast,
can result total variable
from usingcost increases
either too long proportionately
or too short a time span.
picture. A Look Back reviews the chapter with increases in activity
cost per unit remains
Fixed and andvariable
constant
decreases proportionately
costs can be estimated
regardlessanalysis.
of activity
withusing
levels.
decreases in activity.
such tools
The definitions
Variable method, scat-
as the high-low
of scattergraphs
fixed and vari-are easy to use.
tergraphs, and regression The high-low method and
material and A Look Forward introduces stu- able costs haveRegression
meaning only within
analysis is the
morecontext of a specified range of activity (the relevant
accurate.
range) for a defined period of time. In addition, cost behavior depends on the relevant vol-
ume measure (a store manager’s salary is fixed relative to the number of customers visiting
dents to what is to come. >> a particular store but is variable relative to the number of stores operated). A mixed cost has
A Look Forward
both fixed and variable cost components.
Fixed costs allow companies to take advantage of operating leverage. With operating
leverage, eachTheadditional
next chaptersale will
decreases
show you thehowcostchanges
per unit.in This
cost, principle
volume, and allows a small
pricing affect profitability.
percentage change
You willin volume
learn toofdetermine
revenue tothecause
numbera significantly larger percentage
of units of product that must be change
produced and sold
in profits. Theinmagnitude
order to break of operating
even (theleverage
number of canunits
be determined by dividing
that will produce the con-
an amount of revenue that is
tribution margin by net
exactly income.
equal When
to total allYou
cost). costswill
are learn
fixedtoand revenues
establish thehavepricecovered fixed using a cost-
of a product
costs, each additional dollar of revenue represents pure profit. Having a fixed cost
plus pricing approach and to establish the cost of a product using a target-pricing approach. struc-
ture (employing operating leverage) offers a company both risks and rewards. If sales
volume increases, costs do not increase, allowing profits to soar. Alternatively, if sales
volume decreases, costs do not decrease and profits decline significantly more than rev-
enues. Companies with high variable costs in relation to fixed costs do not experience as
great a level of operating leverage. Their costs increase or decrease in proportion to
changes in revenue. These companies face less risk but fail to reap disproportionately
Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds edm69195_ch02_060-111.indd 80
higher profits when volume soars.
Under the contribution margin approach, variable costs are subtracted from revenue
xv
6/22/16 1:15 PM

to determine the contribution margin. Fixed costs are then subtracted from the contribu-
tion margin to determine net income. The contribution margin represents the amount
available to pay fixed costs and provide a profit. Although not permitted by GAAP for
REINFORCED?
HOW ARE CHAPTER CONCEPTS
Regardless of the instructional approach, there is no shortcut to
28 Chapter 1

learning accounting. Students must practice to master basic ac-

counting concepts. The text includes an ample supply of practice
materials, exercises, and problems.
finished products. For example, PepsiCo must be concerned with the activities of the com-
pany that supplies the containers for its soft drinks as well as the retail companies that sell
its products. If cans of Pepsi fail to open properly, the customer is more likely to blame
PepsiCo than the supplier of the cans. Comprehensive value chain analysis can lead to iden-
tifying and eliminating nonvalue-added activities that occur between companies. For exam-
ple, container producers could be encouraged to build manufacturing facilities near Pepsi’s
bottling factories, eliminating the nonvalue-added activity of transporting empty containers
from the manufacturer to the bottling facility. The resulting cost savings benefits customers
by reducing costs without affecting quality.

Self-Study Review Problem

Video lectures and accompanying self-assessment quizzes are available in Connect
for all learning objectives. These representative example problems
SELF-STUDY REVIEW PROBLEM
­include a detailed, worked-out solution and
Tuscan Manufacturing Company makes a unique headset for use with mobile phones. During 2018, its
first year of operations, Tuscan experienced the following accounting events. Other than the adjusting provide another level of support for students
entries for depreciation, assume that all transactions are cash transactions.
1. Acquired $850,000 cash from the issue of common stock. before they work problems on their own.
2. Paid $50,000 of research and development costs to develop the headset.
3. Paid $140,000 for the materials used to make headsets, all of which were started and completed
These review problems are included as
during the year.
4. Paid salaries of $82,200 to selling and administrative employees.
­animated audio presentations available in
5. Paid wages of $224,000 to production workers.
6. Paid $48,000 to purchase furniture used in selling and administrative offices.
the Connect Library.
7. Recognized depreciation on the office furniture. The furniture, acquired January 1, had an
$8,000 estimated salvage value and a four-year useful life. The amount of depreciation is com-
puted as [(Cost − Salvage) ÷ Useful life]. Specifically, [($48,000 − $8,000) ÷ 4 = $10,000].
8. Paid $65,000 to purchase manufacturing equipment.
9. Recognized depreciation on the manufacturing equipment. The equipment, acquired January 1
“End-of-chapter exercise and problem
had a $5,000 estimated salvage value and a three-year useful life. The amount of depreciation is
computed as [(Cost − Salvage) ÷ Useful life]. Specifically, [($65,000 − $5,000) ÷ 3 = $20,000]. materials are varied and first rate.”
10. Paid $136,000 for rent and utility costs on the manufacturing facility.
380 Chapter 8
11. Paid $41,000 for inventory holding expenses for completed headsets (rental of warehouse space,
salaries of warehouse personnel, and other general storage costs).
Required DARLENE COARTS, UNIVERSITY OF
Tuscan started
a.12.Determine and completed 20,000variance
headset units during 2018. The itcompany sold 18,400 head-
the fixed
sets atExplain
able. a price what
cost spending
of $38this
pervariance
unit.
and indicate whether is favorable or unfavor-
means. Identify the manager(s) who is (are) responsible for
NORTHERN IOWA
Compute
13.the the average product cost per unit and recognize the appropriate amount of cost of
variance.
goods sold.the fixed cost volume variance and indicate whether it is favorable or unfavorable.
b. Determine
Explain why this variance is important. Identify the manager(s) who is (are) responsible for
Required
the variance.
a. Show how these events affect the balance sheet and income statement by recording them in a
horizontal financial statements model.
b. Prepare a GAAP-based income statement for the year. Exercise Series A & B and Problem
PROBLEMS—SERIES A c. Distinguish between the product costs and the upstream and downstream costs that Tuscan in-
curred.
d. The company president believes
All applicable that Tuscan
Problems could
in Series save
A are money by
available buying the inventory that it cur-
in Connect.
Series A & B
rently makes. The warehouse supervisor said that would not be possible because the purchase
price of $27 per unit was above the $26 average cost per unit of making the product. Assuming There are two sets of problems and
LO 8-1 Problem 8-18A Flexible budget planning
that the purchased inventory would be available on demand, explain how the company president
could
Howard be correct
Cooper, and why of
the president theGlacier
warehouse supervisor
Computer couldneeds
Services, be biased in hisHe
your help. assessment of thethe
wonders about op- ­exercises, Series A and B. Instructors can
tion to
potential buy the
effects oninventory.
the firm’s net income if he changes the service rate that the firm charges its
CHECK FIGURES customers. The following basic data pertain to fiscal year 2019: assign one set for homework and use the
a. NI = $124,000
c. NI = $130,000 other set for in-class work.
Standard rate and variable costs
Service rate per hour $60.00
Labor cost 32.00
edm69195_ch01_002-059.indd 28 Overhead cost
Selling, general, and administrative cost
5.76
3.44
6/22/16 11:16 AM
Check Figures
Expected fixed costs
Facility maintenance
Selling, general, and administrative
$320,000
120,000
The figures provide a quick reference for
students to check their progress in solving
Required the problem. These are included for all
a. Prepare the pro forma income statement that would appear in the master budget if the firm expects
to provide 30,000 hours of services in 2019. problems in Series A.
b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of
service hours that the firm can achieve. According to the consultant’s analysis, if Glacier charges
customers $56 per hour, the firm can achieve 38,000 hours of services. Prepare a flexible budget
using the consultant’s assumption.
c. The same consultant also suggests that if the firm raises its rate to $64 per hour, the number of
Excel
service hours will decline to 25,000. Prepare a flexible budget using the new assumption.
d. Evaluate the three possible outcomes you determined in Requirements a, b, and c and recommend
Many exercises and problems can be
a pricing strategy.
solved using the Excel spreadsheet
LO 8-1, 8-2, 8-3 Problem 8-19A Analyzing not-for-profit entity variances ­templates located in the Connect Library.
CHECK FIGURE
b. Variance of surplus: $1,620 U
The Redmond Management Association held its annual public relations luncheon in April 2017.
Based on the previous year’s results, the organization allocated $25,290 of its operating budget to A logo appears in the margins next to
cover the cost of the luncheon. To ensure that costs would be appropriately controlled, Molly Hubbard,
the treasurer, prepared the following budget for the 2017 luncheon. these exercises and problems for easy
The budget for the luncheon was based on the following expectations:
1. The meal cost per person was expected to be $14.50. The cost driver for meals was attendance, identification.
which was expected to be 1,400 individuals.
2. Postage was based on $0.49 per invitation and 3,000 invitations were expected to be mailed. The
cost driver for postage was number of invitations mailed.

“The end-of-chapter problems provide a lot of practice for students, and I like having the
3. The facility charge is $1,000 for a room that will accommodate up to 1,600 people; the charge for
one to hold more than 1,600 people is $1,500.

companion A and B problems.”

KENNETH BRONSTEIN, WESTERN WASHINGTON UNIVERSITY

edm69195_ch08_352-401.indd 380 6/29/16 5:50 PM

xvi Fundamental Managerial Accounting Concepts

REINFORCED?
Management Accounting and Corporate Governance 53

Analyze, Think, Communicate (ATC) ANALYZE, THINK, COMMUNICATE

Each chapter includes an innovative section ATC 1-1 Business Applications Case Financial versus managerial accounting
The following information was taken from GoPro, Inc.’s SEC filings:
called Analyze, Think, Communicate (ATC).
This section contains: Fiscal Year Ended

December 31, 2014 December 31, 2013

• Writing Assignments Number of employees

Revenues (in thousands)
970
$1,394,205
757
$985,737
Properties (all leased) 200,000 square feet 200,000 square feet
Total assets (in thousands) $917,691 $439,671
Units shipped (in thousands) 5,180 3,849
Net earnings (in thousands) $128,088 $60,578

• Group Exercises Required

a. Explain whether each line of information in the table above would best be described as being
primarily financial accounting or managerial accounting in nature.
b. Provide some additional examples of managerial and financial accounting information that could
apply to GoPro.
c. If you analyze only the data you identified as financial in nature, does it appear that GoPro’s 2014
• Ethics Cases fiscal year was better or worse than its 2013 fiscal year? Explain.
d. If you analyze only the data you identified as managerial in nature, does it appear that GoPro’s
2014 fiscal year was better or worse than its 2013 fiscal year? Explain.
e. Did GoPro appear to be using its facilities more efficiently or less efficiently in 2014 than in
2013?

ATC 1-2 Group Assignment Product versus upstream and downstream costs
• Internet Assignments Victor Holt, the accounting manager of Sexton, Inc., gathered the following information for 2017.
Some of it can be used to construct an income statement for 2017. Ignore items that do not appear
on an income statement. Some computation may be required. For example, the cost of manufactur-
ing equipment would not appear on the income statement. However, the cost of manufacturing
equipment is needed to compute the amount of depreciation. All units of product were started and
completed in 2017.
1. Issued $864,000 of common stock.

• Real Company Examples 2. Paid engineers in the product design department $10,000 for salaries that were accrued at the end
of the previous year.
3. Incurred advertising expenses of $70,000.
4. Paid $720,000 for materials used to manufacture the company’s product.
5. Incurred utility costs of $160,000. These costs were allocated to different departments on the basis
of square footage of floor space. Mr. Holt identified three departments and determined the square
footage of floor space for each department to be as shown in the table below.

Department Square Footage

“The students also seem to like the ATC group “I really appreciate the Analyze,
Research and development 10,000 Think, Communicate section,
Manufacturing 60,000
assignments. These work very well as an in- especially since we emphasize
Selling and administrative
Total
30,000
100,000
use of information and
class activity.” ­communicating results to management.”

CASSIE BRADLEY, DALTON STATE COLLEGE LISA BANKS, CHARLES S. MOTT COMMUNITY COLLEGE

edm69195_ch01_002-059.indd 53
Management Accounting and Corporate Governance 57
6/22/16 11:16 AM

Mastering Excel and Using Excel ATC 1-7 Spreadsheet Assignment Mastering Excel
Mantooth Manufacturing Company experienced the following accounting events during its first year
of operation. With the exception of the adjusting entries for depreciation, assume that all transactions
The Excel applications are used to make stu- are cash transactions.

dents comfortable with this analytical tool and 1. Acquired $50,000 by issuing common stock.
2. Paid $8,000 for the materials used to make its products, all of which were started and completed

to show its use in accounting. during the year.

“The innovative end-of-chapter materials are
3. Paid salaries of $4,400 to selling and administrative employees.
4. Paid wages of $7,000 to production workers.
5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on
January 1. It had a $1,600 estimated salvage value and a four-year useful life.
6. Paid $13,000 for manufacturing equipment. The equipment was acquired on January 1. It had a
$1,000 estimated salvage value and a three-year useful life.
7. Sold inventory to customers for $25,000 that had cost $14,000 to make.

especially on target as an aid to improving Construct a spreadsheet of the financial statements model as shown here:

student critical thinking and writing skills. The

Excel spreadsheet applications are also excel-
lent real-world activities.”

DAN R. WARD, UNIVERSITY OF LOUISIANA,

LAFAYETTE

Required
Place formulas in row 16 to automatically add the columns. Also add formulas in column S to calcu-
late net income after each event, and add formulas in row 18 to compute total assets and equity. Notice
that you must enter the events since only the first one is shown as an example.

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds
Spreadsheet Tips
1. The column widths are set by choosing Format, then Column, and then Width.
2. The shading in columns B, N, and T is added by highlighting a column and choosing Format, then
Cells, and then clicking on the tab titled Patterns and choosing a color.
3. The sum function is an easy way to add a column or row. For example, the formula in cell C16 is
= SUM(C6:C15).
xvii
4. As an example of the formulas in column S (net income), the formula in cell S7 is =O7−Q7.
5. If you find that some of the columns are too far to the right to appear on your screen, you can set
the zoom level to show the entire spreadsheet. The zoom is set by choosing View, then Zoom, and
WHAT WE DID TO MAKE IT BETTER!
● WHAT’S NEW IN THIS EDITION?
We thank our reviewers and focus group participants for their suggestions for the eighth edition. Many of these sugges-
tions motivated the changes described below:
Chapter 1 Management Accounting and
Corporate Governance
• Updated video lectures and self-assessment quizzes for
each learning objective.
• Revised learning objectives.
• Added content related to upstream and downstream
costs.
• New Curious Accountant feature.
• Updated Self-Study Review Problem.
• Updated exercises, problems, and ATC cases and added
new exercises related to upstream and downstream costs.
Chapter 2 Cost Behavior, Operating Leverage, and
Profitability Analysis
• Added video lectures and self-assessment quizzes for
each learning objective.
• New Curious Accountant feature.
• New Reality Bytes feature.
• New Focus on International Issues feature.
• Updated exercises, problems, and ATC cases.
Chapter 3 Analysis of Cost, Volume, and Pricing to
Increase Profitability
• Updated Curious Accountant feature.
• New Focus on International Issues feature.
• New Reality Bytes feature.
• Updated exercises, problems, and ATC cases.
Chapter 4 Cost Accumulation, Tracing, and Allocation
• Revised Reality Bytes feature.
• Updated exercises, problems, and ATC cases.
Chapter 5 Cost Management in an Automated
Environment: ABC, ABM, and TQM
• Revised Curious Accountant feature.
• Revised Reality Bytes feature.
• Revised Focus on International Issues feature.
• Updated exercises, problems, and ATC cases.
Chapter 6 Relevant Information for
Special Decisions
• Revised Curious Accountant feature.
• Updated Focus on International Issues feature.
• Updated exercises, problems, and ATC cases.
xviii
Chapter 7 Planning for Profit and Cost Control
• Revised Curious Accountant feature.
• Revised Reality Bytes feature.
• Revised Focus on International Issues feature.
• Updated exercises, problems, and ATC cases.
Chapter 8 Performance Evaluation
• Revised Curious Accountant feature.
• Revised Reality Bytes feature.
• Updated exercises, problems, and ATC cases.
Chapter 9 Responsibility Accounting
• Revised Curious Accountant feature.
• Revised Reality Bytes feature.
• Revised Focus on International Issues feature.
• Updated exercises, problems, and ATC cases.
Chapter 10 Planning for Capital Investments
• Revised Curious Accountant feature.
• Updated exercises, problems, and ATC cases.
Chapter 11 Product Costing in Service and
Manufacturing Entities
• Revised Curious Accountant feature.
• New Reality Bytes feature.
• Updated exercises, problems, and ATC cases.
Chapter 12 Job-Order, Process, and Hybrid
Costing Systems
• Revised Curious Accountant feature.
• Updated exercises, problems, and ATC cases.
Chapter 13 Financial Statement Analysis
• New Curious Accountant feature.
• Updated exercises, problems, and ATC cases.
Chapter 14 Statement of Cash Flows
• New Curious Accountant feature.
• New Reality Bytes feature.
• Updated exercises, problems, and ATC cases.
Fundamental Managerial Accounting Concepts
Assurance of Learning Ready and value of AACSB accreditation, we have sought to
recognize the curricula guidelines detailed in AACSB
Many educational institutions today are focused on the
standards for business accreditation by connecting
notion of assurance of learning, an important element
­selected questions in Edmonds 8e with the general
of some accreditation standards. Fundamental Mana-
knowledge and skill guidelines found in the AACSB
gerial Accounting Concepts, 8e, is designed specifi-
standards. The statements contained in Edmonds 8e are
cally to support your assurance of learning initiatives
provided only as a guide for the users of this text. The
with a simple, yet powerful, solution. Each test bank
AACSB leaves content coverage and assessment clearly
question for Fundamental Managerial Accounting
within the realm and control of individual schools, the
Concepts, 8e, maps to a specific chapter learning
mission of the school, and the faculty. The AACSB does
outcome/objective listed in the text. You can use
also charge schools with the obligation of doing assess-
Connect to easily query for learning outcomes/objectives
ment against their own content and learning goals.
that directly relate to the learning objectives for your
While Edmonds 8e and its teaching package make no
course. You can then use the Connect reporting fea-
claim of any specific AACSB qualification or evaluation,
tures to aggregate student results in similar fashion,
we have labeled selected questions according to the six
making the collection and presentation of assurance of
general knowledge and skills areas. The labels or tags
learning data simple and easy.
within Edmonds 8e are as indicated. There are, of
course, many more within the test bank, the text, and the
AACSB Statement teaching package which might be used as a “standard”
McGraw-Hill Education is a proud corporate member for your course. However, the labeled questions are sug-
of AACSB International. Recognizing the ­importance gested for your consideration.

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds xix

 ®

Required=Results
©Getty Images/iStockphoto

McGraw-Hill Connect®
Learn Without Limits
Connect is a teaching and learning platform
that is proven to deliver better results for
students and instructors.
Connect empowers students by continually
adapting to deliver precisely what they
need, when they need it, and how they need
it, so your class time is more engaging and
effective.

73% of instructors who use

Connect require it; instructor Using Connect improves passing rates
by 12.7% and retention by 19.8%.
satisfaction increases by 28% when
Connect is required.

Analytics
Connect Insight®
Connect Insight is Connect’s new one-
of-a-kind visual analytics dashboard that
provides at-a-glance information regarding
student performance, which is immediately
actionable. By presenting assignment,
assessment, and topical performance results
together with a time metric that is easily
visible for aggregate or individual results,
Connect Insight gives the user the ability to
take a just-in-time approach to teaching and
learning, which was never before available.
Connect Insight presents data that helps
instructors improve class performance in a
way that is efficient and effective.
Adaptive
THE ADAPTIVE
READING EXPERIENCE
DESIGNED TO TRANSFORM
THE WAY STUDENTS READ
©Getty Images/iStockphoto

More students earn A’s and

B’s when they use McGraw-Hill
Education Adaptive products.

SmartBook®
Proven to help students improve grades and
study more efficiently, SmartBook contains
the same content within the print book, but
actively tailors that content to the needs of the
individual. SmartBook’s adaptive technology
provides precise, personalized instruction on
what the student should do next, guiding the
student to master and remember key concepts,
targeting gaps in knowledge and offering
customized feedback, and driving the student
toward comprehension and retention of the
subject matter. Available on smartphones and
tablets, SmartBook puts learning at the student’s
fingertips—anywhere, anytime.

Over 5.7 billion questions have

been answered, making McGraw-Hill
Education products more intelligent,
reliable, and precise.

www.mheducation.com
HOW CAN TECHNOLOGY HELP
Online Assignments
Connect helps students learn more efficiently by providing feed-
back and practice material when and where they need it. Connect
grades homework automatically and students benefit from the im-
mediate feedback that they receive, particularly on any questions
they may have missed. Also, select questions have been rede-
signed to test students’ knowledge more fully. They now include
tables for students to work through rather than requiring that all
calculations be done offline.
End-of-chapter questions in Connect include:
• Exercises: Set A
• Problems: Set A
• Multiple-Choice Questions
• Analyze, Think, Communicate

Lecture Videos
One or more lecture videos are available for every learning objective
introduced throughout the text. The videos have been developed by
a member of the author team and have the touch and feel of a live
lecture. The videos are accompanied by a set of self-assessment quiz-
zes. Students can watch the videos and then test themselves to deter-
mine if they understand the material presented in the video. Students
can repeat the process, switching back and forth between the video
and self-assessment quizzes, until they are satisfied that they under-
stand the material. Incorporating lecture videos as a resource for stu-
dents to learn the material is great way to flip your classroom.

NEW! Excel Simulations

Simulated Excel Questions, assignable
within Connect, allow students to practice
their Excel skills—such as basic formulas and
formatting—within the content of managerial
accounting. These questions feature ani-
mated, narrated Help and Show Me tutorials
(when enabled), as well as automatic feed-
back and grading for both students and
professors.

xxii Fundamental Managerial Accounting Concepts

IMPROVE STUDENT SUCCESS?
NEW! Guided Examples
The Guided Examples in Connect provide a narrated, animated, step-by-step walk-
through of select exercises similar to those assigned. These short presentations
can be turned on or off by instructors and provide reinforcement when students
need it most.

McGraw-Hill Customer Experience

At McGraw-Hill, we understand that getting the most from new technology can be
challenging. That’s why our services don’t stop after you purchase our products. You
can e-mail our Product Specialists 24 hours a day to get product training online. Or
search our knowledge bank of Frequently Asked Questions on our support website.
For Customer Support, call 800-331-5094 or visit www.mhhe.com/support. One of our
Technical Support Analysts will be able to assist you in a timely fashion.

“A well-designed textbook with a variety of in-class and online activities and

practice problems. Clear ­examples, good Excel practice exercises, nice
structure. The Instructor’s Manual and the text are tightly integrated
and well laid out (the instructor can easily and quickly choose
practice activities for in-class assignments and homework).

KRISTEN BALL, DODGE CITY COMMUNITY COLLEGE

Tom Edmonds/Chris Edmonds/Bor-Yi Tsay/Phil Olds xxiii

ACKNOWLEDGMENTS

Special thanks to the talented people who prepared the supplements. These take a great
deal of time and effort to write and we appreciate their efforts. Jeannie Folk who prepared
the Test Bank. LuAnn Bean of Florida Institute of Technology prepared the PowerPoint pre-
sentations and the Instructor’s Manual. Jack Terry of ComSource Associates prepared the
Excel templates. We also thank our accuracy checkers, Kristine Palmer of Longwood Univer-
sity and Beth Woods of Accuracy Counts, for checking the text manuscript and solutions
manual. We also thank Kristine Palmer for accuracy checking the PowerPoints, Instructor’s
Manual, and Test Bank.
Our brand manager, Patricia Plumb, and product developer, Danielle Andries, have cer-
tainly facilitated our efforts to prepare a book that will promote 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 Cheryl Osgood and the sales staff for providing the infor-
mative marketing that has so accurately communicated the unique features of the concepts
approach to accounting educators. Many others at McGraw-Hill Education at a moment’s no-
tice redirected their attention to focus their efforts on the development of this text. We extend
our sincere appreciation to Tim Vertovec, Dana Pauley, and Brian Nacik. We deeply appreci-
ate the long hours that you committed to the formation of a high-quality text.
Thomas P. Edmonds ● Christopher T. Edmonds ● Bor-Yi Tsay ● Philip R. Olds

We express our sincere thanks to the following individuals who provided extensive reviews
for the eighth edition:

Reviewers
Solochidi Ahiarah, Buffalo State Mary Ellen Fletcher, Mount Mary Bruce Neumann, University of
College University Colorado Denver
Jennifer Brown, University of Andy Garcia, Bowling Green State Cynthia Phipps, Lake Land
Massachusetts University College
Scott Cazadd, Jefferson Kimberly Hansen, Riverland Nathan Slavin, Hofstra University
College Community College Steven Sossei, Siena College
Amy Conley, Genesee Community Trent Henke, Virginia Tech— Sean Stein-Smith, Fairleigh
College Blacksburg Dickinson University Teane
Cheryl Corke, Genesee Community Susan Little, Saint Leo University Emily Vera, University of Colorado
College Rebecca Martin, Virginia Tech - Denver
Doris Donovan, Dodge City Blacksburg Jennifer Williams, Virginia Tech—
Community College Michael Miceli, Champlain College Blacksburg

Our appreciation to those who reviewed previous editions:

Jed Ashley, Grossmont College
Walter Austin, Mercer University
Kristen Ball, Dodge City Community
College
Lisa Banks, Mott Community
College
Rebecca Barta, Blinn College
James Bates, Mountain Empire
Community College
Frank Beigbeder, Rancho Santiago
College
Daniel Benco, Southeastern
Oklahoma University
Dorcas Berg, Wingate College
Ashton Bishop, James Madison
University
Amy Bourne, Tarrant County
College
Cassie Bradley, Dalton State College
Kenneth Bronstein, Western
Washington University

xxiv Fundamental Managerial Accounting Concepts

Another random document with
no related content on Scribd:
in his note-book a list of the ladies who, he thought, might be fit
candidates for the honour he intended them, the merits of the
multitude being settled, in his mind, in exact accordance with the
supposed extent of their treasures. Let not the reader mistake the
term. By treasure he neither meant worth nor beauty, but the article
which can be paid down in bullion or in bank-notes, possessing the
magic properties of adding field to field, and tenement to tenement.
One after another the pen was drawn through their names, as
occasion offered of scrutinising their means more clearly, or as lack-
success obliged him, until the candidates were reduced to a couple;
to wit—Miss Jenny Drybones, a tall spinster, lean and ill-looking,
somewhat beyond her grand climacteric; and Mrs Martha Bouncer, a
brisk widow, fat, fair, and a few years on the better side of forty.
Miss Jenny, from her remote youth upwards, had been
housekeeper to her brother, a retired wine merchant, who departed
this life six years before, without occasioning any very general
lamentation; having been a man of exceedingly strict habits of
business, according to the jargon of his friends; that is to say, in plain
English, a keen, dull, plodding, avaricious old knave.
But he was rich, that was one felicity; therefore he had friends. It is
a great pity that such people ever die, as their worth, or, in other
words, their wealth, cannot gain currency in the other world; but die
he did, in spite of twenty thousand pounds and the doctor, who was
not called in till death had a firm grip of the old miser’s windpipe,
through which respiration came scant and slow, almost like the
vacant yawns of a broken bellows.
Expectant friends were staggered, as by a thunder-stroke, when
the read will, too legal for their satisfaction, left Miss Jenny in sure
and undivided possession of goods and chattels all and sundry.
For the regular period she mourned with laudable zeal, displaying
black feathers, quilled ruffles, crape veils, and starched weepers, in
great and unwonted prodigality, which no one objected to, or cavilled
about, solely because no one had any business to do so.
It was evident that her views of life from that era assumed a new
aspect, and the polar winter of her features exhibited something like
an appearance of incipient thaw; but the downy chin, wrinkled brow,
and pinched nose, were still, alas! too visible. Accordingly, it is more
than probable that, instead of renewing her youth like the eagles, she
had only made a bold and laudable attempt to rifacciamento, in thus
lighting up her features with a more frequent and general succession
of smiles.
No one can deny that, in as far as regards externals, Miss Jenny
mourned lugubriously and well, not stinting the usually allotted
number of calendar months. These passed away, and so did black
drapery; garments brightening by progressive but rapid strides. Ere
the twelve months expired, Miss Jenny flaunted about in colours as
gaudy as those of “the tiger-moth’s deep damasked wings,”—the
counterpart of the bird of paradise, the rival of the rainbow.
Widow Martha Bouncer was a lady of a different stamp. Her
features still glowed in the freshness of youthful beauty, though the
symmetry of her person was a little destroyed by a tendency to
corpulency. She dressed well; and there was a liveliness and activity
about her motions, together with an archness in her smile, which
captivated the affections of the tobacconist, rather more than was
compatible with his known and undisguised hankering after the so-
called good things of this life, the flesh-pots of Egypt.
Mrs Bouncer was the widow of a captain in a marching regiment;
consequently she had seen a good deal of the world, and had a
budget of adventures ever open for the admiration of the listening
customer. Sometimes it might even be objected, that her tongue went
a little too glibly; but she had a pretty face and a musical voice, and
seldom failed in being attended to.
The captain did not, as his profession might lead us to surmise,
decamp to the other world, after having swallowed a bullet, and
dropped the death-dealing blade from his blood-besmeared hand on
the field of battle, but quietly in his bed, with three pairs of excellent
blankets over him, not reckoning a curiously quilted counterpane.
Long anticipation lessens the shock of fate; consequently the grief of
his widow was not of that violent and overwhelming kind which a
more sharply-wound-up catastrophe is apt to occasion; but, having
noticed the slow but gradual approaches of the grim tyrant, in the
symptoms of swelled ankles, shrivelled features, troublesome cough,
and excessive debility, the event came upon her as an evil long
foreseen; and the sorrow occasioned by the exit of the captain was
sustained with becoming fortitude.
 Having been fully as free of his sacrifices to Bacchus as to the
brother of Bellona, the captain left his mate in circumstances not the
most flourishing; but she was enabled to keep up appearances, and
to preserve herself from the gulf of debt, by an annuity bequeathed to
her by her father, and by the liberality of the widows’ fund.
Time passed on at its usual careless jog-trot; and animal spirits,
being a gift of nature, like all strong natural impulses, asserted their
legitimate sway. Mrs Martha began to smile and simper as formerly.
Folks remarked, that black suited her complexion; and Daniel Cathie
could not help giving breath to the gallant remark, as he was
discharging her last year’s account, that he never before had seen her
looking half so well.
On this hint the lady wrought. Daniel was a greasy lubberly civilian
to be sure, and could not escort her about with powdered collar,
laced beaver, and glittering epaulettes; but he was a substantial
fellow, not amiss as to looks, and with regard to circumstances,
possessing everything to render a wife comfortable and snug. Elysian
happiness, Mrs Martha was too experienced a stager to expect on
this side of the valley of death. Moreover, she had been tossed about
sufficiently in the world, and was heartily tired of a wandering life.
The height of her wise ambition, therefore, reached no higher than a
quiet settlement and a comfortable domicile. She knew that the hour
of trial was come, and sedulously set herself to work, directing
against Daniel the whole artillery of her charms. She passed before
his door every morning in her walk; and sometimes stood with her
pretty face directed to the shop window, as if narrowly examining
some article in it. She ogled him as he sat in church; looking as if she
felt happy at seeing him seated with the bailies; and Daniel was never
met abroad, but the lady drew off her silken glove, and yielded a
milk-white delicate hand to the tobacconist, who took a peculiar
pleasure in shaking it cordially. A subsequent rencontre in a stage
coach, where they enjoyed a delightful téte-à-téte together for some
miles (procul, ô procul esto profani), told with a still deeper effect;
and everything seemed in a fair way of being amicably adjusted.
Miss Jenny, undismayed by these not unmarked symptoms of
ripening intimacy, determined to pursue her own line of amatory
politics, and set her whole enginery of attack in readiness for
operation. She had always considered the shop at the cross as the
surest path for her to the temple of Bona Fortuna. Thence driven, she
was lost in hopeless mazes, and knew not where to turn.
She flaunted about, and flashed her finery in the optical observers
of Daniel, as if to say, This is a specimen,—ex uno disce omnes,—
thousands lie under this sample. Hope and fear swayed her heart by
turns, though the former passion was uppermost; yet she saw a
snake, in the form of Mrs Bouncer, lurking in her way; and she took
every lawful means, or such as an inamorata considers such, to
scotch it.
Well might Daniel be surprised at the quantity of candles made use
of in Miss Jenny’s establishment. It puzzled his utmost calculation;
for though the whole house had been illuminated from top to
bottom, and fours to the pound had been lighted at both ends, no
such quantity could be consumed. But there she was, week after
week, with her young vassal with the yellow neck behind her,
swinging a large wicker-basket over his arm, in which were
deposited, layer above layer, the various produce of Miss Jenny’s
marketing.
On Daniel, on these occasions, she showered her complaisance
with the liberality of March rains; inquiring anxiously after his
health; cautioning him to wear flannel, and beware of the
rheumatics; telling him her private news, and admiring the elegance
of his articles, while all the time her shrivelled features “grinned
horrible a ghastly smile,” which only quadrupled the “fold upon fold
innumerable” of her wrinkles, and displayed gums innocent of teeth,
—generosity not being able to elevate three rusty stumps to that
honour and dignity.
There was a strong conflict in Daniel’s mind, and the poor man
was completely “bamboozled.” Ought he to let nature have its sway
for once, take to his arms the blushing and beautiful widow, and
trust to the success of his efforts for future aggrandisement? Or must
strong habit still domineer over him, and Miss Jenny’s hook, baited
with twenty thousand pounds, draw him to the shores of wedlock, “a
willing captive?” Must he leave behind him sons and daughters with
small portions, and “the world before them, where to choose;” or
none—and his name die away among the things of the past, while
cousins ten times removed alike in blood and regard, riot on his
substance? The question was complicated, and different
interrogatories put to the oracle of his mind afforded different
responses. The affair was one, in every respect, so nicely balanced,
that “he wist not what to do.” Fortune long hung equal in the
balance, and might have done so much longer, had not an unforeseen
accident made the scale of the widow precipitately mount aloft, and
kick the beam.
It was about ten o’clock on the night of a blustering November day,
that a tall, red-haired, moustachioed, and raw-boned personage,
wrapt up in a military great-coat, alighted from the top of the
Telegraph at the Salutation Inn, and delivered his portmanteau into
the assiduous hands of Bill the waiter. He was ushered into a
comfortable room, whose flickering blazing fire mocked the
cacophony of his puckered features, and induced him hastily to doff
his envelopments, and draw in an arm-chair to the borders of the
hearthrug.
Having discussed a smoking and substantial supper, he asked Bill,
who was in the act of supplying his rummer with hot water, if a Mrs
Bouncer, an officer’s widow, resided in the neighbourhood.
“Yes,” replied Bill, “I know her well; she lives at third house round
the corner, on the second floor, turning to the door on your right
hand.”
“She is quite well, I hope?” asked the son of Mars.
“Oh! quite well, bless you; and about to take a second husband. I
hear they are to be proclaimed next week. She is making a good
bargain.”
“Next week to be married!” ejaculated the gallant captain, turning
up his eyes, and starting to his legs with a hurried perplexity.
“So I believe, sir,” continued Bill very calmly. “If you have come to
the ceremony, you will find that it does not take place till then.
Depend upon it, sir, you have mistaken the date of your invitation
card.”
“Well, waiter, you may leave me,” said the captain, stroking his
chin in evident embarrassment; “but stop, who is she about to get?”
“Oh, I thought everybody knew Mr Daniel Cathie, one of the town-
council, sir; a tobacconist, and a respectable man; likely soon to
come to the provostry, sir. He is rather up in years to be sure; but he
is as rich as a Jew.”
 “What do you say is his name?”
“Daniel Cathie, Esq., tobacconist, and a candlemaker near the
Cross. That is his name and designation,—a very respectable man,
sir.”
“Well, order the girl to have my bed well warmed, and to put pens,
ink, and paper into the room. In the meantime, bring me the boot-
jack.”
The captain kept his fiery feelings in restraint before Bill; but the
intelligence hit him like a cannon-shot. He retired almost
immediately to his bed-chamber; but a guest in the adjoining room
declared in the morning, that he had never been allowed to close his
eyes, from some person’s alternately snoring or speaking in his sleep,
as if in violent altercation with some one; and that, whenever these
sounds died away, they were only exchanged for the irregular tread
of a foot measuring the apartment, seemingly in every direction.
It was nine in the morning; and Daniel, as he was ringing a shilling
on the counter, which he had just taken for “value received,” and half
ejaculating aloud as he peered at it through his spectacles—“Not a
Birmingham, I hope”—had a card put into his hand by Jonas
Bunting, the Salutation shoeblack.
Having broken the seal, Daniel read to himself,—“A gentleman
wishes to see Mr Cathie at the Salutation Inn, on particular business,
as speedily as possible. Inquire for the gentleman in No. 7.—A
quarter before nine, A.M.”
“Some of these dunning travellers!” exclaimed Daniel to himself.
“They are continually pestering me for orders. If I had the lighting up
of the moon, I could not satisfy them all. I have a good mind not to
go, for this fellow not sending his name. It is impudence with a
vengeance, and a new way of requesting favours!” As he was
muttering these thoughts between his teeth, however, he was
proceeding in the almost unconscious act of undoing his apron,
which having flung aside, he adjusted his hair before the glass,
carefully pressed his hat into shape, and drew it down on his temples
with both hands; after which, with hasty steps, he vanished from
behind the counter.
Arriving at the inn, he was ushered into No. 7 by the officious Bill,
who handed his name before him, and closed the door after him.
 “This is an unpleasant business, Mr Cathie,” said the swaggering
captain, drawing himself up to his full length, and putting on a look
of important ferocity. “It is needless to waste words on the subject:
there is a brace of pistols, both are loaded,—take one, and I take the
other; choose either, sir. The room is fully eight paces,” added he,
striding across in a hurried manner, and clanking his iron heels on
the carpet.
“It would, I think, be but civil,” said Daniel, evidently in
considerable mental as well as bodily agitation, “to inform me what
are your intentions, before forcing me to commit murder. Probably
you have mistaken me for some other; if not, please let me know in
what you conceive I have offended you!”
“By the powers!” said Captain Thwackeray with great vehemence,
“you have injured me materially,—nay, mortally,—and either your
life, sir, or my own, sir, shall be sacrificed to the adjustment.”
While saying this, the captain took up first the one pistol, and then
the other, beating down the contents with the ramrod, and
measuring with his finger the comparative depth to which each was
loaded.
“A pretty story, certainly, to injure a gentleman in the tenderest
part, and then to beg a recital of the particulars. Have you no regard
for my feelings, sir?”
“Believe me, sir, on the word of an honest man, that as to your
meaning in this business, I am in utter darkness,” said Daniel with
cool firmness.
“To be plain, then,—to be explicit,—to come to the point, sir,—are
you not on the eve of marrying Mrs Bouncer?”
“Mrs Bouncer!” echoed the tallow-chandler, starting back, and
crimsoning. Immediately, however, commanding himself, he
continued:—“As to the truth of the case, that is another matter; but
were it as you represent it, I was unaware that I could be injuring any
one in so doing.”
“Now, sir, we have come to the point; rem tetigisti acu; and you
speak out plainly. Take your pistol,” bravoed the captain.
“No, no,—not so fast;—perhaps we may understand each other
without being driven to that alternative.”
 “Well then, sir, abjure her this moment, and resign her to me, or
one of our lives must be sacrificed.”
While he was saying this, Daniel laid his hands on one of the
pistols, and appeared as if examining it; which motion the captain
instantly took for a signal of acquiescence, and “changed his hand,
and checked his pride.”
“I hope,” continued he, evidently much softened, “that there shall
be no need of resorting to desperate measures. In a word, the affair is
this:—I have a written promise from Mrs Bouncer, that, if ever she
married a second time, her hand was mine. It matters not with the
legality of the measure, though the proceeding took place in the
lifetime of her late husband, my friend, Captain Bouncer. It is quite
an affair of honour. I assure you, sir, she has vowed to accept of none
but me, Captain Thwackeray, as his successor. If you have paid your
addresses to her in ignorance of this, I forgive you; if not, we stand
opposed as before.”
“Oh ho! if that be the way the land lies,” replied Daniel, with a
shrill whistle, “she is yours, captain, for me, and heartily welcome. I
resign her unconditionally, as you military gentlemen phrase it. A
great deal of trouble is spared by one’s speaking out. If you had told
me this, there would have been no reason for loading the pistols.
May I now wish you a good morning! ’Od save us! but these are
fearful weapons on the table! Good morning, sir.”
“Bless your heart, no,” said Captain Thwackeray, evidently much
relieved from his distressing situation. “Oh no, sir; not before we
breakfast together;” and, so saying, before Daniel had a moment’s
time for reply, he pulled the bell violently.
“Bill, bring in breakfast for two, as expeditiously as possible—(Exit
Bill). I knew that no man of honour, such as I know or believe you to
be (your appearance bespeaks it), would act such a selfish part as
deprive me of my legal right; and I trust that this transaction shall
not prevent friendly intercourse between us, if I come, as my present
intention is, to take up my abode among you in this town.”
“By no means,” said Daniel; “Mrs Bouncer is yours for me; and as
to matrimonials, I am otherwise provided. There are no grounds for
contention, captain.”
 Breakfast was discussed with admirable appetite by both. The
contents of the pistols were drawn, the powder carefully returned
into the flask, the two bullets into the waistcoat pocket, and the
instruments of destruction themselves deposited in a green woollen
case. After cordially shaking each other by the hand, the captain saw
Mr Daniel to the door, and made a very low congé, besides kissing
his hand at parting.
The captain we leave to fight his own battles, and return to our
hero, whose stoicism, notwithstanding its firmness, did not prevent
him from feeling considerably on the occasion. Towards Mrs
Bouncer he had not a Romeo-enthusiasm, but certainly a stronger
attachment than he had ever experienced for any other of her sex.
Though the case was hopeless, he did not allow himself to pine away
with “a green and yellow melancholy,” but reconciled himself to his
fate with the more facility, as the transaction between Thwackeray
and her was said to have taken place during the lifetime of her late
husband, which considerably lessened her in his estimation; having
been educated a rigid Presbyterian, and holding in great abhorrence
all such illustrations of military morality. “No, no,” thought he; “my
loss is more apparent than real: the woman who was capable of
doing such a thing, would not content herself with stopping even
there. Miss Jenny Drybones is the woman for me—I am the man for
her money.” And here a thousand selfish notions crowded on his
heart, and confirmed him in his determination, which he set about
without delay.
There was little need of delicacy in the matter; and Daniel went to
work quite in a business-like style. He commenced operations on the
offensive, offered Miss Jenny his arm, squeezed her hand, buttered
her with love-phrases, ogled her out of countenance, and haunted
her like a ghost. Refusal was in vain; and after a faint, a feeble, and
sham show of resistance, the damsel drew down her flag of defiance,
and submitted to honourable terms of capitulation.
Ten days after Miss Jenny’s surrender, their names were
proclaimed in church; and as the people stared at each other in half
wonder and half good-humour, the precentor continued, after a
slight pause, “There is also a purpose of marriage between Mrs
Martha Bouncer, at present residing in the parish, and Augustus
Thwackeray, Esq., captain of the Bengal Rangers; whoever can
produce any lawful objections against the same, he is requested to do
so, time and place convenient.”
Every forenoon and evening between that and the marriage-day,
Daniel and his intended enjoyed a delightful tête-à-tête in the lady’s
garden, walking arm-in-arm, and talking, doubtless, of home-
concerns and Elysian prospects that awaited them. The pair would
have formed a fit subject for the pencil of a Hogarth,—about “to
become one flesh,” and so different in appearance. The lady, long-
visaged and wrinkled, stiff-backed and awkward, long as a maypole;
the bridegroom, jolly-faced like Bacchus, stumpy like an alder-tree,
and round as a beer-barrel.
Ere Friday had beheld its meridian sunshine, two carriages, drawn
up at the door, the drivers with white favours and Limerick gloves,
told the attentive world that Dr Redbeak had made them one flesh.
Shortly after the ceremony, the happy couple drove away amid the
cheering of an immense crowd of neighbours, who had planted
themselves round the door to make observations on what was going
on. Another coincidence worthy of remark also occurred on this
auspicious day. At the same hour, had the fair widow Martha yielded
up her lily-white hand to the whiskered, ferocious-looking, but
gallant Captain Thwackeray; and the carriages containing the
respective marriage-parties passed one another in the street at a
good round pace. The postilions, with their large flaunting ribbon-
knots, huzza’d in meeting, brandishing their whips in the air, as if
betokening individual victory. The captain looking out, saw Miss
Jenny, in maiden pride, sitting stately beside her chosen tobacconist;
and Daniel, glancing to the left, beheld Mrs Martha blushing by the
side of her moustachioed warrior. Both waved their hands in passing,
and pursued their destinies.—Janus; or, the Edinburgh Literary
Almanac.
 THE HAUNTED SHIPS.

By Allan Cunningham.
Though my mind’s not
Hoodwinked with rustic marvels, I do think
There are more things in the grove, the air, the flood,
Yea, and the charnelled earth, than what wise man,
Who walks so proud as if his form alone
Filled the wide temple of the universe,
Will let a frail mind say. I’d write i’ the creed
O’ the sagest head alive, that fearful forms,
Holy or reprobate, do page men’s heels;
That shapes, too horrid for our gaze, stand o’er
The murderer’s dust, and for revenge glare up,
Even till the stars weep fire for very pity.

Chapter I.
Along the sea of Solway—romantic on the Scottish side, with its
woodlands, its bays, its cliffs, and headlands; and interesting on the
English side, with its many beautiful towns with their shadows on
the water, rich pastures, safe harbours, and numerous ships—there
still linger many traditional stories of a maritime nature, most of
them connected with superstitions singularly wild and unusual. To
the curious, these tales afford a rich fund of entertainment, from the
many diversities of the same story; some dry and barren, and
stripped of all the embellishments of poetry; others dressed out in all
the riches of a superstitious belief and haunted imagination. In this
they resemble the inland traditions of the peasants; but many of the
oral treasures of the Galwegian or the Cumbrian coast have the
stamp of the Dane and the Norseman upon them, and claim but a
remote or faint affinity with the legitimate legends of Caledonia.
Something like a rude prosaic outline of several of the most noted of
the northern ballads—the adventures and depredations of the old
ocean kings—still lend life to the evening tale; and, among others, the
story of the Haunted Ships is still popular among the maritime
peasantry.
One fine harvest evening I went on board the shallop of Richard
Faulder, of Allanbay, and committing ourselves to the waters, we
allowed a gentle wind from the east to waft us at its pleasure towards
the Scottish coast. We passed the sharp promontory of Siddick, and
skirting the land within a stone-cast, glided along the shore till we
came within sight of the ruined Abbey of Sweetheart. The green
mountain of Criffell ascended beside us; and the bleat of the flocks
from its summit, together with the winding of the evening horn of
the reapers, came softened into something like music over land and
sea. We pushed our shallop into a deep and wooded bay, and sat
silently looking on the serene beauty of the place. The moon
glimmered in her rising through the tall shafts of the pines of
Caerlaverock; and the sky, with scarce a cloud, showered down on
wood, and headland, and bay, the twinkling beams of a thousand
stars, rendering every object visible. The tide, too, was coming with
that swift and silent swell observable when the wind is gentle; the
woody curves along the land were filling with the flood, till it touched
the green branches of the drooping trees; while in the centre current
the roll and the plunge of a thousand pellecks told to the experienced
fisherman that salmon were abundant.
As we looked, we saw an old man emerging from a path that
winded to the shore through a grove of doddered hazel; he carried a
halve-net on his back, while behind him came a girl bearing a small
harpoon, with which the fishers are remarkably dexterous in striking
their prey. The senior seated himself on a large gray stone, which
overlooked the bay, laid aside his bonnet, and submitted his bosom
and neck to the refreshing sea breeze; and taking his harpoon from
his attendant, sat with the gravity and composure of a spirit of the
flood, with his ministering nymph behind him. We pushed our
shallop to the shore, and soon stood at their side.
“This is old Mark Macmoran, the mariner, with his granddaughter
Barbara,” said Richard Faulder, in a whisper that had something of
fear in it; “he knows every creek, and cavern, and quicksand in
Solway,—has seen the Spectre Hound that haunts the Isle of Man;
has heard him bark, and at every bark has seen a ship sink; and he
has seen, too, the Haunted Ships in full sail; and, if all tales be true,
has sailed in them himself;—he’s an awful person.”
Though I perceived in the communication of my friend something
of the superstition of the sailor, I could not help thinking that
common rumour had made a happy choice in singling out old Mark
to maintain her intercourse with the invisible world. His hair, which
seemed to have refused all acquaintance with the comb, hung matted
upon his shoulders; a kind of mantle, or rather blanket, pinned with
a wooden skewer round his neck, fell mid-leg down, concealing all
his nether garments as far as a pair of hose, darned with yarn of all
conceivable colours, and a pair of shoes, patched and repaired till
nothing of the original structure remained, and clasped on his feet
with two massive silver buckles.
If the dress of the old man was rude and sordid, that of his
granddaughter was gay, and even rich.
She wore a boddice of fine wool, wrought round the bosom with
alternate leaf and lily, and a kirtle of the same fabric, which almost
touching her white and delicate ankle, showed her snowy feet, so
fairy-light and round that they scarcely seemed to touch the grass
where she stood. Her hair—a natural ornament which woman seeks
much to improve—was of a bright glossy brown, and encumbered
rather than adorned with a snood, set thick with marine productions,
among which the small clear pearl found in the Solway was
conspicuous. Nature had not trusted to a handsome shape, and a
sylph-like air, for young Barbara’s influence over the heart of man;
but had bestowed a pair of large bright blue eyes, swimming in liquid
light, so full of love, and gentleness, and joy, that all the sailors, from
Annanwater to far St Bees, acknowledged their power, and sung
songs about the bonnie lass of Mark Macmoran. She stood holding a
small gaff-hook of polished steel in her hand, and seemed not
dissatisfied with the glances I bestowed on her from time to time,
and which I held more than requited by a single glance of those eyes
which retained so many capricious hearts in subjection.
The tide, though rapidly augmenting, had not yet filled the bay at
our feet. The moon now streamed fairly over the tops of Caerlaverock
pines, and showed the expanse of ocean dimpling and swelling, on
which sloops and shallops came dancing, and displaying at every
turn their extent of white sail against the beam of the moon. I looked
on old Mark the Mariner, who, seated motionless on his gray stone,
kept his eye fixed on the increasing waters with a look of seriousness
and sorrow in which I saw little of the calculating spirit of a mere
fisherman. Though he looked on the coming tide, his eyes seemed to
dwell particularly on the black and decayed hulls of two vessels,
which, half immersed in the quicksand, still addressed to every heart
a tale of shipwreck and desolation. The tide wheeled and foamed
around them; and creeping inch by inch up the side, at last fairly
threw its waters over the top, and a long and hollow eddy showed the
resistance which the liquid element received.
The moment they were fairly buried in the water, the old man
clasped his hands together, and said—
“Blessed be the tide that will break over and bury ye for ever! Sad
to mariners, and sorrowful to maids and mothers, has the time been
you have choked up this deep and bonnie bay. For evil were you sent,
and for evil have you continued. Every season finds from you its song
of sorrow and wail, its funeral processions, and its shrouded corses.
Woe to the land where the wood grew that made ye? Cursed be the
axe that hewed ye on the mountains, the bands that joined ye
together, the bay that ye first swam in, and the wind that wafted ye
here! Seven times have ye put my life in peril; three fair sons have ye
swept from my side, and two bonnie grandbairns; and now, even
now, your waters foam and flash for my destruction, did I venture
my frail limbs in quest of food in your deadly bay. I see by that ripple
and that foam, and hear by the sound and singing of your surge, that
ye yearn for another victim, but it shall not be me or mine.”
Even as the old mariner addressed himself to the wrecked ships, a
young man appeared at the southern extremity of the bay, holding
his halve-net in his hand, and hastening into the current. Mark rose,
and shouted, and waved him back from a place which, to a person
unacquainted with the dangers of the bay, real and superstitious,
seemed sufficiently perilous: his granddaughter, too, added her voice
to his, and waved her white hands; but the more they strove the
faster advanced the peasant, till he stood to his middle in the water,
while the tide increased every moment in depth and strength.
“Andrew, Andrew!” cried the young woman, in a voice quavering
with emotion, “turn, turn, I tell you. O the ships, the haunted ships!”
But the appearance of a fine run of fish had more influence with the
peasant than the voice of bonnie Barbara, and forward he dashed,
net in hand. In a moment he was borne off his feet, and mingled like
foam with the water, and hurried towards the fatal eddies which
whirled and reared round the sunken ships. But he was a powerful
young man, and an expert swimmer: he seized on one of the
projecting ribs of the nearest hulk, and clinging to it with the grasp of
despair, uttered yell after yell, sustaining himself against the
prodigious rush of the current.
From a sheiling of turf and straw within the pitch of a bar from the
spot where we stood, came out an old woman bent with age, and
leaning on a crutch. “I heard the voice of that lad Andrew Lammie;
can the chield be drowning, that he skirls sae uncannily?” said the
old woman, seating herself on the ground and looking earnestly at
the water. “Ou ay,” she continued, “he’s doomed, he’s doomed; heart
and hand never can save him; boats, ropes, and man’s strength and
wit, all vain! vain! he’s doomed, he’s doomed!”
By this time I had thrown myself into the shallop, followed
reluctantly by Richard Faulder, over whose courage and kindness of
heart superstition had great power; and with one push from the
shore, and some exertion in sculling, we came within a quoit-cast of
the unfortunate fisherman. He stayed not to profit by our aid; for
when he perceived us near, he uttered a piercing shriek of joy, and
bounded toward us through the agitated element the full length of an
oar. I saw him for a second on the surface of the water; but the
eddying current sucked him down; and all I ever beheld of him again
was his hand held above the flood, and clutching in agony at some
imaginary aid. I sat gazing in horror on the vacant sea before us; but
a breathing-time before, a human being, full of youth, and strength,
and hope, was there: his cries were still ringing in my ears, and
echoing in the woods; and now nothing was seen or heard save the
turbulent expanse of water, and the sound of its chafing on the
shores. We pushed back our shallop, and resumed our station on the
cliff beside the old mariner and his descendant.
“Wherefore sought ye to peril your own lives fruitlessly,” said
Mark, “in attempting to save the doomed? Whoso touches these
infernal ships never survives to tell the tale. Woe to the man who is
found nigh them at midnight when the tide has subsided, and they
arise in their former beauty, with forecastle, and deck, and sail, and
pennon, and shroud! Then is seen the streaming of lights along the
water from their cabin windows, and then is heard the sound of
mirth and the clamour of tongues and the infernal whoop and halloo,
and song, ringing far and wide. Woe to the man who comes nigh
them!”
To all this my companion listened with a breathless attention. I felt
something touched with a superstition to which I partly believed I
had seen one victim offered up; and I inquired of the old mariner—
“How and when came these haunted ships there? To me they seem
but the melancholy relics of some unhappy voyagers, and much more
likely to warn people to shun destruction, than entice and delude
them to it.”
“And so,” said the old man with a smile, which had more of sorrow
in it than of mirth; “and so, young man, these black and shattered
hulks seem to the eye of the multitude. But things are not what they
seem: that water, a kind and convenient servant to the wants of man,
which seems so smooth, and so dimpling, and so gentle, has
swallowed up a human soul even now; and the place which it covers,
so fair and so level, is a faithless quicksand out of which none escape.
Things are otherwise than they seem. Had you lived as long as I have
had the sorrow to live; had you seen the storms, and braved the
perils, and endured the distresses which have befallen me; had you
sat gazing out on the dreary ocean at midnight on a haunted coast;
had you seen comrade after comrade, brother after brother, and son
after son, swept away by the merciless ocean from your very side;
had you seen the shapes of friends, doomed to the wave and the
quicksand, appearing to you in the dreams and visions of the night;
then would your mind have been prepared for crediting the strange
legends of mariners; and the two haunted Danish ships would have
had their terrors for you, as they have for all who sojourn on this
coast.
“Of the time and cause of their destruction,” continued the old
man, “I know nothing certain; they have stood as you have seen them
for uncounted time; and while all other ships wrecked on this
unhappy coast have gone to pieces, and rotted, and sunk away in a
few years, these two haunted hulks have neither sunk in the
quicksand, nor has a single spar or board been displaced. Maritime
legend says, that two ships of Denmark having had permission, for a
time, to work deeds of darkness and dolour on the deep, were at last
condemned to the whirlpool and the sunken rock, and were wrecked
in this bonnie bay, as a sign to seamen to be gentle and devout. The
night when they were lost was a harvest evening of uncommon
mildness and beauty: the sun had newly set; the moon came brighter
and brighter out; and the reapers, laying their sickles at the root of
the standing corn, stood on rock and bank, looking at the increasing
magnitude of the waters, for sea and land were visible from St Bees
to Barnhourie.
“The sails of the two vessels were soon seen bent for the Scottish
coast; and with a speed outrunning the swiftest ship, they
approached the dangerous quicksands and headland of Borranpoint.
On the deck of the foremost ship not a living soul was seen, or shape,
unless something in darkness and form resembling a human shadow
could be called a shape, which flitted from extremity to extremity of
the ship, with the appearance of trimming the sails, and directing the
vessel’s course. But the decks of its companion were crowded with
human shapes; the captain, and mate, and sailor, and cabin boy, all
seemed there; and from them the sound of mirth and minstrelsy
echoed over land and water. The coast which they skirted along was
one of extreme danger; and the reapers shouted to warn them to
beware of sandbank and rock; but of this friendly counsel no notice
was taken, except that a large and famished dog, which sat on the
prow, answered every shout with a long, loud, and melancholy howl.
The deep sandbank of Carsethorn was expected to arrest the career
of these desperate navigators; but they passed, with the celerity of
waterfowl, over an obstruction which had wrecked many pretty
ships.
“Old men shook their heads, and departed, saying, ‘We have seen
the fiend sailing in a bottomless ship; let us go home and pray:’ but
one young and wilful man said, ‘Fiend! I’ll warrant it’s nae fiend, but
douce Janet Withershins, the witch, holding a carouse with some of
her Cumberland cummers, and mickle red wine will be spilt atween
them. ’Od, I would gladly have a toothfu’! I’ll warrant it’s nane o’
your cauld sour slae-water, like a bottle of Bailie Skrinkie’s port, but
right drap-o’-my-heart’s-blood stuff, that would waken a body out of
their last linen. I wonder whaur the cummers will anchor their craft?’
“‘And I’ll vow,’ said another rustic, ‘the wine they quaff is none of
your visionary drink, such as a drouthy body has dished out to his
lips in a dream; nor is it shadowy and unsubstantial, like the vessels
they sail in, which are made out of a cockle-shell, or a cast-off
slipper, or the paring of a seaman’s right thumb-nail. I once got a
handsel out of a witch’s quaigh myself;—auld Marion Mathers of
Dustiefoot, whom they tried to bury in the old kirkyard of Dunscore;
but the cummer raise as fast as they laid her down, and naewhere
else would she lie but in the bonnie green kirkyard of Kier, among
douce and sponsible folk. So I’ll vow that the wine of a witch’s cup is
as fell liquor as ever did a kindly turn to a poor man’s heart; and be
they fiends, or be they witches, if they have red wine asteer, I’ll risk a
droukit sark for ae glorious tout on’t.’
“‘Silence, ye sinners,’ said the minister’s son of a neighbouring
parish, who united in his own person his father’s lack of devotion
with his mother’s love of liquor. ‘Whisht! Speak as if ye had the fear
of something holy before ye. Let the vessels run their own way to
destruction: who can stay the eastern wind, and the current of the
Solway sea? I can find ye Scripture warrant for that: so let them try
their strength on Blawhooly rocks, and their might on the broad
quicksand. There’s a surf running there would knock the ribs
together of a galley built by the imps of the pit, and commanded by
the Prince of Darkness. Bonnily and bravely they sail away there; but
before the blast blows by they’ll be wrecked; and red wine and strong
brandy will be as rife as dykewater, and we’ll drink the health of
bonnie Bell Blackness out of her left foot slipper.’
“The speech of the young profligate was applauded by several of
his companions, and away they flew to the bay of Blawhooly, from
whence they never returned. The two vessels were observed all at
once to stop in the bosom of the bay, on the spot where their hulls
now appear: the mirth and the minstrelsy waxed louder than ever;
and the forms of the maidens, with instruments of music and wine-
cups in their hands, thronged the decks. A boat was lowered; and the
same shadowy pilot who conducted the ships made it start towards
the shore with the rapidity of lightning, and its head knocked against
the bank where the four young men stood, who longed for the
unblest drink. They leaped in with a laugh, and with a laugh were
they welcomed on deck; wine cups were given to each, and as they
raised them to their lips the vessels melted away beneath their feet;
and one loud shriek, mingled with laughter still louder, was heard
over land and water for many miles. Nothing more was heard or seen
till the morning, when the crowd who came to the beach saw with
fear and wonder the two Haunted Ships, such as they now seem,
masts and tackle gone; nor mark, nor sign, by which their name,
country, or destination, could be known, was left remaining. Such is
the tradition of the mariners.”
 Chapter II.
“And trow ye,” said the old woman, who, attracted from her hut by
the drowning cries of the young fisherman, had remained an auditor
of the mariner’s legend; “and trow ye, Mark Macmoran, that the tale
of the Haunted Ships is done? I can say no to that. Mickle have my
ears heard, but more mine eyes have witnessed since I came to dwell
in this humble home by the side of the deep sea. I mind the night
weel: it was on Hallow-e’en, the nuts were cracked, and the apples
were eaten, and spell and charm were tried at my fireside; till,
wearied with diving into the dark waves of futurity, the lads and
lasses fairly took to the more visible blessings of kind words, tender
clasps, and gentle courtship.
“Soft words in a maiden’s ear, and a kindly kiss o’ her lip, were old
world matters to me, Mark Macmoran; though I mean not to say that
I have been free of the folly of daundering and daffin’ with a youth in
my day, and keeping tryst with him in dark and lonely places.
However, as I say, these times of enjoyment were past and gone with
me; the mair’s the pity that pleasure should flee sae fast away,—and
as I couldna make sport I thought I would not mar any; so out I
sauntered into the fresh cold air, and sat down behind that old oak,
and looked abroad on the wide sea. I had my ain sad thoughts, ye
may think, at the time; it was in that very bay my blythe gudeman
perished, with seven more in his company; and on that very bank
where ye see the waves leaping and foaming, I saw seven stately
corses streeked, but the dearest was the eighth. It was a woful sight
to me, a widow, with four bonnie boys, with nought to support them
but these twa hands, and God’s blessing, and a cow’s grass. I have
never liked to live out of sight of this bay since that time; and mony’s
the moonlight night I sit looking on these watery mountains, and
these waste shores; it does my heart good, whatever it may do to my
head. So ye see it was Hallow-e’en; and looking on sea and land sat I;
and my heart wandering to other thoughts soon made me forget my
youthful company at hame. It might be near the howe hour of the
night; the tide was making, and its singing brought strange old-world
stories with it; and I thought on the dangers that sailors endure, the