Intermediate Accounting Reporting and Analysis 3Rd Edition James Wahlen Full Chapter

Intermediate Accounting: Reporting
and Analysis 3rd Edition James Wahlen

Visit to download the full and correct content document:
https://ebookmass.com/product/intermediate-accounting-reporting-and-analysis-3rd-e
dition-james-wahlen/
Powerful preparation.
Maximum confidence.
The right tools to help prepare you for the Exam
With Becker Professional Education, you get a fully integrated

CPA Exam Review course that helps you:
MOVE BEYOND MEMORIZATION TO APPLICATION CPA SkillMaster Videos

Interactive simulations and videos move you beyond memorization, Tackle Task-Based Simulations
helping you apply concepts — a critical component of the CPA Exam. ʥȈɽȃƺɁȶˎǁǉȶƺǉӝÝʍɨ
expert instructors take you
through the most complex
questions step-by-step.
STUDY SMART
It’s like having your
Adapt2U pre-assessment provides you a recommended study path. own CPA coach!
TRACK PROGRESS AND BUILD CONFIDENCE

Mock exams, progress tests and a study planner help you focus on where you need the most help.
LEARN WHAT’S NEEDED

Study with a course that replicates the CPA Exam.
CHOOSE FROM 3 FLEXIBLE COURSE FORMATS

:ȃɁɁɰǉǹɨɁȴČǉȢǹӸČɽʍǁʰӗ¸ȈʤǉÝȶȢȈȶǉɁɨ¸Ȉʤǉ:ȢƃɰɰɨɁɁȴǹɁɨȴƃɽɰӝ
© 2018 Becker Professional Education Corporation. All rights reserved.

the CPA review
Becker Professional Education, 3005 Highland Parkway, Downers Grove, IL 60515-5799 Learn more at becker.com
Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
THIRD EDITION
INTERMEDIATE ACCOUNTING
REPORTING AND ANALYSIS
James M. Wahlen
Professor of Accounting, James R. Hodge Chair of Excellence
Kelley School of Business, Indiana University
Jefferson P. Jones
Associate Professor
School of Accountancy, Auburn University
Donald P. Pagach
Professor of Accounting
Poole College of Management, North Carolina State University
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
This is an electronic version of the print textbook. Due to electronic rights restrictions,
some third party content may be suppressed. Editorial review has deemed that any suppressed
content does not materially affect the overall learning experience. The publisher reserves the right
to remove content from this title at any time if subsequent rights restrictions require it. For
valuable information on pricing, previous editions, changes to current editions, and alternate
formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for
materials in your areas of interest.
Important Notice: Media content referenced within the product description or the product
text may not be available in the eBook version.
Intermediate Accounting: Reporting and © 2020, 2017 Cengage Learning, Inc.
Analysis, 3E
James M. Wahlen, Jefferson P. Jones Unless otherwise noted, all content is © Cengage.
and Donald P. Pagach ALL RIGHTS RESERVED. No part of this work covered by the copyright herein
may be reproduced or distributed in any form or by any means, except as
Senior Vice President, Higher Ed Product,
Content, and Market Development: Erin Joyner permitted by U.S. copyright law, without the prior written permission of the
copyright owner.
Product Director: Jason Fremder
Product Manager: Jonathan Gross

For product information and technology assistance, contact us at
Content Manager: Marta Healey-Gerth Cengage Customer & Sales Support, 1-800-354-9706
or support.cengage.com.
Product Assistant: Aiyana Moore
For permission to use material from this text or product, submit all
Executive Marketing Manager: Nathan Anderson
requests online at www.cengage.com/permissions.
Production Service: Lumina Datamatics
Senior Art Director: Bethany Bourgeois The authors have drawn on public filings of numerous public companies in
developing the materials included in this book. Except as expressly noted by
Text Designer: Michael Stratton/Stratton Design
the authors, if at all, no public companies have participated in the development
Cover Designer: Michael Stratton/Stratton Design of this book and the inclusion of any company’s financial information herein
Cover Image: Salvatore Catalon/Shuttertsock should not be construed as an endorsement of this book by that, or any other,
company.
Design Images: Salvatore Catalano/Shutterstock
Intellectual Property Analyst: Reba Frederics Library of Congress Control Number: 2018967119
Intellectual Property Project Manager: Carly Student Edition ISBN: 978-1-337-78828-1

Belcher
Cengage
20 Channel Street
Boston, MA 02210
USA
Cengage is a leading provider of customized learning solutions with employees

residing in nearly 40 different countries and sales in more than 125 countries
around the world. Find your local representative at: www.cengage.com.
Cengage products are represented in Canada by

Nelson Education, Ltd.
To learn more about Cengage platforms and services, register or access

your online learning solution, or purchase materials for your course,
visit www.cengage.com.
Printed in the United States of America

Print Number: 03 Print Year: 2019
For our students,
with thanks for permitting us to take the journey with you
For our colleagues who use this book,

with thanks for allowing us the privilege to contribute to your noble efforts to teach your students
For our families, with love,

Debbie, Jessica, and Ailsa, Jaymie and Aaron, Melaney, Parker, Morgan, Elisabeth, Graham,
Olivia, and Luke
SET COURSE EXPECTATIONS AND
GUIDE STUDENTS TO SUCCESS!
MOTIVATION
Many students come to intermediate accounting with an unrealistic understanding of what the
course demands. Students are often surprised by both the quick pace of the course and the
amount of time they need to spend outside of class working through homework assignments.
CengageNOWv2 Start-Up Center

The CengageNOWv2 Start-Up Center provides a variety of resources that help students identify
areas where they need more practice and attention so that they know where they need to focus
in order to be successful.
What Is Accounting, this section includes an:

• Introduction to Accounting
• Success Strategies
Accounting Review Module, designed to help students refresh their understanding of

basic accounting skills, including:
• Accounting equation
• Rules of debits and credits
• Journal entries and posting
• Adjusting entries—accruals and deferrals
• Financial statements
• Time value of money
• And more
How to Use CengageNOWv2 Module quickly familiarizes your students with

CengageNOWv2 and directs them to all of its built-in student resources. This allows
students to focus on learning accounting, not learning a particular software system.
iv
© MARK ROS
C
SEE WHY ITCURRENT LIABILITIES
MATTERS!
LEARNING O
After reading this
AND CONTINGENT will be able to:
LO 9.1 Explain the
OBLIGATIONS of a liability
LO 9.2 Describe the
classificatio
current liab
MOTIVATION
Positive Business-Focused Context A Risky Proposition
LO 9.3 Identify, me
current liab
contractual
Intermediate Accounting 3e takes a positive focus by LO 9.4 Understand
emphasizing in each chapter how accounting infor- In order to determine if they should provide resources to a company, investors
liabilities w
are determi
mation helps people make important decisions about and creditors analyze the risk involved. Financial statement information relat- activities.
LO 9.5 Identify and
companies. This positive focus helps students appreci- ing to current liabilities and contingent obligations is particularly useful in the
contingent g
analysis of a company’s liquidity, financial flexibility, and credit risk. To assess a
ate why good accounting information is so important including w
premiums.
company’s liquidity, which represents the company’s ability to meet its short-term
to decision makers. The text also infuses real-world obligations, financial statement users will examine the relationship between a LO 9.6 Describe the
disclosure o
context by using Starbucks as a running case in each company’s current assets and its current liabilities. Starbucks’s current liabilities, and conting
chapter. The text also uses other highly recognizable which represent obligations to employees, suppliers, and other short-term credi-
companies as examples to provide additional context tors, make up approximately 47% of the company’s total liabilities as of the end
of fiscal year 2017, as shown below.
on the importance of accounting information for busi-
ness decisions.
How Are Current Liabilities and Contingencies Presented in the Financial Statements? 9-33
8.5%
REAL REPORT DISCLOSURE OF CURRENT LIABILITIES 9.3 Current Liabilities

44.1%
General Mills, Inc. General Mills, Inc. Long-Term Debt
General Mills, Inc. Balance Sheet (in part)
47.4% Other Long-Term Liabilities
(millions of dollars) May 28, 2017 May 29, 2016
Liabilities (in part)
Current Liabilities:
Accounts payable $2,119.8 $2,046.5
Current portion of long-term debt 604.7 1,103.4
Notes payable 1,234.1 269.8
Other current liabilities 1,372.2 1,595.0
Total current liabilities $5,330.8 $5,014.7
Notes to Consolidated Financial Statements (in part)

Note 8: Debt (in part)
Notes Payable—The components of notes payable and their respective weighted-average
8-10 Chapter were
interest rates at the end of the periods 8 Inventories:
as follows: Special Valuation Issues
May 28, 2017 May 29, 2016
8.1 Notes
Weighted
ABERCROMBIE & FITCH’S INVENTORY
Average Notes
Weighted
DISCLOSURE
Average REAL REPORT Real Reports
Payable Interest Rate Payable Interest Rate
U.S. commercial paper
Abercrombie & Fitch
Financial institutions
$ 954.7
279.4
1.1% Notes to the
7.0%
$ Financial
---
269.8
--- (in part)
Statements
8.6%
Real Reports allow students to interact with
$1,234.1 2.4%
Note 2: Summary $269.8 Policies (in8.6%
of Significant Accounting part) actual annual report excerpts, analyze them,
To ensure availability of funds, weInventories
maintain bank credit lines sufficient to cover our out-
standing notes payable. Commercial Inventories
paper on is athecontinuing
Consolidated Balance
source Sheets are valued
of short-term at the lower of cost or net real-
financing.
izable value on a weighted average cost basis. The Company reduces the carrying value
and apply what they have learned by
We have commercial paper programs available to us in the United States and Europe. We
of inventory through a lower of cost or net realizable value adjustment, the impact of which
also have uncommitted and asset-backed credit
is reflected in costlines that exclusive
of sales, support of
our foreign operations.
depreciation and amortization, in the Consolidated
answering the corresponding questions.
In fiscal 2016, we entered into a Statements
$2.7 billion fee-paid committed credit facility
Income that was
originally scheduled to expire in May
izable2021.
of Operations
value In fiscal 2017,
adjustment
and Comprehensive
weon
is based amended
(Loss).
the credit
the Company’s
The lower of cost or net real-
facili- of multiple factors and
consideration Students have the ability to practice activities
ty’s date by 1 year to May 2022. assumptions, including demand forecasts, current sales volume, expected sell-off activity,
composition and aging of inventory, historical recoverability experience, and risk of obso-
Note 17: Supplemental Information
lescence from changes (in part)
in economic conditions or customer preferences.
they will encounter in the real world as they
In Millions Note 4: Inventories (in May
part) 28, 2017
Inventories consisted of (in thousands):
May 29, 2016 sharpen analytical skills.
Other current liabilities:
Accrued trade and consumer promotions $ 482.6 $ 563.7 February 3, 2018 January 28, 2017
Inventories at original cost
Accrued payroll 326.6 386.4 $ 446,559 $ 425,807
Less: Lower of cost and net realizable value adjustment (13,362) (18,402)
Dividends payable Less: Shrink estimate 21.5 23.8 (8,804) (7,610)
Accrued taxes Inventories 58.0 110.5 $ 424,393 $ 399,795
Accrued interest, including interest rate swaps 83.8 90.4
Grain contracts 5.6 5.5
Restructuring and other exit costs reserve 85.0 76.6
SuggestedDerivative payable
answers to these questions are Questions: 18.1 35.6
found at the end of the chapter.
Miscellaneous 1. What method does Abercrombie 291.0 302.5
& Fitch use to value its inventory?
Total 2. What is the amount of $1,372.2 $1,595.0
inventory write-downs for the fiscal year ending on February 3,
2018?
3. Does Abercrombie & Fitch record inventory write-downs using the direct or allowance
method?
Questions: Suggested answers to these questions are
GAAP specifies that if a company experiences a temporary found at thedecline
market end of the
inchapter.
1. What is the composition of General Mills’s short-term notes payable? Are these notes
an interim period, the company should ignore the decline in its interim financial
payable properly classified as current liabilities?
statements. If the company does not expect the inventory price to recover, it should
2. General Mills reported current recognize
assets of $4,061.4
the loss inmillion on May
the interim 28,in2017.
period whichCompute its occurs. If the company
the decline
current ratio and provide any relevant comments.
recognizes a loss and then reverses it in a later interim period that year, it should
3. General Mills reported cost ofrecognize
goods sold of $10,733.6
a loss recovery andmillion for 2017.
increase Compute
the inventory its by the amount of the
value
payables turnover. recovery, but only up to the original cost.8 Note that under U.S. GAAP, a loss due
to the write-down of inventory can only be reversed within the same fiscal year it
was originally recognized. Losses recognized in the annual financial statements can-
not be recovered.
Conceptual Evaluation of Inventory Valuation Rules

The reduction of the value of the inventory and the recognition of a loss provide rele-
vant and representationally faithful valuations for a company’s balance sheet and income
statement. As discussed in Chapter 2, assets are defined as “probable future economic
benefits.” When the cost of the inventory exceeds the expected benefits, the lower
inventory value is a better measure of the expected benefits because an unrecoverable
v
cost is not an asset. In addition, because a decline in inventory value is an economic
8
FASB ASC 270-10-45: Interim Reporting: Overall: Other Presentation Matters.
EXPOSE STUDENTS TO CONCEPTS
BEFORE CLASS BEGINS!
MOTIVATION
Students don’t want to waste time going over concepts that they have already mastered.
With the Adaptive Study Plan, they can focus on learning new topics and fully under-
standing difficult concepts.
Adaptive Study Plan

The Adaptive Study Plan in CengageNOWv2 is an assignable/gradable study center that
adapts to each student’s unique needs and provides a remediation pathway to keep stu-
dents progressing.
The Adaptive Study Plan

is assignable/gradable in
CengageNOWv2 and available
for self-study and review.
How does it work?

Step 1: Students take a chapter-level quiz consisting of questions that cover both
conceptual and procedural aspects of the chapter.
Step 2: Students receive feedback for each answer option explaining why the answer is
right or wrong.
Step 3: Based on the quiz results, students are provided a remediation path that
includes media assets and algorithmic practice problems to help them improve their
understanding of the course material.
Instructors may use prerequisites that require students to achieve mastery in the
Adaptive Study Plan before moving on to new material.
The new Adaptive Study Plan offers the benefit of

customization coupled with remediation.
– Jennifer Schneider, professor at
University of North Georgia
vi
EDUCATION VIDEOS SHOW STUDENTS HOW
TO APPLY WHAT THEY LEARN!
MOTIVATION
Video: Tell Me More
Tell Me More activities explain the core con-
cepts of the chapter through an assignable/
gradable presentation that is ideal for all class
formats—flipped model, online, hybrid, or
face-to-face.
Exercises 4-55
E4-2 Plant and Equipment Your analysis of Moen Corporation’s fixed asset accounts at year end reveals the following
LO 4.3 information:
1. Moen owns two tracts of land. The first, which cost $18,000, is being held as a future building site. It has a
current market value of $20,000. The second, which cost $19,000, was purchased 10 years ago. The current
Tell Me More activities for every Learning Objective are assignable/
office and factory buildings are on this site. The land has a current market value of $56,000.
2. Moen owns two buildings. The office building and the factory building were both built 10 years ago at a cost
gradable in CengageNOWv2 and available for self-study and review.
of $50,000 and $120,000, respectively. At that time, each was expected to have a life of 30 years and a residual
value of 10% of original cost. They are being depreciated on a straight-line basis.
3. Moen owns factory machinery with a total cost of $51,000 and accumulated depreciation of $35,300.
Included in factory machinery is one machine that cost $7,000 and has accumulated depreciation of $4,200.
The best way to learn accounting is through practice, but students often get stuck when attempting homework assign-
This machine is being held for resale and is not being used in operations.
4. Moen owns office equipment that cost $14,500 and has a book value of $6,300. It owns office furniture that
ments on their own.

cost $17,900 and has a book value of $11,400.
Required:
Prepare the property, plant, and equipment section of Moen’s year end balance sheet.
E4-3 Shareholders’ Equity The following are several of Graf Corporation’s accounts at the end of 2019: Video: Show Me How
LO 4.3 Account Credit Balance
Common Stock, $10 par $ 47,100 Created for the most frequently assigned
Bonds Payable (due 2020) 126,000
SHOW
ME HOW
Additional Paid-in Capital on Preferred Stock 39,600 end-of-chapter items, Show Me How problem
Retained Earnings 209,000
Premium on Bonds Payable
Unearned Rent
12,300
4,800
demonstration videos provide a step-by-step
Preferred Stock, $100 par
Additional Paid-in Capital on Common Stock
65,400
53,900
model of a similar problem. Embedded tips
Unfunded Accrued Pension Cost
Treasury Stock (cost)
18,400
(7,600) debit
and warnings help students avoid common
Accumulated Other Comprehensive Income 8,200
mistakes and pitfalls.
Required:
Prepare the shareholders’ equity section of Graf’s 2019 ending balance sheet.
E4-4 Classifications on Balance Sheet A balance sheet may contain the following major sections:
Show
LO 4.3
Me
A. How
Current videos
assets are linked to assignments in CengageNOWv2
F. Current liabilities and
B. Long-term investments G. Long-term liabilities
available for self-study
C. Property, and review.
plant, and equipment H. Contributed capital
D. Intangible assets I. Retained earnings
E. Other assets J. Accumulated other comprehensive income
Required:
The following is a list of accounts. Using the letters A through J, indicate in which section of the balance sheet
each account would most likely be classified. Also indicate with a check mark (✓) any item that is a contra account.
If an account cannot be classified in any of the preceding sections, indicate with an X and explain.
____1. Investments in Marketable Securities ____ 9. Unearned Rent (to be earned within next 6
____2. Discount on Bonds Payable (bonds due in months)
5 years) ____10. Accrued Pension Cost
____3. Additional Paid-in Capital on Common Stock ____11. Trademarks
____4. Accounts Receivable ____12. Deficit
____5. Notes Payable (due in 5 years) ____13. Salaries Payable
____6. Patents (net) ____14. Land
____7. Unrealized Decrease in Fair Value of ____15. Investment in Ace Company Preferred Stock
Available-for-Sale Securities (to be held for 3 years)
____8. Preferred Stock
vii
CLOSE THE GAP BETWEEN HOMEWORK
AND EXAM PERFORMANCE!
APPLICATION
Many students perform well on homework but struggle

when it comes to exams. With the Blank Sheet of Paper
Experience, students must problem-solve on their own, just
as they would if taking a test on a blank sheet of paper.
Good tool to make students understand concepts
without overly relying on technology’s help.
– Ramesh Narasimhan, professor Blank Sheet of Paper Experience
at Montclair State University A less-leading Blank Sheet of Paper Experience discourages
overreliance on the system.
• The use of drop-down menus and Smart Entry (type-
ahead) has been eliminated.
Good
I like tool to make
it because students
it appears understand
to bridge the gap concepts
between
without
the overlyand
homework relying
my on technology’s help.
exam. • Students must refer to the Chart of Accounts and
– Ramesh Narasimhan,
– Lawrence professor
Chui, professor decide for themselves what account is impacted.
atatMontclair
UniversityState
of St.University
Thomas • The number of accounts in each transaction is not
given away.
• Whether the account should be debited or credited
This will minimize students’ complaints about how is not given away.
the exam looks different from the homework format. • Transactions may be entered in any order (as long as
– Rama Ramamurthy, professor the entries are correct).
at Georgetown University • Check My Work Feedback only reports on what
students have actually attempted, which prevents
students from “guessing” their way through the
assignment.
Check it out! Visit cnowv2demo.cengage.com for an interactive demo.

viii
HELP STUDENTS MAKE CONNECTIONS
AND SEE THE BIG PICTURE!
Homework software should not get in the way of learning. One of the biggest
APPLICATION
complaints students have about online homework is the scrolling, which prevents
students from seeing the big picture and understanding the accounting system. The
new Multi-Panel View addresses this issue and enhances student learning.
Multi-Panel View This is just a lot better and less confusing

The Multi-Panel View in CengageNOWv2 enables students to than scrolling up and down. ... Having it
see all the elements of a problem on one screen. like that would make it much easier—not
• Students make connections and see the tasks as so much scrolling and it wouldn’t be so
connected components in the accounting process. confusing.
• Dramatically reduced scrolling eliminates student – Tyler Mason, student at Northern
frustration. Essex Community College
With the ability to move and

resize journals, ledgers, forms,
and financial statements, it is
Multi-Panel View makes it much easier for students to see how each piece
easier to navigate the problem
of the accounting cycle impacts the other pieces. Having it all in one view
and understand the accounting
system.
reduces student frustration and gives them a clearer picture of the complete
accounting cycle.
– Kristen Quinn, professor at Northern Essex Community College
ix
CLOSE THE GAP BETWEEN HOMEWORK
AND EXAM PERFORMANCE!
Students often complete homework at odd

APPLICATION
times. And when they use CengageNOWv2, they

get help right when they need it.
PAGE 1 PAGE 2
Adaptive Feedback JOURNAL Score: 33/138
Adaptive Feedback in CengageNOWv2 responds DATE DESCRIPTION POST.

DEBIT CREDIT
REF.
to students based upon their unique answers 1 Jul. 11 Office Equipment 10,000.00 1
and alerts them to the type of error they have 2 Cash 8,000.00 2
made without giving away the answer. 3 Note Payaable 2,000.00 3
4
PAGE 1 PAGE 2
There is a minor spelling error in the account title. You will be graded as if you had 5
JOURNAL Score: 33/138
POST. entered “Note Payable.” 6
DATE DESCRIPTION REF. DEBIT CREDIT
1 Jul. 11 Office Equipment 10,000.00 1 7

2 Cash 8,000.00 2 Line
3
4
Note Payaable 2,000.00 3
4
• The amount for this account is incorrect, although you’ve entered the amount in the 8
correct column. [-2] 9
5 5
6 6
7 7
8 8
9 9
10 10
11 11
Points: 0.24 / 1
Feedback
Check My Work In addition to groundbreaking, adaptive feedback,
Identify which accounts are affected in each transaction. Keep in mind that every transaction involves at least two accounts. Determine
whether the account increases or decreases and record each increase or decrease following the rules of debit and credit. Use the Posting
CengageNOWv2 continues to provide multiple layers of
Reference column to enter the corresponding account number from the general ledger account. Remember total debits should equal total
credits in your entries.
guidance to keep students on track and progressing.
• Check My Work Feedback provides general
Learning Objective 1
Learning Objective 2 guidance and hints as students work through
Learning Objective 3
homework assignments.
• Check My Work Feedback in CengageNOWv2
now only reports on what students have
actually attempted, which prevents them from
I like the adaptive feedback. It will reduce a number of
“guessing” their way through assignments.
errors that cause students to give up.
– Kevin Jones, professor at Drexel University • Explanations are available after the assignment
has been submitted and provide a detailed
description of how to arrive at the solution.
Excellent! Often learning from feedback is more powerful
than learning from the instructor, text, etc.
– Lisa Brown, professor at Indiana Institute of Technology
Check it out! Visit cnowv2demo.cengage.com for an interactive demo.
KEEP STUDENTS ON TRACK
AND PROGRESSING!
The best way to learn accounting is through practice, but students often get stuck when attempting homework assignments
APPLICATION
on their own.
Video: Show Me How

Created for the most frequently
assigned end-of-chapter items,
Show Me How problem
8-24 Chapter 8 Inventories: Special Valuation Issues
demonstration videos provide a
step-by-step model of a similar
Walmart U.S. segment’s inventories. The problem. Embedded
inventory at tips andsegment
the Walmart International
is valued primarily by the retail inventory warnings
method of help students
accounting, using theavoid
first-in, first-out
(“FIFO”) method. The retail inventory method of accounting results in inventory being val-
common mistakes and pitfalls.
ued at the lower of cost or market, since permanent markdowns are immediately recorded
as a reduction of the retail value of inventory. The inventory at the Sam’s Club segment is
valued using the weighted average cost LIFO method. At January 31, 2018, and January
31, 2017, the Company’s inventories valued at LIFO approximate those inventories as if
they were valued at FIFO.
Suggested answers to these questions are Questions:

found at the end of the chapter.
1. What method does Walmart use to value its inventory? Describe how this method is applied.
2. Why do you think Walmart uses the inventory method you identified in the previous question
Show Me How videos are linked to assignments in CengageNOWv2 anditsavailable
to value inventory? for
self-study and review. 3. Why does Walmart use the retail LIFO inventory method for domestic operations but the
retail FIFO inventory method for international operations?
Got It?
A helpful “Got It?” series of questions appears GOT IT?
8-14 What are the advantages of the retail inventory method compared to the gross profit
after coverage of each Learning Objectives method?
to confirm students understand the material 8-15 What is the necessary condition for the retail inventory method to provide valid
results?
presented and are ready to continue in the 8-16 Explain the meaning of the following terms: markup, additional markup, markup
cancellation, net additional markup, markdown, markdown cancellation, and net
chapter. Students have the opportunity to mark-down.
spend additional time reviewing and master- 8-17 Describe how a company computes the cost-to-retail ratio for the following cost flow
assumptions: FIFO, average cost, LIFO, and lower of average cost or market. Why
ing a concept before moving ahead. In addi- do the different methods approximate each cost flow assumption?
tion, these questions can now be assigned 8-18 What assumptions are necessary for the lower of cost or market retail inventory
method to actually produce an inventory value equal to the lower of average cost or
within CNOWv2 and provide instructors with market?
8-19 The retail inventory method indicated an inventory value of $80,000. A phys-
open-ended questions that will allow their ical inventory indicated a value of $70,000. Suggest possible causes of this
students an opportunity to dive deeper into discrepancy.
various concepts and topics associated with

their Intermediate Accounting course.
LEA RN I N G O BJ E C T I V E 8 .5 WHAT IS THE DOLLAR-VALUE RETAIL
Understand and apply the dollar-value
METHOD?
BECKER PROFESSIONAL EDUCATION REVIEW QUESTIONS
The previous
LIFO retail method.
discussion of the retail LIFO method assumed that there were no changes
in the retail price of inventory during the period. However, when prices change during
End-of-Chapter CPA review questions from Becker PREPARE STUDENTS
a period, FOR
a company canSUCCESS.
combine the principles of the retail LIFO method with the
Students review key concepts using proven questions from Becker LIFO
dollar-value Professional
method (discussed in Chapter 7) to eliminate the effects of this price
change. This combination is called the dollar-value LIFO retail method. Although
Education®—one of the industry’s most effective tools to prepare for the
no new principles areCPA Exam.
involved, we provide an illustration of the dollar-value retail LIFO
inventory method due to its complexity.
• Located in select end-of-chapter sections
Example Weston Company adopted LIFO on January 1, 2019, and reports the infor-
• Tagged by concept in CNOWv2 mation in Example 8.6.
• Similar questions to what students would actually find on the CPA Exam
xi
HELP STUDENTS GO BEYOND
MEMORIZATION TO TRUE UNDERSTANDING!
MASTERY
9-34 Chapter 9 Current Liabilities and Contingent Obligations
Review Center REVIEW CENTER

The Review Center at the end of each chapter At the beginning of the chapter, we discussed how the analysis of a company’s current
summarizes all major concepts from the liabilities and contingencies helps financial statement users assess the liquidity, financial
flexibility, and credit risk of a company. We also identified several objectives you would
chapter at a glance. These timely Review Cen- accomplish after reading the chapter. The objectives are listed below and followed by a
brief summary of the key points.
ters condense and summarize review material L EARNING OBJECTIVE 9.1 KEY TAKEAWAYS
for each Learning Objective. These review Explain the characteristics of a liability. • The characteristics of a liability are that:
° It must involve a present obligation, which may or may not be legally enforceable,
features also present Key Terms and Key Cal- that will be settled by a probable future sacrifice involving the transfer of assets,
provision of services, or other use of assets at a specified or determinable date.
culations grouped by Learning Objective for ° The company has little or no discretion to avoid the future sacrifice of economic
benefits.
quick review. This at-a-glance resource saves ° The transaction, event, or arrangement obligating the company has already
happened.
students time and allows them to find chapter KEY TERMS
highlights in one consistent, easy-to-locate equitable and constructive liabilities, p. 9-3 legal liabilities, p. 9-3
place in each chapter. L EARNING OBJECTIVE 9.2 KEY TAKEAWAYS

Exercises Describe the nature, classification, and6-49 • Current liabilities are obligations that are due within 1 year from the balance sheet
valuation of current liabilities. date. Reporting current liabilities on the balance sheet provides insights into a com-
pany’s liquidity and financial flexibility and is useful in assessing a company’s future
E6-7 Accounts Receivable Calculations The following amounts were reported for Cotton, Newton, and Miller cash flows.
LO 6.4 Companies: • Most current liabilities are measured, recorded, and reported at their maturity
Cotton Newton Miller amount and can be classified as having contractual amounts, amounts determined by
operating activities, or amounts requiring future resolution of uncertainty.
Accounts Receivable, 1/1/2019 $ 502,300 $ 282,100 $ 128,500
Accounts Receivable, 12/31/2019
Cash collections during the year
(a)
4,770,900
311,000
2,715,200
152,700
(c)
Next Level
KEY TERMS
current liabilities, p. 9-4 liquidity, p. 9-4
Credit sales 4,935,500 (b) 1,571,100
Required:
Next Level requirements
current ratio, p. 9-5
financial flexibility, p. 9-4
encourage
quick ratio, p. 9-5 students
Next Level Compute the missing amounts.
L EARNING OBJECTIVE 9.3
to
KEY TAKEAWAYS
master advanced thinking skills. These
E6-8 Estimation versus Direct Write-Off of Bad Debts Blunt Company makes credit sales of $21,000 during the
LO 6.5 month of February 2019. During 2019, collections are received on February sales
Identify, measure, and record current
of $20,400, accounts represent- • Current
liabilities based on a contractual amount.
requirements
liabilities in this groupwithin
result fromselect end-of-chapter
terms of contracts.
ing $600 of these sales are written off as uncollectible, and a $100 account previously written off is collected. • These liabilities include accounts payable, notes payable (interest-bearing and
Required:
questions require students to such
non-interest-bearing), short-term financing techniques goasbeyond
lines of creditthe
and
commercial paper, current maturities of long-term debt, dividends payable, refund-
SHOW 1. Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% ablebasic understanding of accounting rules and
deposits, and property taxes.
ME HOW
of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur. • Accounts payable are normally recorded at face value, after considering cash dis-
2. Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred?
Why?
procedures
counts, and no interest isand develop
subsequently charged.critical-thinking
A review of the shipping termsand is
often necessary to ensure that the accounts payable is recorded in the proper time
E6-9 Estimating Bad Debts from Receivables Balances The following information is extracted from Shelton decision-making skills. Specific open-ended
period.
LO 6.5 Corporation’s accounting records at the beginning of 2019: • Interest-bearing notes are recorded at an amount equal to the face value of the note,
and requirements are now
interest expense is then accrued over theconverted
life of the note byinto
applyingfill-in-
the stated
Accounts Receivable $63,000 interest rate to the face value. For non-interest-bearing notes payable, the implicit
Allowance for Doubtful Accounts 1,400 (credit) the-blank questions in CengageNOW and
interest is deducted from the face amount of the note to determine the TM received
cash
StarbucksDuring 2019, Annual Report
sales on credit amounted to $575,000, $557,400 was collected on outstanding receivables and
by the borrower, and interest expense is recorded over the life of the note as an
$2,600 of receivables were written off as uncollectible. On December 31, 2019, Shelton estimates its bad debts to are automatically
adjustment to the discount on notesgradable
payable. assignments.
• The currently maturing portion of long-term debt is classified as a current liability
The Starbucks continuing
be 4% of the outstanding thread
gross accounts case
receivable balance.
to show the effect on a company’s liquidity. In contrast, short-term debt that is
Required:
integrates actual
1. Prepare financial
the journal information
entry necessary
A-2
to record Shelton’s estimate of bad debt expense for 2019.
Appendix A Starbucks Corporation’s Annual Report (Excerpts)
2. Prepare the Accounts Receivable section of Shelton’s December 31, 2019, balance sheet.
throughout
3. Compute theShelton’s
book. Students
receivables are to one decimal place.)
turnover. (Round
4. If Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?
motivated and engaged by the inte-
E6-10 Aging Analysis of Accounts Receivable Cowen’s, a large department store located in a metropolitan area, has
gration
LO 6.5 of experiencing
been the realdifficulty
financial information
in estimating its bad debts. The company has decided to prepare an aging schedule
for its outstanding accounts receivable and estimate bad debts by the due dates of its receivables. This analysis dis-
and business strategy of Starbucks in
closes the following information:
Balance Age of Receivable Estimated Percentage Uncollectible
discussions$193,000
and examples
Under 30 days
throughout 0.8%
this edition.
SHOW
ME HOW
114,000
73,000 Specific 61–120end-of-chapter
30–60 days
days
2.0%
5.0%
applications 25,000demonstrate
41,000 121–240 days
241–360 days how a wide 20.0%
35.0%
19,000 Over 360 days 60.0%
variety of accounting concepts apply to
$465,000
a singleRequired:
company. In addition, excerpts
1. Use the preceding analysis to compute the estimated amount of uncollectible receivables.
from their
2. What annual report
is the net realizable can
value be found
of Cowen’s as
accounts receivable?
3. Prepare the journal entry to record Cowen’s estimated uncollectibles, assuming the balance in Allowance for
AppendixDoubtfulA
a. 0
in the
Accountsback
prior toof the
adjustment text.
is:
b. $3,000 (debit)
c. $2,800 (credit)
xii
ONLINE SOLUTIONS
CengageNOWv2 is a powerful course management and online homework resource that

provides control and customization to optimize the student learning experience.
Included are many proven resources such as algorithmic activities, test bank, course
management tools, reporting and assessment options, and much more.
Recent CengageNOW Enhancements

• Refreshed Design: This refreshed look will help you and your students
focus easily and quickly on what is important, while maintaining the same
functionality that CengageNOW users know and love.
• Integration with Popular Learning Management Systems: Single login,
deep linking, and grade return! (Check with your local Learning Consultant for
more details!)
• Upload Files Capability: You can now upload files in CengageNOW for
student use—including videos, Excel files, Word files, and more.
• Email Instructor Feature: Students can now send you a screenshot of the
question they are working on directly through CengageNOW and ask specific
questions about where they are stuck.
• Better Date Management: When modifying assignment due dates for a
whole course, the system will now automatically adjust due dates based on a
new start date, making it easier to reuse a course from one term to the next
and adjust for snow days.
• Streamlined Assignment Creation Process: A simplified and streamlined
Assignment Creation process allows instructors to quickly set up and manage
assignments from a single page!
• Report Options: New reporting options allow you to get better reports on
your students’ progress.
• Student Registration Process: When you create a course, a URL will be
generated that will automatically take students right into the instructor’s
course without them having to enter the course key!
xiii
xiv Online Solutions
MindTap eReader
The MindTap eReader for Wahlen/Jones/
Pagach’s Intermediate Accounting 3e is the most
robust digital reading experience available.
Hallmark features include:
• Fully optimized for the iPad.
• Note taking, highlighting, and more.
• Embedded digital media such as
Dynamic Exhibits.
The MindTap eReader also features

ReadSpeaker®, an online text-to-speech
application that vocalizes, or “speech-enables,”
online educational content. This feature is ideally
suited for both instructors and learners who
would like to listen to content instead of (or in
addition to) reading it.
NEW TO THIS EDITION
New! Updated Coverage of Revenue • Updated discussion of the allowance method to be consistent
with the current expected
Recognition, Investments, Leases, and • credit loss model (CECL) as required by a recently issued
Starbucks’s 2017 Financial Statements FASB standard
Intermediate Accounting 3e is completely updated to address the Chapter 7
new standards for revenue recognition, investments, and lease ac-
counting. The revenue standard provides a robust framework for • Added purchase return journal entries for alternative inventory
addressing revenue recognition issues and becomes fully effective systems (Example 7.1)
in 2019. The authors have updated and revised all of the mate- • Added discussion of sales returns in the determination of in-
rial that is impacted by this important new standard. While the ventory quantities consistent
most significant changes are seen in Chapter 17, Advanced Issues with the new revenue recognition standard
in Revenue Recognition, the authors have updated almost every
chapter to incorporate the new standard. The investment standard Chapter 8
primarily affects the classification and measurement of minority • Updated inventory write-down discussion to include discus-
passive investments in equity securities as discussed in Chapter sion of the lower of cost or net realizable value rule
13. Under this standard, all equity investments will generally be • Added discussion on how to convert the gross profit as a per-
measured at fair value with changes in fair value reported through centage of cost to the gross profit as a percentage of sales in
earnings. The new leasing standard is also fully incorporated into applying the gross profit inventory estimation method
the text. Chapter 20, Accounting for Leases, has been fully re- • Added “Why It Matters Feature” describing gross profit mar-
written to incorporate the complexities of the new standard. The gin ratio
authors have also updated all of the discussions in each chapter to
include Starbucks’ 2017 financial statements, to make accounting • Added ethics feature on inventory valuation
come to life for students. In addition to the many new digital as- Chapter 9
sets created for this edition of Intermediate Accounting, the text-
book content itself has also been thoroughly revised. • Updated corporate tax rate information to reflect Tax Cut and
Jobs Act
All chapters incorporate the following improvements: • Added “Looking Ahead” feature regarding the classification
• The “Got It?” feature is a quick check at the end of each sec- principle to distinguish between current and noncurrent debt
tion that allows students to immediately check their compre- Chapter 12
hension of a topic before moving on.
• Revised the goodwill impairment test to remove the require-
• At the end of each chapter, a “Review Center” collects the
ment to compute an implied value of goodwill (e.g., Step 2 of
most important highlights from the chapter in one place, let-
the impairment test) as required by ASU 2017-04
ting students see at a glance the key takeaways, terms, and
formulas for each learning objective. Chapter 13
Chapter 1 • Updated coverage to reflect new standards regarding the clas-
sification, measurement, and impairment of investments in
• Updated discussion of the FASB and IASB efforts toward con-
which an investor does not have significant influence or control
vergence, including the completed projects and the projects
that may not achieve convergence • Revised coverage of the impairment of held-to-maturity and
available-for-sale debt investments to reflect the current ex-
Chapter 2 pected credit loss (CECL) model and the available-for-sale
• Updated discussion of the FASB’s Conceptual Framework credit loss (AFSCL) model
Chapter 3 Chapter 14
• More effective presentation of the accounting equation and • Updated coverage of debt issuance costs to reflect changes
the double-entry system of accounting made as part of the FASB’s Simplification Initiative
• A more streamlined presentation of the accounting cycle Chapter 16
Chapter 4 • Additional discussion of noncontrolling interests
• Updated presentation of Starbucks’s most recent balance Chapter 17
sheets, including balance sheet–based ratios analysis
• Entirely new coverage of revenue from contracts with customers
Chapter 5 • Multiple examples related to each step of revenue recognition
• Updated discussion of the new revenue recognition principles • New end-of-chapter multiple-choice, review exercises, exercises,
• Updated discussion of the statement of comprehensive income problems, and cases
• Updated presentation of Starbucks’s most recent income Chapter 18
statements, including ratios analysis
• Updated for the 2018 tax reform
Chapter 6 • New chapter organization to better focus on interperiod
• Added discussion of cryptocurrencies income tax allocation
xv
xvi New To This Edition
• Improved discussion of permanent differences • Improved organization of chapter examples to improve stu-
• Updated coverage of classification of deferred taxes to reflect dent learning
changes made as part of the FASB’s Simplification Initiative Chapter 21
Chapter 19 • Revised and improved opening vignette and improved chapter
• Revised organization to aid understanding of defined benefit examples
pension plans • New organization to improve discussion of the direct and in-
direct methods
Chapter 20
• Entirely new coverage of FASB’s new lease standard
• Multiple examples related to lessee and lessor accounting
ABOUT THE AUTHORS
James M. Wahlen is the James R. Hodge Chair, Professor of Accounting, Chair of the James M. Wahlen,
Accounting Department and the former Chairman of the MBA Program at the Kelley School Indiana University
of Business at Indiana University. He received his Ph.D. from the University of Michigan and
has served on the faculties of the University of Chicago, University of North Carolina at Chap-
el Hill, INSEAD, the University of Washington, and Pacific Lutheran University. Dr. Wahlen’s
teaching and research interests focus on financial accounting, financial statement analysis, and
the capital markets. His research investigates earnings quality and earnings management, earn-
ings volatility as an indicator of risk, fair value accounting for financial instruments, account-
ing for loss reserve estimates by banks and insurers, stock market efficiency with respect to
accounting information, and testing the extent to which future stock returns can be predicted
with earnings and other financial statement information. His research has been published
in a wide array of academic and practitioner journals in accounting and finance. He has had
public accounting experience in both Milwaukee and Seattle and is a member of the American
Accounting Association. He has received numerous teaching awards during his career. In his
free time Dr. Wahlen loves spending time with his wife, daughters, and son-in-law; spoiling
his incredibly adorable granddaughter, Ailsa; outdoor sports (biking, hiking, skiing, golf);
cooking (and, of course, eating); and listening to rock music (especially if it is loud and live).
Dr. Jefferson P. Jones is an Associate Professor of Accounting in the School of Accountancy Jefferson P. Jones,
at Auburn University. He received his Bachelor of Accounting and Master of Accountan- Auburn University
cy degrees from Auburn University and his Ph.D. from Florida State University. His re-
search interests focus on financial accounting, specifically investigating the quality of reported
accounting information and accounting education. He has published articles in numerous
journals, including Advances in Accounting, Review of Quantitative Finance and Accounting,
Issues in Accounting Education, International Journal of Forecasting, and The CPA Journal.
Dr. Jones has received numerous teaching awards, including the Auburn University Beta Al-
pha Psi Outstanding Teaching Award (ten times), the Auburn University Outstanding Master
of Accountancy Professor Teaching Award (five times), the Auburn University Outstanding
Distance Master of Accountancy Teaching Award (three times), and the Auburn University
College of Business McCartney Teaching Award. In addition, he has made numerous pre-
sentations around the country on research and pedagogical issues. He holds a CPA certificate
in the state of Alabama (inactive) and is a member of the American Accounting Association,
the American Institute of Certified Public Accountants (AICPA), and the Alabama Society of
CPAs (ASCPA). He has had public accounting experience as an auditor for Deloitte & Touche.
Dr. Jones is also a coauthor of Cornerstones of Financial Accounting, Corporate Financial
Accounting, and Financial and Managerial Accounting. He is married, has two children, and
enjoys playing golf and watching college football.
Donald P. Pagach is a Professor of Accounting at the Poole College of Management at North Donald P. Pagach,
Carolina State University. He received his Bachelor of Accounting and Master of Accountan- North Carolina State
cy degrees from the University of Wisconsin–Madison and his Ph.D. from Florida State Uni- University
versity. His research interests focus on financial accounting and enterprise risk management,
with a specific focus on forecasting and financial statement analysis. He has published articles
in numerous journals, including Journal of Accounting Research, Contemporary Accounting
Research, Journal of Accounting, Auditing and Finance, and The CPA Journal. Dr. Pagach
has been named a University Outstanding Teacher and has received research awards for his
work on Enterprise Risk Management. Previously, Dr. Pagach taught at Louisiana State Uni-
versity and has had public accounting experience working for Coopers & Lybrand as an
auditor. He holds a CPA certificate in the state of North Carolina and is a member of the
American Accounting Association, the American Institute of Certified Public Accountants
(AICPA). Dr. Pagach is married, has three children, and enjoys traveling, especially if the trip
includes a beach.
xvii
ACKNOWLEDGMENTS
Many individuals provided invaluable assistance in the preparation of this book and we would like to acknowledge their help here.
We would like to thank all of the reviewers and focus group participants whose insights and thoughtful comments helped to
shape this and past editions.
Daniel Bayak, Lehigh University Lisa Koonce, The University of Texas at Catherine Plante, University of New
Brian Bratten, University of Kentucky Austin Hampshire
Robert Braun, Southeastern Louisiana Joseph Krupka, Georgia Southwestern Cheryl Prachyl, University of North
University State University Texas at Dallas
Mary Ellen Carter, Boston College Yvette J. Lazdowski, Plymouth State Nathan Slavin, Hofstra University
Kimberly Charland, Kansas State University John Smigla, University of Kentucky
University Byunghwan Lee, California State Greg Sommers, Southern Methodist
Bryan Church, Georgia Tech Polytechnic University, Pomona University
Janice Cobb, Texas Christian University Mostafa Maksy, Kutztown University of Charles Stanley, Baylor University
W. Terry Dancer, Arkansas State Pennsylvania Margaret M. Tanner, University of
University Katie Maxwell, University of Arizona Arkansas
Araya Debessay, University of Delaware Lakshmana Krishna Moorthy, Rutgers Bruce Wampler, University of Tennessee
Joan DiSalvio, Fairleigh Dickinson University at Chattanooga
University Barbara J. Muller, Arizona State Janis Weber, University of Louisiana at
Dana Hollie, Louisiana State University University Monroe
Travis Holt, University of Tennessee at Ramesh Narasimhan, Montclair State Peter Westort, University of Wisconsin
Chattanooga University Oshkosh
Bambi Hora, University of Central Derek Oler, Texas Tech University Gail E. Wright, Stevenson University
Oklahoma Shailendra Pandit, University of Illinois Xiaoli Yuan, Elizabeth City State
Adam Koch, University of Virginia at Chicago University
Jo Lynne Koehn, University of Central Jeff Paterson, Florida State University
Missouri Alee Phillips, University of Kansas
We are also indebted to our supplement preparers, whose efforts have contributed to enhancing the overall experience
of the instructors and students using this book, and our verifiers, whose work has helped ensure the utmost quality and
accuracy of this edition.
David S. Baglia, Grove City College David M. Karn, Howard Community Kristine N. Palmer Kristen P. Quinn,
Beth S. Blankers, Buena Vista University College Northern Essex Community College
Gary R. Bower, Community College of Yvette J. Lazdowski, Plymouth State Vernon J. Richardson, University of
Rhode Island University Arkansas
Melodi Bunting, Edgewood College Patti Little, Henry Ford Community Fernando Rodriguez John J. Sabbagh,
Bruce Caster, Utica College College Northern Essex Community College
Amy Crouch, International Business Steve Ludwig, Northwest Missouri State Angela H. Sandberg, Shorter University
College University Paul Schloemer, Ashland University
David T. Dearman, University of Kenneth H. Martin, Martinique Stacie A. Surowiec, Harford
Arkansas at Little Rock Development Services Community College
Bruce England, Massasoit C College Katie Maxwell, University of Arizona Diane L. Tanner, University of North
and Bridgewater State University Michelle McFeaters, Grove City College Florida
Drew M. Goodson, Central Carolina Dr. Rodney R. Michael Linda D. Arthur Wharton, Towson University
Community College Miller, Northeast Community College Amanda Wilson Beck Alexander
Jana Wilson Hosmer, Blue Ridge Barbara J. Muller, Arizona State Woloszyn Jr., Binghamton University
Community College University
xviii
INSTRUCTOR RESOURCES
Solutions Manual
Author-written and carefully verified multiple times to ensure accuracy and consistency
with the text, the Solutions Manual contains answers to the Got It? questions, Multi-
ple-Choice questions, Review Exercises, Exercises, Problems, Cases, and Using Codifica-
tion questions that appear in the text. These solutions help you easily plan, assign, and
efficiently grade assignments.
Test Bank
NEW for this edition, Test Bank content is now delivered in an online platform. Cengage
Learning Testing Powered by Cognero is a flexible, online system that allows you to:
• Author, edit, and manage test bank content from multiple Cengage Learning
solutions
• Create multiple test versions in an instant
• Deliver tests from your LMS, your classroom, or wherever you want
The third edition tests have been completely reviewed, revised, and verified to ensure
accuracy.
Companion Website
This robust companion website provides immediate access to a rich array of teaching
and learning resources—including PowerPoint slides and Excel Template Solutions. Easily
download the instructor resources you need from the password-protected, instructor-on-
ly section of the site.
PowerPoint Slides Bring your lectures to life with slides designed to clarify
difficult concepts for your students. The lecture PowerPoints include key terms
and definitions, equations, examples, exhibits, and all Example Exercises (with
solutions) from the textbook.
Excel Template Solutions Excel Templates are provided for selected long or
complicated end-of-chapter exercises and problems to assist the student as they
set up and work the problem. Certain cells are coded to display a tip or guidance
about what should be entered, which helps students stay on track. Selected
problems that can be solved using these templates are designated by an icon in
the textbook and are listed in the assignment preparation grid in the Instructor’s
Manual. The Excel Template Solutions provide answers to these templates.
xix
STUDENT RESOURCES
BECKER PROFESSIONAL EDUCATION REVIEW QUESTIONS

End-of-Chapter CPA review questions from Becker PREPARE STUDENTS FOR SUCCESS.
Students review key concepts using proven questions from Becker Professional
Education®—one of the industry’s most effective tools to prepare for the CPA Exam.
• Located in select end-of-chapter sections
• Tagged by concept in CNOWv2
• Similar questions to what students would actually find on the CPA Exam
Website
Designed specifically for your students’ accounting needs, this website features Excel
Templates, learning games, and flashcards.
• Excel Templates: These Excel Templates help students stay on track. If students
enter an incorrect answer in certain cells, a red asterisk will appear to let them
know something is wrong. Problems that can be solved using these templates
are designated by an icon.
• Flashcards: Students can prepare with these flashcards, which cover the key
terms and definitions they need to know for each chapter.
xx
BRIEF CONTENTS
PART 1 FINANCIAL REPORTING & FINANCIAL STATEMENTS: OBJECTIVES,

CONCEPTS, & ANALYSIS
1 THE DEMAND FOR AND SUPPLY OF FINANCIAL ACCOUNTING INFORMATION 1-3
2 FINANCIAL REPORTING: ITS CONCEPTUAL FRAMEWORK 2-1
3 REVIEW OF A COMPANY’S ACCOUNTING SYSTEM 3-1
4 THE BALANCE SHEET AND THE STATEMENT OF SHAREHOLDERS’ EQUITY 4-1
5 THE INCOME STATEMENT AND THE STATEMENT OF CASH FLOWS 5-1
TIME VALUE OF MONEY MODULE M-1
PART 2 BUSINESS OPERATING ACTIVITIES

6 CASH AND RECEIVABLES 6-3
7 INVENTORIES: COST MEASUREMENT AND FLOW ASSUMPTIONS 7-1
8 INVENTORIES: SPECIAL VALUATION ISSUES 8-1
9 CURRENT LIABILITIES AND CONTINGENT OBLIGATIONS 9-1
PART 3 INVESTING ACTIVITIES

10 PROPERTY, PLANT, AND EQUIPMENT: ACQUISITION AND SUBSEQUENT INVESTMENTS 10-3
11 DEPRECIATION, DEPLETION, IMPAIRMENT, AND DISPOSAL 11-1
12 INTANGIBLES 12-1
13 INVESTMENTS AND LONG-TERM RECEIVABLES 13-1
PART 4 FINANCING ACTIVITIES

14 FINANCING LIABILITIES: BONDS AND LONG-TERM NOTES PAYABLE 14-3
15 CONTRIBUTED CAPITAL 15-1
16 RETAINED EARNINGS AND EARNINGS PER SHARE 16-1
PART 5 SPECIAL TOPICS IN FINANCIAL REPORTING

17 ADVANCED ISSUES IN REVENUE RECOGNITION 17-3
18 ACCOUNTING FOR INCOME TAXES 18-1
19 ACCOUNTING FOR POSTRETIREMENT BENEFITS 19-1
20 ACCOUNTING FOR LEASES 20-1
21 THE STATEMENT OF CASH FLOWS 21-1
22 ACCOUNTING FOR CHANGES AND ERRORS 22-1
APPENDIX A Starbucks Corporation’s Annual Report (Excerpts) A-1

APPENDIX B List of the Official Pronouncements of the AICPA and FASB B-1
APPENDIX C List of the Official Pronouncements of the IASB C-1
APPENDIX D Brief Guide to Key Differences between IFRS and U.S. GAAP by Chapter D-1
INDEXI-1
xxi
CONTENTS
PART 1 2 FINANCIAL REPORTING: ITS CONCEPTUAL

FINANCIAL REPORTING & FINANCIAL FRAMEWORK 2-1
STATEMENTS: OBJECTIVES, CONCEPTS, & What Is the FASB’s Conceptual Framework? 2-2
ANALYSIS How Do Principles, Concepts, Standards, and
Rules Differ? 2-3
1 THE DEMAND FOR AND SUPPLY OF FINANCIAL Conceptual Framework: Brief History and
ACCOUNTING INFORMATION 1-3 Current Status 2-5
Introduction 1-4 What Are the Objectives of Financial Reporting? 2-6
Information Useful in Decision Making 2-8
Why Does the World Need Financial
Types of Useful Information for Investors, Lenders,
Accounting Information? 1-7
and Other Creditors 2-9
Business Activities 1-7
Who Are the Stakeholders? What Do They Need to Know? 1-8
What Qualities Make Accounting
What Drives Stakeholders’ Demand for
Information Useful? 2-11
Accounting Information? 1-9 Qualitative Characteristics 2-11
What Drives the Demand for Accounting Standards Decision Usefulness 2-12
and Independent Audits? 1-10 Enhancing Characteristics 2-14
The Supply of Financial Accounting What Are the Most Important Assumptions
Information 1-12 in Accounting? 2-16
The Role of the Securities and Exchange Commission (SEC) 1-12 Reporting Entity 2-16
Going Concern 2-18
The FASB 1-14
Period of Time 2-18
The Structure of the FASB 1-14 Monetary Unit 2-19
FASB Emerging Issues Task Force (EITF) 1-14 Mixed Attribute Measurement 2-19
FASB Accounting Standards Codification 1-15 Recognition 2-20
FASB Pronouncements 1-15 Accrual Accounting 2-20
Codification 1-16 Conservatism 2-21
The FASB’s Process and Operating Procedures 1-19 What Is the Financial Reporting
The IASB and IFRS 1-20 Model in the Conceptual Framework? 2-22
Convergence of FASB and IASB Accounting
Standards 1-21 3 REVIEW OF A COMPANY’S ACCOUNTING
The SEC and International Convergence 1-22 SYSTEM 3-1
Standard Setting in a Political Environment 1-23
What Are the Components of an Accounting
What Is the Product? Financial Reporting System? 3-2
and the Financial Statements 1-24
Accounting Equation 3-3
Brief Introduction: Starbucks’s Business 1-25 How Business Activities Impact the Accounting Equation 3-4
The Balance Sheet: Measuring Financial Position 1-25 Transactions, Events, Arrangements, and
Income Statement: Measuring and Reporting Performance 1-28 Supporting Documents 3-5
Statement of Cash Flows 1-31 Accounts 3-5
Statement of Shareholders’ Equity 1-31 Financial Statements 3-7
Important Information with the Financial Statements 1-33
What Is the Accounting Cycle? 3-8
Why Is Accounting Important?
The Economic Consequences of How Do We Record Entries in the
Financial Reporting 1-36 General Journal (Step 1)? 3-9
Ethics and Integrity in the Accounting Profession 1-37 Illustrating the Accounting Cycle 3-9
xxii
Contents xxiii
How Do We Post to the General Ledger Current Liabilities 4-19

(Step 2)? 3-13 Long-Term Liabilities 4-20
Trial Balance 3-14 Shareholders’ Equity 4-21
Contributed Capital 4-22
How Do We Prepare Adjusting Entries
Earned Capital 4-23
(Step 3)? 3-15
Noncontrolling Interests 4-24
Deferrals 3-15
What Is the Statement of Shareholders’
Accruals 3-18
Equity? 4-25
Accounting Estimates 3-19
Periodic Inventory 3-21 Additional Balance Sheet Disclosures 4-26
How Do We Prepare Financial Statements Summary of Accounting Policies 4-26
(Step 4)? 3-23 Fair Value and Risk of Financial Instruments 4-27
Income Statement 3-24 Loss and Gain Contingencies 4-27
Statement of Shareholders’ Equity 3-25 Subsequent Events 4-29
Balance Sheet 3-25 Related Party Transactions 4-31
Statement of Cash Flows 3-26 Comparative Financial Statements 4-31
How Do We Prepare Closing Entries (Step 5)? 3-27 How Do We Analyze Balance Sheet
Information? 4-32
How Do We Use a Worksheet to Prepare
Intracompany and Intercompany Comparisons 4-32
Financial Statements? 3-29
Common-Size Analysis 4-33
What Is the Purpose of Reversing Entries? 3-31 Rate of Change Analysis 4-33
Alternative Procedures 3-32 Ratio Analysis 4-35
Return on Investment 4-36
How Do We Use Subsidiary Ledgers
Return on Common Equity 4-38
and Special Journals? 3-34
Risk and Financial Flexibility Ratios 4-38
Subsidiary Ledgers 3-34 Leverage 4-39
Special Journals 3-35 Liquidity 4-39
Appendix 3.1: What Is Cash-Basis Operating Capability Ratios 4-41
Accounting? 3-35 How Does Balance Sheet Classification
and Presentation Differ under IFRS
4 THE BALANCE SHEET AND THE STATEMENT versus U.S. GAAP? 4-45
OF SHAREHOLDERS’ EQUITY 4-1
What Is the Purpose of the Balance Sheet? 4-2 5 THE INCOME STATEMENT AND THE STATEMENT
OF CASH FLOWS 5-1
What Elements Are Recognized on the
Balance Sheet? 4-4 What Are the Purposes of the
Income Statement? 5-2
Assets 4-4
Liabilities 4-5 What Is Income? 5-4
Shareholders’ Equity 4-6 Capital Maintenance Concept 5-4
How Are the Elements of a Balance Sheet Comprehensive Income and Net Income 5-5
Measured? 4-7 What Are the Elements of the
Historical Cost and Adjusted Historical Cost 4-8 Income Statement? 5-6
Present Value and Adjusted Present Value 4-9 Revenues 5-6
Fair Value 4-10 Expenses 5-9
Current Replacement Cost 4-12 Gains and Losses 5-10
Net Realizable Value 4-13
What Are the Major Components of the
How Are Items Classified and Reported Income Statement? 5-12
on the Balance Sheet? 4-14
Single-Step and Multiple-Step Formats 5-12
Current Assets 4-16 Sales Revenue 5-14
Long-Term Investments 4-17 Cost of Goods Sold 5-15
Property, Plant, and Equipment 4-17 Operating Expenses 5-16
Intangible Assets 4-18 Other Operating Income Items 5-16
Other Assets 4-19 Operating Income (Loss) 5-17
xxiv Contents
Items Resulting from Financing and Investing Activities 5-17 How Do We Compute the Present
Unusual and Nonrecurring Gains and Losses 5-17 Value of a Single Sum? M-9
Pretax Income from Continuing Operations 5-18 The Idea M-9
Income Tax Expense Related to Continuing Operations 5-18 Formula and Table Approaches M-9
Income from Continuing Operations 5-19 Application M-10
Net Income Attributable to Noncontrolling Interests 5-19
What Are Annuities? M-11
How Does Net Income Affect Retained Earnings? 5-20
How Do Income Statements Report Results How Do We Compute the Future Value
from Discontinued Operations? 5-21 of an Ordinary Annuity? M-12
Reporting Results of Discontinued Operations 5-21 Formula Approach M-12
Operating Income (or Loss) of a Discontinued Operation 5-23 Table Approach M-13
Gain or Loss on Sale 5-24 Applications M-14
Disclosures 5-26 How Do We Compute the Future Value
How Do We Compute and Report Earnings of an Annuity Due? M-15
per Share? 5-26 Table Approach M-15
Basic Earnings per Share 5-26 How Do We Compute the Present Value
Diluted Earnings per Share 5-27 of an Ordinary Annuity? M-16
Disclosures 5-27
How Do We Compute the Present Value
How Do Companies Report Comprehensive of an Annuity Due? M-20
Income? 5-28
Formula Approach M-20
U.S. GAAP versus IFRS: Similarities and Table Approach M-22
Differences in Reporting Income 5-30 Application M-23
How Do Companies Report the Statement How Do We Compute the Present Value
of Cash Flows? 5-33 of a Deferred Annuity? M-24
Overview and Uses of the Statement of Cash Flows 5-33 Application M-25
Reporting the Statement of Cash Flows 5-33 Summary of Present and Future Value
Operating Activities: Direct Method 5-36 Calculations M-26
How Do We Analyze the Information in How Do We Use Present Value Techniques
Income Statements and Cash Flow Statements? 5-37 in Financial Reporting? M-27
Common-Size and Profit Margin Analysis 5-37
Rate of Change Analysis 5-38
Ratio Analysis 5-39 PART 2
Earnings Quality and Earnings Management 5-41 BUSINESS OPERATING ACTIVITIES
Appendix 5.1: Segment And Interim
Reporting 5-42 6 CASH AND RECEIVABLES 6-3
Segment Reporting 5-42 What Is Cash? 6-5
Interim Financial Reports 5-46 Cash and Cash Equivalents 6-6
Preparation and Disclosure of Summarized Interim Why Do Businesses Need Cash Controls? 6-7
Financial Data 5-48
Cash Control Procedures 6-7
Electronic Payments 6-8
TIME VALUE OF MONEY MODULE M-1
What Are the Different Types of Receivables? 6-9
What Is the Time Value of Money? M-3 Overview of Accounting for Trade Receivables 6-10
Simple Interest versus Compound Interest M-4
How Are Accounts Receivable Recorded? 6-10
How Do We Compute the Future Value Trade Discounts 6-11
of a Single Sum? M-5 Cash (Sales) Discounts 6-11
The Idea M-5 Sales Returns and Allowances 6-13
Formula Approach M-6
How Are Uncollectible Accounts Receivable
Table Approach M-7
Estimated? 6-14
Application M-7
Contents xxv
Allowance Method 6-15 Comparison of Inventory Cost Flow Assumptions 7-22

Direct Write-Off Method 6-20 What Are the Consequences of Using
How Do Companies Account for the Alternative Inventory Cost Flow
Financing of Accounts Receivable? 6-22 Assumptions? 7-23
Secured Borrowing 6-23 Income Measurement 7-23
Sale of Accounts Receivable 6-25 Income Tax Effects 7-24
Recording the Sale of Accounts Receivable 6-26 Liquidation of LIFO Layers 7-24
Disclosure of Financing Agreements Earnings Management 7-25
of Accounts Receivable 6-28 Inventory Valuation 7-26
How Do Companies Account for Notes What Does Management Need to Consider in Selecting
Receivable? 6-29 an Inventory Cost Flow Assumption? 7-27
Short-Term Interest-Bearing Notes Receivable 6-29 What Is the Dollar-Value LIFO Method? 7-30
Short-Term Non-Interest-Bearing Notes Receivable 6-29 Cost Indexes 7-30
Sales or Assignments of Notes Receivable 6-30 Inventory Pools 7-31
Notes Receivable Reported at Fair Value 6-32 Application of Dollar-Value LIFO 7-31
How Are Receivables Disclosed? 6-32 How Do Companies Disclose Inventory
Values and Methods? 7-33
Appendix 6.1: Internal Controls for Cash 6-36
LIFO Valuation Allowance (LIFO Reserve) 7-34
Petty Cash 6-36
Interim Statements Using LIFO 7-36
Bank Reconciliation 6-37
8 INVENTORIES: SPECIAL VALUATION ISSUES 8-1

7 INVENTORIES: COST MEASUREMENT
AND FLOW ASSUMPTIONS 7-1 What Is an Inventory Write-Down? 8-2
How Do Companies Classify Inventory? 7-3 How Is the Value of Inventory Computed? 8-2
How Do You Apply the Inventory Valuation Rules? 8-4
Raw Materials Inventory 7-3
How Are the Inventory Valuation Rules Implemented? 8-7
Work-in-Process Inventory 7-3
How Do You Record Inventory Write-Downs? 8-8
Finished Goods Inventory 7-3
How Are Inventory Write-Downs Reported? 8-9
Flow of Inventory Costs 7-3
Conceptual Evaluation of Inventory Valuation Rules 8-10
How Do Companies Report Inventory in Their
Financial Statements? 7-5 Can Inventory Be Valued above Cost? 8-13
How Do Companies Keep Track of Inventory? 7-6 How Is Inventory Estimated Using the
Perpetual Inventory System 7-6 Gross Profit Method? 8-14
Periodic Inventory System 7-6 Evaluation of the Gross Profit Method 8-16
Comparison of Perpetual and Periodic Inventory Systems 7-8 How Is Inventory Estimated Using the
How Do Companies Determine Inventory Retail Inventory Method? 8-16
Quantities? 7-9 Retail Inventory Method Terminology 8-18
Goods in Transit 7-9 Application of the Retail Inventory Method 8-18
Consigned Goods 7-10 Additional Adjustments under the Retail Method 8-22
Product Financing Arrangements 7-11 Conceptual Evaluation of the Retail Inventory Method 8-23
Sales Returns 7-11 What Is the Dollar-Value Retail Method? 8-24
Bill and Hold Sales 7-11
Purchase Obligations 7-12 What Are the Effects of Inventory Errors? 8-26
How Do Companies Determine Appendix 8.1: How is Lower of Cost or NRV
Inventory Costs? 7-13 Applied in a Periodic Inventory System? 8-28
Purchase Discounts 7-14
What Are the Different Cost 9 CURRENT LIABILITIES AND CONTINGENT
Flow Assumptions? 7-15 OBLIGATIONS 9-1
Specific Identification 7-16 What Are Liabilities? 9-2
First-In, First-Out (FIFO) 7-17
Average Cost 7-19
What Is a Current Liability? 9-4
Last-In, First-Out (LIFO) 7-20 How Are Current Liabilities Classified? 9-4
xxvi Contents
How Are Current Liabilities Valued? 9-6 How Do We Account for Expenditures
How Do You Account for Current Subsequent to Acquisition? 10-26
Liabilities Based on a Contractual Amount? 9-7 Additions 10-27
Trade Accounts Payable 9-7 Improvements and Replacements 10-27
Notes Payable 9-8 Rearrangement and Moving 10-28
Currently Maturing Portion of Long-Term Debt 9-10 Repairs and Maintenance 10-28
Dividends Payable 9-12 Appendix 10.1: Oil and Gas Properties 10-29
Refundable Deposits 9-12
Property Taxes 9-13
11 DEPRECIATION, DEPLETION, IMPAIRMENT,
How Do We Account for Current AND DISPOSAL 11-1
Liabilities with Amounts Determined by
Operating Activities? 9-14 What Are the Factors Involved in
Depreciation? 11-2
Unearned (Deferred) Revenues 9-14
Accrued Liabilities 9-15 Asset Cost 11-3
Liabilities Related to Compensation 9-15 Service Life 11-3
Sales and Use Taxes 9-20 Residual Value 11-3
Income Taxes 9-21 Methods of Cost Allocation 11-4
How Do We Account for Contingent Gains What Are the Methods of Cost
and Losses? 9-22 Allocation? 11-4
Gain Contingencies 9-22 Time-Based Methods 11-5
Loss Contingencies 9-22 Activity Methods 11-8
Warranty Obligations 9-27 Recording and Reporting Depreciation 11-9
Premium, Coupon, and Cash Rebate Obligations 9-29 What Should Be Considered When
How Are Current Liabilities and Selecting Depreciation Methods? 11-10
Contingencies Presented in the Financial Financial Statement Effects 11-10
Statements? 9-32 Other Factors 11-11
What Additional Depreciation
Methods Exist? 11-14
PART 3
Group Depreciation 11-14
INVESTING ACTIVITIES Composite Depreciation 11-16
10 PROPERTY, PLANT, AND EQUIPMENT: How Are Depreciable Assets Disclosed? 11-18
ACQUISITION AND SUBSEQUENT What Are Some Additional Issues
INVESTMENTS 10-3 Related to Depreciation? 11-19
What Are the Characteristics of Property, Depreciation for Partial Periods 11-19
Plant, and Equipment? 10-5 Changes and Corrections of Depreciation 11-21
How Do We Account for the Acquisition Depreciation and Accretion Related to Asset
of Property, Plant, and Equipment? 10-7 Retirement Obligations 11-22
Determination of Cost 10-7 How Do We Account for the

Asset Retirement Obligations 10-10 Impairment of Property, Plant,
Lump-Sum Purchase 10-11 and Equipment? 11-23
Deferred (Future) Payments 10-11 Impairment of Assets to Be Held and Used 11-24
Issuance of Securities 10-12 Impairment of Assets Held for Sale 11-26
Assets Acquired by Donation 10-12 Conceptual Evaluation of Asset Impairment 11-26
How Do We Account for Nonmonetary How Do We Account for the Disposal
Asset Exchanges? 10-15 of Property, Plant, and Equipment? 11-29
Exception to the General Rule to Use Fair Value How Is Depletion Recorded? 11-31
for Nonmonetary Exchanges 10-17
Appendix 11.1: How Is Depreciation
What Is the Cost of Self-Constructed Assets? 10-18
Calculated for Income Tax Purposes? 11-33
Overhead Costs 10-18
MACRS Principles 11-34
Interest during Construction 10-19
Contents xxvii
12 INTANGIBLES 12-1 How Do We Account for Transfers and

Impairments? 13-17
How Do We Account for Intangible Assets? 12-2
Transfers of Investments between Categories 13-17
Initial Valuation of Intangible Assets 12-3
Impairments 13-19
Amortization and Impairment of Intangible Assets 12-4
How Are Investments in Equity Securities
How Do We Account for Research and
Measured and Reported? 13-21
Development Costs? 12-7
Recording the Initial Cost of Equity Securities 13-22
In-Process R&D 12-10
Recording Dividend Income 13-22
Start-Up Costs 12-10
Recognition of Unrealized Holding Gains and Losses 13-22
How Are Intangible Assets Disclosed? 12-11 Realized Gains and Losses on Sales of Equity Securities 13-23
Identifiable Intangible Assets 12-13 Summary and Conceptual Discussion 13-24
Marketing-Related Intangible Assets 12-14 How Do You Account for Minority Active
Customer-Related Intangible Assets 12-14 Investments? 13-25
Artistic-Related Intangible Assets 12-15 Accounting Procedures 13-26
Contract-Based Intangible Assets 12-15 Changes in Ownership Level 13-30
Technology-Based Intangible Assets 12-16 How Are Investments Disclosed in the
How Do We Account for Unidentifiable Financial Statements? 13-32
Intangibles? 12-19
What Is the Accounting for Other Types
Internally Developed Goodwill 12-19 of Investments? 13-34
Purchased Goodwill 12-19
Long-Term Notes Receivable 13-34
Impairment of Goodwill 12-20
Cash Surrender Value of Life Insurance 13-35
Bargain Purchase 12-22
Investments in Funds 13-36
Appendix 13.1: Derivative Financial
13 INVESTMENTS AND LONG-TERM RECEIVABLES 13-1
Instruments 13-36
How Are Investments Classified and
Fair Value Hedge 13-38
Reported? 13-3
Cash Flow Hedge 13-42
Debt Investments 13-3
Equity Investments 13-4
Fair Value Option 13-5 PART 4
How Are Investments in Held-to-Maturity FINANCING ACTIVITIES
Securities Measured and Reported? 13-6
14 FINANCING LIABILITIES: BONDS AND
Recording Initial Cost 13-6 LONG-TERM NOTES PAYABLE 14-3
Recognition of Interest Income and Amortization
of Bond Premiums and Discounts 13-6 Why Do Companies Issue Long-Term
Amortization for Bonds Acquired between Interest Dates 13-9 Financing Liabilities? 14-4
Sale of a Held-to-Maturity Investment Prior to Maturity 13-9 What Are the Terms and Characteristics
How Are Investments in Trading Securities of Bonds Payable? 14-5
Measured and Reported? 13-10 Characteristics of Bonds 14-5
Recording the Initial Cost of Trading Securities 13-11 The Bond Issue Process 14-6
Recording Interest Income 13-11 How Is the Issue Price of Bonds Payable
Recognition of Unrealized Holding Gains and Losses 13-12 Computed? 14-7
Realized Gains and Losses on Sales of Trading Securities 13-13
Face Value and Price 14-8
How Are Investments in Available-for-Sale How Is the Issuance of Bonds Payable
Securities Measured and Reported? 13-14 Recorded? 14-9
Recording the Initial Cost of Available-for-Sale
Bonds Issued between Interest Payment Dates 14-10
Securities 13-14
Recording Interest Income 13-14 How to Amortize Discounts and Premiums 14-12
Recognition of Unrealized Holding Gains and Losses 13-15 Effective Interest Method 14-12
Realized Gains and Losses on Sales of Bond Interest Schedules—Effective Interest Method 14-14
Available-for-Sale Securities 13-16 Straight-Line Method 14-16
xxviii Contents
Accruing Bond Interest 14-17 Nonmonetary Issuance of Stock 15-13

Zero-Coupon Bonds 14-18 Stock Splits 15-13
Debt Issuance Costs 14-18 Stock Warrants 15-14
Fair Value Option 14-19 How Do Companies Account for
How Do We Account for the Noncompensatory Share Purchase Plans? 15-17
Extinguishment of Liabilities? 14-20
What Are Share-Based Compensation Plans? 15-18
Bonds Retired at Maturity 14-21
Overview of Compensatory Share Option Plans 15-18
Bonds Retired Prior to Maturity 14-21
How Do We Account for Compensatory
How Do We Account for Bonds with Share Option Plans? 15-19
Equity Characteristics? 14-22 Restricted Share Unit Plans and Share
Bonds Issued with Detachable Stock Warrants 14-23 Appreciation Rights 15-26
Convertible Bonds 14-24 Additional Disclosures 15-30
How Do We Account for Long-Term Conceptual Evaluation 15-33
Notes Payable? 14-31 What Characteristics Describe Preferred
Notes Payable Issued for Cash 14-32 Stock? 15-33
Notes Payable Exchanged for Cash Preference as to Dividends 15-34
and Rights or Privileges 14-33 Cumulative Preferred Stock 15-34
Notes Payable Exchanged for Property, Participating Preferred Stock 15-34
Goods, or Services 14-34 Convertible Preferred Stock 15-35
Guarantees 14-36 Preferred Stock with Stock Warrants 15-36
What Should Be Disclosed for Callable Preferred Stock 15-37
Long-Term Liabilities? 14-37 Redeemable Preferred Stock 15-37
Preference in Liquidation 15-38
Appendix 14.1: Troubled Debt Voting Rights 15-38
Restructurings 14-39
What Is Treasury Stock and How
How Does a Debtor Account for Troubled Debt Is It Accounted For? 15-38
Restructuring? 14-39
Cost Method 15-39
How Does a Creditor Account for Troubled Debt
Restructuring? 14-43 How Is the Contributed Capital Section
Conceptual Evaluation of Accounting for Structured? 15-43
Troubled Debt Restructurings 14-46
16 RETAINED EARNINGS AND EARNINGS
15 CONTRIBUTED CAPITAL 15-1 PER SHARE 16-1
What Information Does Shareholders’ What Comprises Retained Earnings? 16-2
Equity Provide? 15-2
How Do We Account for Dividends? 16-2
How are Corporations Organized? 15-4 Requirements to Distribute Dividends 16-3
How Are Corporations Classified? 15-4 What Are the Different Types of Dividends? 16-3
How Are Corporations Formed? 15-4
Cash Dividends 16-3
How Is the Capital Structure of a Property Dividends 16-7
Corporation Defined? 15-5 Scrip Dividends 16-8
Capital Stock and Shareholders’ Rights 15-5 Stock Dividends 16-9
Basic Terminology 15-6 Stock Splits 16-12
Legal Capital 15-7 Liquidating Dividends 16-12
Additional Paid-in Capital 15-8 How Do We Account for Prior Period
How Do We Account for the Issuance Adjustments (Restatements)? 16-13
of Capital Stock? 15-10 Restrictions (Appropriations) of Retained Earnings 16-14
Authorization 15-10 How Do Companies Report Changes in
Issuance for Cash 15-10 Shareholders’ Equity? 16-15
Stock Issuance Costs 15-11
Accumulated Other Comprehensive Income 16-16
Stock Subscriptions 15-11
Statement of Retained Earnings 16-16
Combined Sales of Stock 15-12
Contents xxix
Miscellaneous Changes in Shareholders’ Equity 16-17 Presentation 17-29

Noncontrolling Interest 16-17 Disclosure 17-29
Earnings Per Share 16-20 What Are the Methods to Account for
Long-Term Contracts? 17-32
How Are Basic Earnings per Share
(EPS) Computed? 16-20 Long-Term Contracts 17-32
How Do We Account for Long-Term
Numerator Calculations 16-21
Contracts over Time? 17-33
Denominator Calculations 16-21
Components of Earnings per Share 16-24
18 ACCOUNTING FOR INCOME TAXES 18-1
When Do Companies Report Diluted
Earnings per Share? 16-26 What Are the Accounting Issues Related
to Income Taxes? 18-3
Computing Diluted Earnings per Share 16-26
Share Options and Warrants 16-27 What Are the Basic Issues for Interperiod
Convertible Securities 16-29 Income Tax Allocation? 18-4
Computation of Tentative and Final Temporary Differences 18-4
Diluted Earnings per Share 16-31 Interperiod Income Tax Allocation: Conceptual Issues 18-6
Special Issues Related to Diluted Earnings per Share 16-32
Additional Considerations 16-34
How Are Current and Deferred Taxes
EPS Disclosure Illustration 16-35
Recorded and Reported Under Interperiod
Income Tax Allocation? 18-9
Basic Entries 18-9
PART 5 Change in Income Tax Laws or Rates 18-15
SPECIAL TOPICS IN FINANCIAL REPORTING How Do We Account for Permanent
Differences? 18-16
17 ADVANCED ISSUES IN REVENUE
RECOGNITION 17-3 How Do We Account for Operating Loss
When Can Companies Recognize Revenue? 17-4 Carryforwards? 18-19
The 5-Step Revenue Recognition Model 17-5 Conceptual Issues 18-19
How Do You Identify a Contract How Does Intraperiod Income Tax

with a Customer? 17-7 Allocation Affect the Income Statement? 18-25
What Are the Issues in Identifying a Contract? 17-7 How Are Income Tax Items Presented and
How Do You Identify Performance Disclosed in the Financial Statements? 18-28
Obligations in a Contract? 17-12 Balance Sheet Presentation 18-28
Upfront Payments 17-13 Financial Statement Disclosures 18-28
Licensing 17-14 What Are Accounting Issues Related
Principal–Agent Contract Consideration 17-15 to Uncertain Tax Positions? 18-31
How Do You Determine the Transaction
Price? 17-17 19 ACCOUNTING FOR POSTRETIREMENT
Time Value of Money 17-17 BENEFITS 19-1
Variable Consideration 17-18 What Are the Characteristics of
Noncash Consideration 17-20 Pension Plans? 19-3
Consideration Payable to a Customer 17-20
What Types of Pensions Plans Are There? 19-4
How Do You Allocate the Transaction
How Do Companies Account for
Price to the Performance Obligations
Pension Plans? 19-6
in the Contract? 17-21
Accounting for Defined Contribution Plans 19-6
Changes in Transaction Price 17-23
How Do Companies Account for Defined Benefit Plans? 19-7
When Should You Recognize Revenue? 17-24 What Are the Components of Pension Expense? 19-8
Methods for Revenue Recognition When Performance Pension Obligation 19-11
Obligations Are Satisfied over Time 17-27 Pension Assets 19-11
Contract Costs 17-28 Demonstrating Accounting for Defined
What Are the Required Disclosures for Benefit Pension Plans 19-19
Revenue Recognition? 17-29 Disclosure 19-26
xxx Contents
Pension Spreadsheet 19-33 How Does the Lessor Report and Disclose
What Are the Additional Issues Related to Leases? 20-34
Accounting for Pensions? 19-36 Lessor Financial Statement Presentation 20-34
Conceptual Issues 19-36 Disclosure Requirements 20-34
Reporting Issues 19-38
Technical Issues 19-38 21 THE STATEMENT OF CASH FLOWS 21-1
How Do You Account for Other What Information Does the Statement of
Postretirement Benefits? 19-41 Cash Flows Provide, and How Is It Reported? 21-2
Conceptual Overview of Other Postretirement Benefits 19-42 What Classifications Are Used in the
Accounting Principles 19-43 Statement of Cash Flows? 21-3
Net Postretirement Benefit Expense 19-43 Presentation and Content of the Statement of Cash Flows 21-5
OPRB Liability 19-45 What Information Does the Statement of Cash Flows
Attribution Period 19-45 Help Financial Statement Users Understand? 21-6
Differences from Accounting for Pensions 19-45 Cash Inflows and Outflows 21-8
OPRB Disclosure 19-46
How are Cash Flows for Operating
Activities Reported? 21-9
20 ACCOUNTING FOR LEASES 20-1 Direct Method 21-10
WHY LEASE? 20-2 Indirect Method 21-14
What Are the Advantages and Disadvantages to the How is a Statement of Cash Flows Prepared
Lessee? 20-2 Under the Visual Inspection Method? 21-18
What Are the Advantages and Disadvantages to the
How Is the Statement of Cash Flows
Lessor? 20-3
Prepared Using the Spreadsheet Method? 21-23
What Is a Lease? 20-3
The Spreadsheet Method: A Four-Step Process 21-24
What Is an Identified Asset? 20-4
How Are Special Items Accounted for in
Does the Lessee Have Control Over the Asset? 20-4
the Statement of Cash Flows? 21-33
How Do You Classify a Lease? 20-6
Sale of Depreciable Asset 21-33
Transfer of Ownership Test 20-6 Retirement of Bonds 21-33
Purchase Option Test 20-6 Interest Paid and Income Taxes Paid 21-34
Economic Life Test 20-7 Short- and Long-Term Investments 21-35
Present Value of Lease Payments Test 20-7 Cash Dividends Declared 21-37
Specialized Nature Test 20-7 Cash Flows for Compensatory Share Option Plans 21-38
How Does a Lessee Account for Its Leases? 20-8 Changes in Foreign Currency Exchange Rates 21-39
How Do We Measure Lease Assets and Liabilities? 20-8 Appendix 21.1: Prepare the Operating
Lessee Accounting for Operating Leases 20-10 Activities Section under the Direct
Lessee Accounting for Finance Leases 20-13 Method 21-40
Other Lessee Capitalization Issues 20-16 Visual Inspection—Direct Method 21-40
How Does the Lessee Report and Disclose Spreadsheet Method 21-42
Leases? 20-20
Financial Statement Presentation 20-20 22 ACCOUNTING FOR CHANGES AND ERRORS 22-1
Disclosure Requirements 20-21
What Are the Types of Accounting Changes,
How Does a Lessor Account for and and How Are They Reported? 22-3
Report a Lease? 20-22 Method of Reporting Accounting Changes and Errors 22-3
Lessor Accounting for an Operating Lease 20-23
How Do We Account for a Change in
Sales-Type Leases (Lessor) 20-24
Accounting Principle? 22-4
Initial Direct Costs Involved in a Sales-Type Lease 20-26
Unguaranteed and Guaranteed Residual Values 20-26 Retrospective Adjustment Method 22-5
Direct-Financing Leases (Lessor) 20-30 Direct and Indirect Effects 22-11
Initial Direct Costs Involved in a Direct-Financing Impracticability of Retrospective Adjustment 22-11
Lease 20-33 Accounting Changes in Interim Financial Statements 22-12
Contents xxxi
How Do We Account for a Change in an APPENDIX A Starbucks Corporation’s Annual Report

Accounting Estimate? 22-12 (Excerpts)A-1
A Change in Principle Distinguished from a APPENDIX B List of the Official Pronouncements
Change in an Estimate 22-13 of the AICPA and FASB B-1
How Do We Account For A Change In A
Reporting Entity? 22-15 APPENDIX C List of the Official Pronouncements
of the IASB C-1
How Do We Account for a Correction
of an Error? 22-15 APPENDIX D Brief Guide to Key Differences between
IFRS and U.S. GAAP by Chapter D-1
Error Analysis 22-18
Error Correction 22-20 INDEXI-1
1
PART
FINANCIAL REPORTING &
FINANCIAL STATEMENTS:
Objectives, Concepts, & Analysis
CHAPTER 1 CHAPTER 4
The Demand for and Supply of Financial Accounting The Balance Sheet and the
COURTESY DONALD MCCULLOUGH
Information Statement of Shareholders’ Equity
CHAPTER 2 CHAPTER 5
Financial Reporting: Its Conceptual Framework The Income Statement and the
Statement of Cash Flows
CHAPTER 3
Review of a Company’s Accounting System Time Value of Money Module
1
C H A P T E R
© DUDAREV MIKHALL/SHUTTERSTOCK.COM
THE DEMAND FOR AND LEARNING OBJECTIVES
After reading this chapter you

SUPPLY OF FINANCIAL will be able to:
LO 1.1 U
nderstand the forces that
ACCOUNTING drive the demand for financial

accounting information in the
world economy.
INFORMATION LO 1.2 U
nderstand the forces that
determine the supply of
accounting information,
including the role of the
Securities and Exchange
Your Future Is Bright! Commission (SEC).

LO 1.3 E xplain the role of the
Financial Accounting
Standards Board (FASB) for
As the world of business becomes increasingly international and establishing U.S. Generally
Accepted Accounting
technologically advanced, you might wonder what the future has in Principles (U.S. GAAP).
store for the accounting profession. More importantly, as you con- LO 1.4 E xplain and use the FASB
sider accounting as a major, you might ask what the future holds Accounting Standards
Codification system, and
for you upon graduation. Recent evidence suggests that a very understand the standard-
exciting future awaits! setting process.
LO 1.5 E xplain the role of the
Accounting is a profession devoted to helping people by creating and report-
International Accounting
ing the financial information they need to make good business decisions. Investors Standards Board (IASB) in
establishing International
and creditors are becoming increasingly sophisticated and global, demanding
Financial Reporting Standards
more relevant and reliable information from companies all over the world. All (IFRS) and the efforts to try to
converge accounting standards
indications are that future years will present great opportunities for the accounting
between the FASB and the IASB.
profession to continue to create tremendous value in the world economy and in LO 1.6 U
nderstand the output of the
local economies. In surveys of small business owners, accountants are consis- financial reporting process
and the four primary financial
tently viewed as among the most trusted business advisers. In addition, many statements, as well as the
companies are placing increasing importance on accounting skills in their exec- important information reported
with financial statements.
utive training programs, and emphasizing the certified public accountant (CPA)
LO 1.7 U
nderstand that, because
credential in their executive searches. financial accounting information
The ongoing growth in hiring talented individuals with strong accounting skills triggers important economic
consequences, integrity, and
is expected to continue. According to data from the Bureau of Labor Statistics,1 the ability to resolve ethical
accountants and auditors are expected to experience faster than average dilemmas is essential to the
accounting profession.
1
See http://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm. 1-3
1-4 Chapter 1 The Demand for and Supply of Financial Accounting Information
employment growth through 2026, and CPAs should have 59% of all of the firms surveyed expect to hire the same
the best prospects. Employment of accountants and audi- number or more accounting graduates. Further, 88% of the
tors is expected to grow by 10% by 2026, faster than the firms surveyed expected to need the same number or more
average for all occupations. This profession will see a large CPAs on staff. These accountants are going to need skills
increase in the number of new jobs, about 140,000 over to understand business and accounting in a global context,
the decade, and a total of over 500,000 job openings. The with expertise in U.S. and international accounting methods.
overall health of the economy and business growth, chang- Various surveys commonly rank public accounting
ing financial laws and corporate governance regulations, among the top five careers for people who want more pay,
and increased accountability for protecting an organiza- more upside career growth potential, and more control over
tion’s stakeholders will drive job growth. where they are going. Finally, accounting is traditionally
To further support this exciting potential, a recent sur- one of the top majors on college campuses, in part because
vey by the American Institute of Certified Public Accoun- accounting is a service profession devoted to helping peo-
2
tants (AICPA) noted that hiring of accounting graduates by ple. By all indications, accounting skills are very valuable
public accounting firms added almost 35,000 new jobs in and in high demand, and your future professional career in
2016 alone. When asked about projections of hiring trends, accounting appears bright!
INTRODUCTION
The accounting profession creates one of the most valuable and essential resources
in the world economy—relevant and reliable financial information that people use to
make important decisions about companies. The world economy, which allocates scarce
resources and enables productive investments, creates the standard of living that people
enjoy. The world economy cannot function effectively or efficiently without useful and
credible financial information. Corporations, governments, the capital markets, inves-
tors, creditors, banks, suppliers, customers, employees, labor unions, pension funds,
regulatory authorities, academic institutions, individuals, and many others rely on finan-
cial information to make important economic decisions.
The role of financial accounting is to identify, measure, record, and report financial
information that is relevant and faithfully represents companies to present and potential
future stakeholders.
As such, accounting is the “language of business.” The objective of this text is to prepare
you to be a successful professional accountant with the knowledge and skills necessary
to produce this valuable information in order to help people make important economic
decisions. The “bottom-line” of the accounting profession is helping people by provid-
ing them with useful information about companies.
The prior paragraph may sound like hype, overstating the importance of accounting—
but that is not the case. Every day, around the world, investors, bankers and other lenders,
2
S ee https://www.aicpa.org/content/dam/aicpa/interestareas/accountingeducation/newsandpublications/
downloadabledocuments/2017-trends-report.pdf
Introduction 1-5
financial analysts, corporate managers, and many others pore through financial accounting
information to analyze the profitability, risk, and growth of companies and make informed
investing, financing, operating, strategic, and other decisions. The parties that depend on
financial accounting information to make important decisions include:
• Investors and analysts commonly use the information to value companies and shares
of stock and make buy and sell decisions every day.
• Bankers and other lenders use the information to assess credit risk and make lending
decisions.
• Corporate boards and executives use the information to evaluate the performance of
their company and its strategy and the executive management team’s success (or lack
thereof) in executing the strategy.
• Compensation committees within boards of directors use this information to deter-
mine whether corporate managers have achieved certain goals and objectives measured
with accounting information (such as sales growth or earnings targets), and then deter-
mine whether managers have earned bonuses that depend on achieving those goals.
• Companies evaluate this information to assess the strategies and performance
of competitors, to evaluate potential acquisitions of other companies, to evaluate
investment opportunities in other countries, and to assess prospective customers,
suppliers, and partners.
• Individuals use this information to evaluate companies as potential employers or
investment opportunities.
• Because of this widespread interest, the financial media (print, broadcast, and online)
provides daily news coverage about companies based on newly released accounting
information, such as quarterly or annual earnings announcements.
For these important decisions and many more in the world economy, accounting infor-
mation plays an essential role.
Exhibit 1.1 provides a graphic representation of how accounting information helps
people.3 The bottom of the graphic depicts a firm engaging in economic activities—
raising capital, investing in productive assets, hiring employees, producing and selling
products and services to customers, and so on. As accountants, we identify, measure,
record, and report useful information about all of these activities. Some of these activi-
ties involve simple transactions, and measuring and reporting them is clear and straight-
forward. However, in our fast-paced global economy, companies often engage in many
complex activities and transactions that require judgment and estimation by the accoun-
tants. So, to fulfill our responsibilities as professional accountants, we need a lot of skill
and knowledge about accounting, and a deep understanding of business, along with
critical thinking and ethical decision-making and integrity. As a result, accountants pro-
duce useful information in financial statements and financial reports that help a wide
variety of investors, creditors, and other stakeholders make intelligent decisions about
the company. This information and these decisions help the company to prosper and
grow, and to compete for more economic resources (more capital, productive assets,
employees, and customers). Across the entire economy, our efforts to produce useful
information about companies helps decision makers allocate capital, talent, and produc-
tive resources to the best and most productive uses, which in turn helps society and the
economy as a whole to prosper and grow.
This text will help you learn the principles, concepts, standards, and methods that the
accounting profession uses to produce financial accounting information that is relevant
and faithfully represents companies to decision makers. The text will help you understand:
• the conceptual framework of financial reporting;
• the financial reporting process and the financial statements—balance sheets, income
statements, statements of cash flows, and statements of shareholders’ equity;
3
T his graphic was created by members of the Pathways Commission on Accounting Higher Education, a joint effort by the Amer-
ican Accounting Association and the American Institute of Certified Public Accountants. http://aaahq.org/portals/0/images/
misc/Pathways-THIS-IS-ACCOUNTING_AAA_AICPA_branded_20160613.jpg
1.1 This is Accounting!
• the key elements of financial statements as well as the methods and practices for
measuring and reporting them.
The text also prepares you to account for a wide array of very different business
activities using U.S. Generally Accepted Accounting Principles (U.S. GAAP) as well
as International Financial Reporting Standards (IFRS), which are used in roughly 130
countries. This text illustrates these methods and principles for you using a variety of
real company examples from around the world. In particular, each chapter of the text
uses the financial statements of Starbucks and various other companies as illustrative
cases to help you understand financial statement information and accounting principles
and methods under U.S. GAAP. In addition, the text also uses the financial statements
of Nestlé, LVMH, and other international companies to help you understand similar-
ities and differences between IFRS and U.S. GAAP. The text will deepen your under-
standing of why accounting information is relevant and representationally faithful to
many different stakeholders by illustrating how financial statement users use the infor-
mation you will produce as an accountant. The text will also make you aware of the
types of ethical issues you may face as a professional accountant.
The first chapter in the text describes and motivates what we do as accountants, why
we do what we do, the financial statement information we produce, and who cares about
that information. This chapter gives you an important frame of reference as we work
together through all the later chapters of the book. Specifically, this chapter will help you:
• Understand the forces that drive the demand for accounting information. Why does
the world need accounting information?
• Understand the supply of accounting information. How do accountants produce
useful information for decision makers?
Why Does the World Need Financial Accounting Information? 1-7
• Review the information content of the financial statements. What is the output of
the accounting production process?
• Appreciate the economic consequences of financial reporting. In what ways does
accounting information create value in the world?
LEAR NI NG OBJECTI VE 1.1

WHY DOES THE WORLD NEED FINANCIAL
Understand the forces that drive the
ACCOUNTING INFORMATION? demand for financial accounting
Companies compete for a wide variety of resources—financial capital, physical and nat- information in the world economy.
ural resources, intellectual property and technology, new product and service ideas,
skilled employees and executives, customers and new sales channels and markets to
reach more customers, suppliers that can provide essential production resources, and
many others. To compete successfully, companies first develop a business plan, with
broad strategic objectives as well as specific tactics. To be profitable, a company’s busi-
ness model should guide its strategy and business activities to be different from that of
its rivals, utilizing whatever competitive advantages it might have.
Business Activities
After formulating a strategic plan, the company will typically engage in three sets of
activities: financing, investing, and operating. Companies will engage in these activities
regularly, some of them daily, throughout the life of the firm.
Financing Activities A company must first engage in financing activities to raise the
capital it will need to run its operations. The first step in financing is to raise equity
capital by attracting investments from business owners, such as common shareholders.
These owners invest capital, but this is risky because there is no guarantee of repayment
or return on their investment. If the company is not profitable, the common sharehold-
ers could lose their entire investment. However, if the company is profitable, the com-
mon shareholders enjoy dividends and increases in the value of their shares. As owners,
common shareholders also typically have control of the company. With votes associated
with each common equity share, the shareholders can vote to determine the direction
and actions the company will take.
Once equity capital is in place, companies sometimes seek additional financial cap-
ital from lenders by issuing bonds in the capital market or taking loans from banks or
other financial institutions. Credit capital obligates the company to repay the borrowed
funds at some future date and to pay periodic interest payments as a return on the bor-
rowed funds. As such, creditors take less downside risk but enjoy less upside potential
than common shareholders. On the upside, profitable companies will simply pay inter-
est and principal as required by the loan agreement. On the downside, an unsuccessful
company may default on the loan and perhaps declare bankruptcy. In that unfortunate
outcome, the creditors might receive only a partial (or zero) repayment of the loans,
depending on the liquidation value (if any) of the company’s assets.
Investing Activities Once a company has financial capital, it typically engages in
i nvesting activities to invest that capital in productive resources that are necessary
to operate the business. These resources can include property, plant, and equipment;
technology (software and information systems); intellectual property (such as patents or
copyrights); legal rights (such as licenses, franchises, or other legal rights); and operat-
ing agreements (such as leases, distributorships, or partnerships).
Operating Activities With necessary resources in place, the company can commence
day-to-day operating activities, producing goods and/or services and selling them
to customers. The company will likely hire employees and managers to run the busi-
ness. It will also likely have to acquire raw materials, supplies, and inventory to produce
goods for customers. It may need to establish agreements with suppliers of key materials
for production. The company will also need to establish a customer base, sales chan-
nels, and markets. The company will have to comply with all applicable laws and reg-
ulations governing the business, including paying payroll taxes, property taxes, sales or
value-added taxes, import or export duties, and, of course, income taxes.
Who Are the Stakeholders? What Do They Need

to Know?
Most companies have many different stakeholders (parties with some type of interest
in the company): common equity shareholders, banks, creditors, managers and employ-
ees, suppliers, customers, labor unions, pension funds, government authorities (tax, reg-
ulatory, and legal), local communities, and others. In fact, it is helpful to think of the
firm as a legal entity (such as a corporation) that engages in a wide array of explicit and
implicit contracts, agreements, arrangements, and transactions with various stakehold-
ers, as illustrated in Exhibit 1.2.
1.2 Company Stakeholders
Equity
Many Investors
Others
Banks
Local
Communities
Creditors
Tax
Authorities
The Company Managers
Government
Regulatory
Authorities
Employees
Pension
Funds
Suppliers
Labor
Unions Customers
What information does each type of stakeholder need about the company?
Investors Equity investors enjoy the upside profits if the company is successful, but they
also bear the bottom-line risk if the company is not successful. As a potential equity inves-
tor, what would you like to know about the company in order to make an informed
investment decision (e.g., whether or not to invest, how many shares of stock to purchase,
and what price to pay)? In addition to knowing about the business model, strategies, and
Why Does the World Need Financial Accounting Information? 1-9
competitive advantages of the company, you might be interested to know what resources
the company owns and uses in conducting its operations, right? You may also be very
interested to know if the company is generating a profit and positive cash flows, and
whether profits and cash flows are growing over time. You should also find out how
much debt the company owes, so you can assess the riskiness of the business.
Creditors Creditors face less risk of loss of their investments because they have superior
claim in bankruptcy over equity investors, but creditors do not share in the same upside
potential as equity investors. If you are a potential creditor, what information will you
need to know about the company before you can make an informed decision about
whether or not to lend to this company? For example, you will probably want to know
how much equity capital the company has in place, so you know how much capital the
owners are willing to risk before you will be willing to risk any of your own capital,
right? You may also be interested in the resources the company owns to conduct busi-
ness, as well as any outstanding loans and obligations the company may already have.
Finally, you will be especially interested in the company’s cash flows and its ability to
meet interest and principal payments when they become due.
While the information needs of equity investors and creditors overlap, they also
differ in important respects. For example, equity investors tend to be more interested in
profits (the source of future dividends and share value appreciation), whereas creditors
tend to be more interested in cash flows (the source of interest and principal repay-
ments). Other potential stakeholders face differing decisions and, therefore, have over-
lapping but differing needs for information in order to engage in informed contracting
with the company.
What Drives Stakeholders’ Demand for Accounting

Information?
If you were a prospective equity investor or creditor, and you were not provided any infor-
mation about the company’s profits, cash flows, resources, existing debt obligations, risks,
and growth, what would you do? Most people are risk averse, so for a given level of expected
profit or return, they prefer less risk rather than more risk. Therefore, if you are risk averse
and don’t have access to the information you need to make an informed decision, you will
likely refuse to invest or lend any of your hard-earned money in this company. Prospective
customers, suppliers, employees, and other potential stakeholders will respond in a similar,
risk averse manner when faced with a lack of necessary information.
This demand for information compels the company that needs to raise financial
capital, make investments, and conduct operations to provide stakeholders with rele-
vant and faithfully represented financial information. Thus, a natural demand for
accounting information arises from the information needs of equity shareholders,
creditors, and various other stakeholders to make resource allocation decisions.
This demand arises because companies have to compete for and attract scarce economic
resources, such as equity and debt capital, productive capital, employees, supplier and
customer relationships, technology, and intellectual property. Financial reporting is
the process of communicating financial accounting information to existing and
potential future investors, creditors, lenders, and other external decision makers.
The Separation of Ownership and Control The demand for financial reporting and
accounting information is further driven by the need to avoid potential problems that can
arise when the ownership of a company’s resources is separate from the control of those
resources. In a typical corporation, for example, common equity shareholders and cred-
itors (the principals) provide financial resources by investing in and lending to the com-
pany. The company executives, managers, and employees (the agents) have been hired to
invest those financial resources and run the company’s daily business activities on behalf of
the investors and creditors. Problems can arise because of the separation of ownership
and control. The investors and creditors (the principals) who have provided financial
capital own the resources but are separate from the executives, managers, and employees
(the agents) who have day-to-day control of those resources. Exhibit 1.3 illustrates the
separation of ownership and control.
1.3 When Ownership Is Separate from Control
The separation of
ownership and
control
Principals Agents
Separation
Ownership: Control:
Supply and own Manage and control
resources resources
Information
Common equity shareholders, Executives,
asymmetry
creditors, other resource managers,
providers employees
The separation of ownership and control gives rise to information asymmetry

roblems, which simply means problems arising from parties needing but not having the
p
same information. A company’s managers usually have a wealth of inside information about
the company—what resources the company has invested in; how the sales, profits, and
cash flows are shaping up for the year; how the company is spending cash; strategic direc-
tions; new products; and so forth. The investors and creditors need but might not have the
detailed information the managers have. If investors and creditors do not have the informa-
tion they need, they might refuse to provide the financial capital the company requires.
How do you bridge this information gap? The need to bridge the information
gap created by the separation of ownership and control drives the demand for
financial accounting information. Periodic reporting of relevant and representation-
ally faithful financial statement information helps mitigate information asymmetry prob-
lems. Financial reporting enables company managers to provide investors and creditors
with necessary information to value the company, monitor the company’s actions, and
enter contracts with many other potential stakeholders. Quarterly and annual reporting
of sales, profits, cash flows, financial position, and other relevant financial information
helps investors and creditors to make resource allocation decisions.
Periodic reporting of financial statements also helps inform investors and creditors
about the stewardship of the managers. Financial statements reveal how the managers are
using company resources, spending cash, creating revenue growth, controlling expenses,
and generating profits. Not surprisingly, company managers can often earn bonuses if they
meet certain goals, such as revenue growth targets or earnings targets, in order to align
managers’ incentives and actions with those preferred by the investors and creditors.
What Drives the Demand for Accounting Standards

and Independent Audits?
Investors’ and creditors’ demands for information will not be entirely satisfied, and
problems arising from the separation of ownership and control will not be completely
eliminated, based solely on a system of companies self-reporting financial information.
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Kaukaasialainen
tanssijatar
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.
Title: Kaukaasialainen tanssijatar
Author: comte de Arthur Gobineau
Translator: Aarne Anttila
Release date: November 10, 2023 [eBook #72087]
Language: Finnish
Original publication: Hämeenlinna: Arvi A. Karisto Oy, 1921
Credits: Juhani Kärkkäinen and Tapio Riikonen
*** START OF THE PROJECT GUTENBERG EBOOK

KAUKAASIALAINEN TANSSIJATAR ***
KAUKAASIALAINEN TANSSIJATAR
Kirj.
J. A. de Gobineau
Ranskankielestä suomentanut
Aarne Anttila
Kolmen markan romaaneja 8.
Hämeenlinnassa, Arvi A. Karisto Oy, 1921.
SISÄLLYS:
J.A. de Gobineau
I. Madame Marronin hotellissa
II. Orjakauppa-yhtiö
III. Kaimakamin morsian
IV. Kuvernöörin luona
V. Tataarien kunnia
VI. Tanssijattaren kohtalo
J.A. de Gobineau
Joseph Arthur De Gobineau, kreivi, valtiomies ja kirjailija, syntyi

heinäkuun 14 päivänä 1816 Ville-d'Avrayssa Pariisin lähistöllä. Hän
aloitti julkisen valtiomies-uransa ulkoasiainministeri Tocquevillen
kabinettipäällikkönä. Sen jälkeen hän toimi lähetystön sihteerinä
Bernissä, Hannoverissa, Frankfurtissa. V. 1855 hänet määrättiin
Ranskan lähetystöön Persiaan, sitten keisarilliseksi komisarioksi
Ranskan kalastuslaitokseen Newfoundlandiin; sieltä hän palasi vielä
Persiaan, siirrettiin lähettilääksi Ateenaan, sitten Rio de Janeiroon ja
lopuksi Tukholmaan, josta toimesta sai eron v. 1877. Gobineau kuoli
1882.
Tämä "kiertolais"-elämä ei suinkaan ole ollut vailla merkitystä

Gobineaun kirjalliselle tuotannolle. Matkoillaan hän hankki
omakohtaisilla huomioilla aineksia kansatieteellisiin ja rotufilosofisiin
teoksiinsa: Essai sur l’inégalité des races humaines (Tutkimus
ihmisrotujen erilaisuudesta, 1853-55), Religions et les Philosophies
dans l'Asie centrale (Keski-Aasian uskonnot ja filosofiat, ilm. 1865) ja
La Renaissance (Uudennus, 1873), jotka varsinaisesti ovat
perustaneet hänen maineensa.
Gobineau ja hänen — varsinkin Saksassa kannatusta saavuttanut

oppisuuntansa, "gobinismi", lähtevät musta-, kelta- ja valkoihoisten
alkuperäisestä ja jyrkästä rotueroavaisuudesta. Näistä ovat
viimemainitut, arjalaiset, ehdottomasti korkeimmalla.
Kansainvaellukset ja sekoitus ovat muunnelleet puhdasta tyyppiä,
mutta germaaneissa virtaa arjalainen veri jotenkin puhtaana ja
Pohjolassa tapaa tämän valiorodun kaikkein jaloimmat edustajat.
Germaaneilla on vielä loistava historiallinen tehtävä ja tulevaisuus
edessään. Yhteiskunnallisesti on gobinismi ylimysmielinen ja
juutalaisvastainen, taiteellisesti se on sukua Wagnerin ja Nietzschen
ajatustavalle ja teorioille.
Gobineaun kaunokirjallisissakin teoksissa ilmenee hänen

kansatieteellinen harrastuksensa. Paitsi sitä, että hän mielellään
valitsee aiheensa kaukaisista maista, liittää hän niihin runsaasti
kuvauksia vieraiden kansojen omituisista tavoista ja ajatuksista.
Tämän huomaa lukija myös nyt julkaistusta novellista
Kaukaasialainen tanssijatar, joka nimellä Danseuse de Shamakha
sisältyy v. 1876 ilmestyneeseen novellikokoelmaan Nouvelles
asiatiques.
Suomentaja.
I
Madame Marronin hotellissa
Don Juan Moreno y Rodil oli Segovian jääkärien luutnantti, kun

hänen rykmenttinsä sekaantui sotilas-salaliittoon, jonka toimeenpano
epäonnistui. Kaksi majuria, kolme kapteenia ja joukko kersantteja
vangittiin ja ammuttiin. Sankarimme pääsi sentään pakoon ja hänen
onnistui harhailtuaan pari kuukautta mitä kurjimmassa kunnossa
Ranskassa hankkia itselleen upseerinvaltakirja Venäjän
palvelukseen joidenkin tuttavuussuhteiden perustuksella. Hän sai
pian käskyn lähteä joukkojensa luo Kaukaasiaan, jossa niihin
aikoihin reilu ja huoleton sotiminen oli jokapäiväistä leipää.
Luutnantti Moreno astui Marseillessa laivaan. Hän oli jo

luonteeltaankin harvinaisen vakava, ja hänen karkoituksensa, surkea
tilansa ja ennenkaikkea se syvä murhe, jonka aiheutti hellästi
rakastetun neitosen jättäminen vähintäin vuosiksi, vahvistivat hänen
luonnollista taipumustaan siinä määrin, että tuskin kenessäkään voi
huomata vähemmän halua elämän ilojen tavoitteluun.
Vaivaloisen matkan jälkeen tuli laiva, jossa hän kulki, perille ja

laski ankkuriin Mustanmeren rannalla sijaitsevan Potin kaupungin
edustalle. Poti oli siihen aikaan Kaukaasian Euroopan-puolisen osan
pääsatama.
Osaksi hiekkaisesta, osaksi liejuisesta suokasveja työntävästä

rannikosta alkain ulottui puolittain vedessä kasvava metsä
loppumattomiin sisämaahan päin, pitkin leveän virran rantoja, jonka
mutkikas juoksu oli täynnä kallioita, liejukasoja ja ajelehtivia
puunrunkoja. Se oli Phasis, muinaisajan "kultainen virta", jota
nykyjään nimitetään Rioniksi. Tämän rehevän kasvullisuuden
keskessä menestyy erinomaisesti kuumetauti, jonka vallitessa kaikki
liikuntakykyiset olennot kärsivät, samalla kun kasvikunta rehoittaa
sitä paremmin. Kuumetauti on ottanut Aieteen ja auringonlasten
valtikan ja hallitsee rajoittamattomana herrana. Talot, jotka on
rakennettu keskelle seisovaa vettä, leikattujen puiden suurien
runkojen väliin, ovat tulvain varalta yhdistetyt toisiinsa paaluilla ja
jättiläismäisillä hirsiportailla. Raskaat, paanujen peittämät katot
ulottavat kilpikonnanmuotoisia, tiiviitä tasojaan kauas ulos ja
suojelevat siten, mikäli mahdollista, miltei simpukankuorilta
näyttävien majojen ahtaita ikkunoita tiheiltä sadekuuroilta.
Morenoon näiden outojen olojen näkeminen vaikutti omituisesti.

Laivalla tiedettiin, että hän oli venäläinen upseeri, ja sellaiseksi hänet
ilmoitettiin maihinastuttuaankin. Niin sattui, että hän eräällä jotenkin
leveällä kadulla, jossa hän neuvotonna harhaili, näki pitkäkasvuisen,
oljenkarvaisen, leveänenäisen miehen tulevan luokseen, jonka
toisiaan lähellä olevat silmät tuijottivat ilmaan ja jonka ylähuulta
koristivat harvat ja piikkimäiset kissanviikset. Tämä nuori mies ei
ollut kaunis, mutta reipas ja voimakas ja ulkonäöltään avomielinen ja
ystävällinen. Hänellä oli yllään insinöörijoukkojen univormu ja
sitäpaitsi hopeiset olkapunokset, jotka annetaan vain silloin, jos on
oppiaikanaan kunnostautunut. Paljoakaan välittämättä Don Juanin
muodollisen pidättyvästä tervehdyksestä ryhtyi nuorukainen
puhelemaan seuraavaan tapaan ranskaksi:
"Juuri sain tietää, että eräs Imereti-rakuunain upseeri on saapunut

Potiin ja aikoo joukkojensa luo Bakuun. Te olette se upseeri. Olen
toverina mielelläni käytettävänänne ja matkalla samaan suuntaan
kuin tekin. Jos haluatte, matkustamme yhdessä ja tehdäksemme
lähempää tuttavuutta pyydän saada kunnian tarjota teille tuolla
Grand Hotel de Colchidessa lasin samppanjaa. Ellen muuten erehdy,
ei päivällisaikaankaan ole pitkälti. Olen kutsunut myös muutamia
ystäviäni ja te suonette minulle ilon saada esitellä teidät heille."
Kaiken tämän hän sanoi harvinaisen miellyttävästi sillä

ilmeikkäällä tavalla, josta venäläiset näyttävät perineen osan,
senjälkeen kun ranskalaiset, sen varsinaiset keksijät, ovat sen
kadottaneet.
Espanjalainen maanpakolainen tarttui vastaantulijaa käteen ja

lausui:
"Nimeni on Juan Moreno."
"Minua sanotaan Assanoffiksi. Oikeastaan on nimeni Murad,

Hassan Beyn poika. Olen venäläinen, oikeastaan tataari Shervanin
maakunnasta ja, jos haluatte, muhamettilainen lisäksi, siihen
suuntaan kuin herra Voltaire voisi olla, tuo suuri mies, jonka teoksia
mielelläni luen, jos ei suorastaan Paul de Kock ole esillä."
Senjälkeen Assanoff pisti kätensä Morenon kainaloon ja vei hänet

joen toiselle puolelle. Siellä huomasi jo pitkän matkan päästä ison
matalan talon tai pitkän huonerivin, jonka etupäädyssä
taivaansinisellä laudalla loisteli valkoisin kirjaimin kirjoitus: "Grand
Hotel de Colchide, hoitaja Jules Marron (vanhempi)", kaikki
ranskaksi.
Astuessaan hotellin saliin, jossa pöytä oli katettuna, tapasivat

molemmat upseerit toverinsa jo kokoontuneina juomassa pienin
kulauksin ohrapaloviinaansa ja syömässä kaviaaria ja kuivattua
kalaa ruokahalua kiihoittaakseen. Toveruksista ansaitsevat ainakin
muutamat lähemmän maininnan: kaksi ranskalaista
kauppamatkustajaa, joista toinen oli tullut Kaukaasiaan ostamaan
silkkimatojen ruokaa, toinen puunkuorta; edelleen eräs unkarilainen,
hyvin vähäpuheinen matkailija, ja saksilainen nuoranpunoja, joka
aikoi saavuttaa onnensa Persiassa.
Kaikki nämä ovat vain statisteja, joilla ei ole mitään tekemistä

tarinamme kanssa. Enemmän täytyy meidän mainita seuraavista.
Ensiksi ilmestyi madame Marron vanhempi, jonka oli määrä hoitaa
juhlassa emännyyttä.
Tämä lihavahko nainen, joka varmaan oli jo yli neljänkymmenen,

ei ollut tämän rajan sivuutettuaan ollenkaan halukas luopumaan
viehättämistempuista ainakaan päättäen niistä harvinaisen
viekoittelevista silmäniskuista, jotka lakkaamatta sinkoilivat. Madame
Marron vanhemmalla oli vielä loistava väri ja hänen
persoonallisuudellaan kokonaisuudessaan viehätysvoima, joka
parhaassa tapauksessa oli keskitasoa vähän korkeampi ja jota hän
perin anteliaasti koetti saada näkyville. Hänellä oli pitkät mustat
kiharat, jotka suurin kiemuroin valuivat poskille ja erittäin
viehättävästi ulottuivat vyötäisille asti. Hän osasi keskustella eloisasti
ja ymmärsi koristella puhettaan somin sananparsin ja vilkastuttaa
sitä Marseillen-murteellaan. Liike kävi, kuten jo kuulimme, herra
Marron vanhemman nimellä, mutta eivät edes madame Marronin
lähimmät uskotut tienneet puolisosta muuta sanoa, kuin etteivät
koskaan olleet häntä tunteneet eivätkä olleet kenenkään muun
kuulleet puhuvan hänestä kuin hänen rouvansa, joka aika-ajoin ja
silloin tällöin oli toivovinaan, että hän vihdoinkin pian tulisi esiin.
Paljon tunnetumpi oli se tosiasia, että Potissa sijaitsevan Grand
Hotel de Colchiden kaunis emäntä oli Leokadian nimellä kauan aikaa
ollut Tiflisissä puheen aiheena. Hän oli ollut siellä muotiompelijatar,
ja koko Kaukaasian armeija, jalkaväki, ratsuväki, tykistö,
insinöörijoukot, sillanrakentajat (kaikkia niitä oli yllin kyllin!) olivat
vastustuksetta taipuneet hänen viehätysvoimansa edessä.
"Tiedän varsin hyvin", sanoi Assanoff Morenolle lyhyesti

kertoessaan näistä asioista, "tiedän varsin hyvin, Leokadia ei ole
nuori eikä erikoisen kauniskaan. Mutta mitäpä tehdä Potissa? Piru
on täällä vielä ilkeämpi kuin muualla, ja ajatelkaahan — ranskatar.
Ranskatar Potissa! Mitenkä voisi vastustaa?"
Sen jälkeen hän esitteli toverinsa eräälle tavattoman

pitkäkasvuiselle, voimakkaalle, vaalealle miehelle, jolla oli
harmahtavat silmät, paksut huulet ja huomattavan hyväntuulinen
kasvojen ilme. Hän oli venäläinen. Jättiläinen hymyili. Hänellä oli
huonohko, mutta mukava matkapuku, joka heti ilmaisi omistajansa
selvän tarkoituksen välttää kaikkia hankaluuksia. Gregor Ivanitsh
Wialg oli rikas tilanomistaja, jonkunlainen aatelismies ja samalla
lahkolainen. Hän kuului erääseen paljon parjattuja, vaan
kristikunnassa yhä uudelleen esiintyviä veljeskuntia, joita suuremmat
seurakunnat toisinaan tulella ja miekalla hävittävät, mutta jotka
kaikesta huolimatta, niinkuin eräät ruoholajit, huomaamatta levittävät
muutamia siemeniä ja niin jälleen työntävät vesaa. Hän oli sanalla
sanoen duhobortsi eli "hengen vihollinen". Venäjän hallitus ja
Venäjän papisto ovat tähän uskonlahkoon nähden, johon Wialg
kuului, vihamielisellä kannalla, ja kun he pääsivät jonkun sen
jäsenen jäljille valtakunnan sisämaakunnissa, niin tuomitsivat he
hänet, jos ei tosin kuolemaan, kuten keskiaikana, niin ainakin
maanpakolaisuuteen Kaukaasiaan.
"Hengen viholliset" uskovat, että ihmisen terve, hyvä, viaton,

rauhallinen osa on liha. Liha itsessään ei tunne mitään huonoa
viettiä, mitään luonnonvastaista pyrkimystä. Ravinnonotto,
lisääntyminen, rauha ovat sen tehtävät. Jumala on ne sille antanut ja
johtaa ne aina viettien avulla jälleen sen mieleen. Niin kauan kun se
ei ole turmeltunut, hakee se aivan puhdasta ja yksinkertaista
tilaisuutta saadakseen tyydytystä, joka on siis samaa kuin vaellus
taivaallisen oikeuden teillä, ja mitä tyydytetympi se on, sitä lähemmä
se tulee jumaluutta. Ihmisen turmelee juuri henki. Henki lähtee
paholaisesta. Se on ihmiskunnan kehitykselle ja säilymiselle
kokonaan hyödytön. Se yksin herättää intohimot, keksii oletetut
tarpeet ja oletetut velvollisuudet, jotka vastoin oikeutta ja järjestystä
estävät lihan kutsumusta, ja tuo loputtomasti pahaa mukanaan.
Henki on synnyttänyt maailman taipumuksen ristiriitaan ja taisteluun,
kunnianhimoon ja vihaan. Hengestä lähtevät myös murhat, sillä liha
elää vain säilyäkseen eikä suinkaan hävittääkseen ja hävitäkseen.
Henki on hulluuden, teeskentelyn ja kaikenlaisten
säännöttömyyksien ja siis myöskin väärinkäytösten ja hurjastelujen
isä, jotka tavallisesti pannaan lihan syyksi, tuon kunnon toverin, joka
juuri viattomuutensa tähden on niin helposti harhaan viekoteltavissa,
ja sentähden on todellisesti uskonnollisten ja todellisesti
valistuneiden ihmisten velvollisuus puolustaa poikaparkaa ja pitää
hengen viettelyksiä voimainsa mukaan siitä kaukana. Tästä kaikesta
seuraa, ettei saa enää olla mitään positiivista uskontoa, jotta ei
kukaan kävisi suvaitsemattomaksi ja vainoavaksi, ei avioliittoa, ettei
voisi tapahtua aviorikoksia, ei mitään pakkoa minkäänlaista
taipumusta vastaan, jotta jokainen lihan kapina sillä tavoin
täydellisesti torjuttaisiin, ja viimein, että kaikki järjen kehittäminen on
periaatteellisesti hyljättävä vihattavana pyrkimyksenä, joka vie vain
synnillisyyden voittoon eikä koskaan ole toiminut muuksi kuin
paholaisen hyväksi.
"Hengen viholliset", jotka täten halveksivat kaikkia järjen toiminnan

tuloksia, eivät pidä arvossa edes teollisuutta ja rajoittuvat siis
kaikkein välttämättömimmän valmistamiseen ja yksinkertaisimpiin
tuotantotapoihin. Sitä vastoin he pitävät auraa tavattoman korkeassa
arvossa ja osoittautuvat kokeneiksi maanviljelijöiksi ja
mallikelpoisiksi karjanhoitajiksi. Talonpoikaistalot, joita he ovat
perustaneet Kaukaasiaan, ovat kauniita, hyvin hoidettuja ja tuottavia,
ja joskin olisi klassillista ja runollista verrata siellä vallitsevia tapoja
niihin, jotka muinoin olivat yleiset Syyrian jumalattaren temppelissä,
niin voi kuitenkin huoletta väittää, että duhobortsit tavoissaan,
töissään ja toimissaan ovat paljon yläpuolella Amerikan
mormooneja.
"Ette voi löytää rakastettavampaa ihmistä", sanoi Assanoff

ystävälleen osoittaen terveen ihmisjärjen vastustajaa, "parempaa,
hauskempaa, miellyttävämpää miestä ei yleensä ole olemassa! Olen
asunut hänen naapurinaan lähellä vuoristoa, ja kuinka hyvin olen
silloin viihtynyt, kuinka hyödyllistä se on ollut minulle, sitä ei voi
sanoakaan, sitä te ette voi uskoa. Hei, Gregor Ivanitsh, vanha
hupsu, senkin vekkuli! Annahan kun syleilen sinua! Matkustatkos
huomenna kanssamme?"
"Kyllä, herra luutnantti, toivottavasti. En tiedä ainakaan, miksi

minun ei sopisi huomenna matkustaa kanssanne. Mutta Bakuunko
asti. E—e, ei puhettakaan! Minä jään Shemahaan!"
"Se on perin kurja pesä", vastasi Assanoff muiden vieraiden
kanssa istuessaan pöytään ja lautasliinaansa avaten.
"Ette tiedä, mitä puhutte", vastasi lahkolainen antaessaan

jättiläismäisen lusikallisen soppaa kadota suuhunsa, sillä madame
Marron vanhempi kestitsi vieraitaan arvon mukaan ja pieni
abshahilais-tyttö oli juuri asettanut täyden lautasen Gregor Ivanitshin
eteen.
Leokadia, joka tunsi Kaukaasian perinpohjin, arveli olevan

tarpeellista sekaantua keskusteluun.
"Olkaa vaiti", huusi hän luoden Gregor Ivanitshiin katseen, joka

ilmaisi syvää suuttumusta, "tiedän hyvin, minkä hengen lapsia olette
ja mihin viittailette. Mutta minä en siedä kerta kaikkiaan, että minun
pöydässäni ja herra Marron vanhemman kunnioitettavassa talossa
puhutaan sellaista, että kuormarenkikin punastuu."
Leokadia tuli itse tulipunaiseksi osoittaakseen, että hänen

häveliäisyytensä ei suinkaan ollut pienempi kuin kuormarengin,
jonka hyveellisyyden määrää hän juuri oli kuvannut.
"No, no, ei mitään kateutta", vastasi Assanoff tyynnyttävin

kädenliikkein. "Teidän kokemuksenne näyttää keksivän käärmeitä,
joita minun viattomuuteni ei aavistakaan. Olkaa aivan huoletta! Minä
pysyn horjumattoman uskollisesti valoissani. Selitähän Gregor
Ivanitsh, mitä oikeastaan tarkoitat! Olen utelias mies."
"Onhan kyllinkin tunnettua", vastasi uudelleen duhobortsi ja kaatoi

itselleen jättiläismäisen lasin kashetiviiniä, "että Shemahan kaupunki
on kuuluisa, mitä nautintojen valinnan hienouteen tulee. Se oli
muinoin riippumattomien tataariruhtinaiden asuinpaikka ja siellä
pidettiin yllä tanssijatarkoulua, jota ihailtiin kaikkialla ja joka oli
tunnettu Persiassakin. Luonnollisesti virtasi väkeä joukoittain tälle
ilahduttavalle seudulle nauttiakseen niin monien kauniiden neitosten
näkemisestä ja esityksistä. Mutta sallimus ei tahtonut, että
muhamettilaiset iän kaiken yksin omistaisivat sellaisen aarteen.
Meidän keisarilliset joukkomme valtasivat Shemahan niinkuin monta
muutakin alkuasukas-ruhtinaan hallituskaupunkia. Vääräuskoiset
puolustautuivat kaikin voimin, ja kun he olivat häviämäisillään,
joutuivat he aivan raivoihinsa. Jotta venäläisetkään eivät saisi
maistaa heidän onneaan, päättivät he, että tanssijattaret oli kaikki
murhattava."
"Tässä on taas yksi niitä julkeuksia, jotka useammin esiintyessään

toden totta voisivat ajaa minut uskontosi helmaan", pisti Assanoff
väliin.
"Mutta verilöylyn täydellisestä toimeenpanosta ei sentään tullut

mitään."
"Ei, hyvä kyllä!"
"Samalla hetkellä, kun teurastus alkoi, valloittivat venäläiset

rykmentit väkirynnäköllä kaupungin. Näky oli kauhistuttava:
ammottava muurinaukko päästi sotilaat virtaamaan sisään, ja heidän
oli ensi töikseen pistettävä kuoliaaksi raivokkaat puolustajat, jotka
eivät väistyneet hiuskarvan vertaa. Suureksi ihmeekseen tapasivat
meidän miehemme siellä ja täällä nuorten tyttöjen ruumiita, jotka
punaisissa ja sinisissä, kulta- ja hopeakuteisissa harsopuvuissaan ja
jalokivissään makasivat kivityksellä verta vuotaen. Tunkeutuessaan
kauemmaksi kaduille he huomasivat suurin joukoin sellaisia uhreja,
jotka vielä elivät, ja joita muhamettilaiset sapeliniskuin tappoivat. Nyt
he syöksyivät kahta rohkeammin kahakkaan, ja sitten ilmeni
vastarinnan murtumisen jälkeen, että noista ihailtavista olennoista,
jotka olivat kohottaneet Shemahan maineen taivaisiin, noin
neljännes oli pelastettu."
"Jos ei tarina olisi päättynyt ainakin puolittain onnellisesti",

huudahti Assanoff, "niin en olisi voinut syödä edelleen. Sen käänteen
vuoksi, jonka olet asialle antanut, voinen sentään kestää
jälkiruokaan asti. Madame, oletteko niin rakastettava, että annatte
minulle samppanjaa?"
Liike, jonka tämä pyyntö sai aikaan, katkaisi keskustelun hetkeksi.

Kun oli juotu malja Kaukaasiaan vasta tulleen upseerin terveydeksi
— jonka ehdotuksen madame Marron vanhempi esitti niin
rakastettavasti, että se olisi syystä kyllä tehnyt rauhattomaksi
omituisen insinööri-upseerimme, jos hän muuten olisi välittänyt
sellaisista vähäpätöisyyksistä — pääsi joku vieraista taas
keskustelun alkuun.
"Muutamia viikkoja sitten", sanoi hän, "tulin Shemahaan ja olen

saanut kuulla, että arvossapidetyin sikäläinen tanssijatar on joku
Umm Djehan. Hän panee kaikkien päät pyörälle."
"Umm Djehan", huomautti nyt 'hengen vihollinen', "on aivan

viheliäinen naikkonen, oikukas, tyhmä olento. Hän tanssii huonosti,
ja hänestä puhutaan vain sietämättömän luonteensa ja hillittömän
oikullisuutensa tähden. Muuten hän ei ole edes kaunis, ei
vähääkään!"
"Minusta näyttää, ystäväiseni", huusi Assanoff, "ettei meillä ole

mitään syytä olla tyytyväisiä mainittuun nuoreen olentoon".
"Siinä mielessä, kuin näytte käsittävän", jatkoi ensimmäinen
puhuja, "ei Umm Djehan ainakaan suuria merkitse. Olen kuitenkin
tavannut erään eläkkeellä olevan jalkaväenupseerin, joka on
tuntenut hänet nuoruudesta aikain. Se kaunotar kuuluu erääseen nyt
hävinneeseen lesgiläiseen heimoon, ja pian saatte kuulla, etteivät
hänen maanmiehensä juuri ole lempeiden kirjoissa. Kun tyttö oli
kolmen tai neljän vanha, ottivat sotamiehet hänet huomaansa
palavan vuoristokylän raunioiden keskeltä hänen äitinsä vierestä,
joka makasi kuolleena tikarilla murhaamansa upseerin yli
ojentuneena. Eräs kenraalinleski otti hänet luokseen ja aikoi antaa
hänelle eurooppalaisen kasvatuksen. Hän sai erittäin hellää kohtelua
ja hyviä vaatteita, aivan niinkuin talon molemmat omat tyttäret.
Hänellä oli sama kasvattajatar, joka opetti neitejä, ja hän oppi
pikemmin ja nopeammin kuin nämä venäjää, saksaa ja ranskaa.
Mutta yksi hänen lempileikkejään oli kastaa kissanpoikia kiehuvaan
veteen. Hän oli kymmenvuotias yrittäessään porrasaskelmalla miltei
kuristaa kotiopettajattarensa, kunnon mademoiselle Martinetin
sentähden, että tämä viikkoa aiemmin oli sanonut häntä pikku
tyhmyriksi, ja sai ainakin sen aikaan, että toisen oivallinen,
kastanjanruskea tukkalaite meni ainaiseksi ihan pilalle. Puolen
vuoden kuluttua seurasi vielä parempaa. Hänen mieleensä juolahti,
tai oikeastaan hän ei ollut koskaan unohtanutkaan, että hänen
hyväntekijättärensä nuorempi tytär oli vuosi takaperin sysännyt
häntä leikkiessä. Umm Djehan oli siitä kaatunut ja kolhaissut
kuhmun otsaansa. Hän katsoi velvollisuudekseen pyyhkiä pois
tämän häväisyn ja leikkasi hyvin tähdätyllä ja voimakkaalla
partaveitsen pistolla pientä toveriaan poskeen — onneksi ei
kauemma, sillä hänen tarkoituksensa oli pistää toiselta silmä puhki.
Tästä viime tempusta kenraalitar sai kyllikseen: hän karkoitti
pedonalun pois kodistaan ja sydämestään erään muhamettilaisen
rouvan huomaan.
"Neljäntoista vanhana Umm Djehan karkasi Derbentista,

kasvatusäitinsä kotoa. Kahteen vuoteen ei tietty, miten hänen oli
käynyt. Ja nyt hän kuuluu tanssijatarjoukkoon, ja rouva Furugh el
Hösnet eli Kauneudenloiste opettaa, johtaa ja pitää silmällä häntä.
Muuten on Gregor Ivanitsh oikeassa. Monikin on koettanut vietellä
Umm Djehania, mutta kenenkään ei ole onnistunut."
Assanoff piti tätä tarinaa niin ihmeellisenä, että hän halusi

Morenolle ilmaista ihastuksensa. Mutta se oli turhaa lemmenvaivaa.
Espanjalainen ei ottanut vähääkään osaa näihin — kuten hän sanoi
— karkurin kujeisiin. Kun hän sentähden pysyi vaiteliaana, piti
insinööri häntä jörönä toverina ja välitti yhä vähemmän hänestä, mitä
enemmän samppanja sytytti hänen omaa mielikuvitustaan
kirkkaaseen liekkiin.
Aterian päätyttyä vetäytyivät ranskalaiset ja unkarilainen

huoneisiinsa, samoin Moreno. Assanoff puolestaan alkoi parin muun
vieraan ja madame Marron vanhemman kanssa pelata korttia
"hengen vihollisen" tuijotellessa heitä epävarmemmiksi muuttuvin
katsein ja juodessa paloviinaa. Nämä erilaiset huvitukset kestivät niin
kauan, kunnes pelaajat hypähtivät läheisestä raskaasta
kolahduksesta kovasti säikähtäen seisomaan: Gregor Ivanitsh oli
romahtanut pitkälleen. Assanoff oli sillä aikaa menettänyt rahansa.
Kello oli lyönyt juuri kaksi. Kaikki menivät maata, ja herra Marron
vanhemman pitämä Grand Hotel de Colchide nukkui pian mitä
raskaimmassa unessa.
II
ORJAKAUPPA-YHTIÖ
Kello oli tuskin viisi, kun hotellin palvelija kolkutti Morenon

makuuhuoneen ovelle ilmoittaen, että lähtöhetki oli käsissä. Vähäistä
myöhemmin näyttäytyi Assanoff käytävässä. Sotilasviitta oli
kerrassaan huolimattomasti hartioille heitettynä, ja perin rypistynyt
punainen silkkipaita oli hyvin rempallaan kaulasta ja valkoinen lakki
törröllään paksun, kiharaisen tukan päällä, johon mikään
kampaustaito ei ollut tuonut järjestystä. Hänen kasvonsa olivat
ruokottomat, kalpeat ja venähtäneet, silmät punertavat. Hän otti Don
Juanin vastaan valtavasti haukotellen ja oikoen käsivarsiaan pitkin
pituuttaan.
"No, vanha ystävä", huusi hän, "meidän on siis lähdettävä.

Nousetteko te mielellänne näin varhain lomalla ollessanne ja ehkä
palveluksessakin? Hei, Gregor! Pässinpää! Tuoppas pullo
samppanjaa, jotta pääsemme liikkeelle, tai piru minut periköön, ellen
murskaa luitasi!"
"Ei pisaraakaan samppanjaa", sanoi Moreno, "meidän on

lähdettävä. Ette muista, kuinka pontevasti meitä eilen kehoitettiin

Intermediate Accounting Reporting and Analysis 3Rd Edition James Wahlen Full Chapter

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Intermediate Accounting Reporting and Analysis 3Rd Edition James Wahlen Full Chapter

Uploaded by

Copyright:

Available Formats

Intermediate Accounting: Reporting

and Analysis 3rd Edition James Wahlen

With Becker Professional Education, you get a fully integrated

MOVE BEYOND MEMORIZATION TO APPLICATION CPA SkillMaster Videos

TRACK PROGRESS AND BUILD CONFIDENCE

LEARN WHAT’S NEEDED

CHOOSE FROM 3 FLEXIBLE COURSE FORMATS

© 2018 Becker Professional Education Corporation. All rights reserved.

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

Product Manager: Jonathan Gross

Intellectual Property Project Manager: Carly Student Edition ISBN: 978-1-337-78828-1

Cengage is a leading provider of customized learning solutions with employees

Cengage products are represented in Canada by

To learn more about Cengage platforms and services, register or access

Printed in the United States of America

For our colleagues who use this book,

For our families, with love,

CengageNOWv2 Start-Up Center

What Is Accounting, this section includes an:

Accounting Review Module, designed to help students refresh their understanding of

How to Use CengageNOWv2 Module quickly familiarizes your students with

REAL REPORT DISCLOSURE OF CURRENT LIABILITIES 9.3 Current Liabilities

Notes to Consolidated Financial Statements (in part)

May 28, 2017 May 29, 2016

Conceptual Evaluation of Inventory Valuation Rules

Adaptive Study Plan

The Adaptive Study Plan

How does it work?

The new Adaptive Study Plan offers the benefit of

ments on their own.

Many students perform well on homework but struggle

Check it out! Visit cnowv2demo.cengage.com for an interactive demo.

Multi-Panel View This is just a lot better and less confusing

With the ability to move and

Students often complete homework at odd

times. And when they use CengageNOWv2, they

Adaptive Feedback in CengageNOWv2 responds DATE DESCRIPTION POST.

1 Jul. 11 Office Equipment 10,000.00 1 7

Check it out! Visit cnowv2demo.cengage.com for an interactive demo.

Video: Show Me How

Suggested answers to these questions are Questions:

various concepts and topics associated with

9-34 Chapter 9 Current Liabilities and Contingent Obligations

Review Center REVIEW CENTER

place in each chapter. L EARNING OBJECTIVE 9.2 KEY TAKEAWAYS

CengageNOWv2 is a powerful course management and online homework resource that

Recent CengageNOW Enhancements

The MindTap eReader also features

BECKER PROFESSIONAL EDUCATION REVIEW QUESTIONS

PART 1 FINANCIAL REPORTING & FINANCIAL STATEMENTS: OBJECTIVES,

PART 2 BUSINESS OPERATING ACTIVITIES

PART 3 INVESTING ACTIVITIES

PART 4 FINANCING ACTIVITIES

PART 5 SPECIAL TOPICS IN FINANCIAL REPORTING

APPENDIX A Starbucks Corporation’s Annual Report (Excerpts) A-1

PART 1 2 FINANCIAL REPORTING: ITS CONCEPTUAL

How Do We Post to the General Ledger Current Liabilities 4-19

Allowance Method 6-15 Comparison of Inventory Cost Flow Assumptions 7-22

8 INVENTORIES: SPECIAL VALUATION ISSUES 8-1

Determination of Cost 10-7 How Do We Account for the

12 INTANGIBLES 12-1 How Do We Account for Transfers and

Accruing Bond Interest 14-17 Nonmonetary Issuance of Stock 15-13

Miscellaneous Changes in Shareholders’ Equity 16-17 Presentation 17-29

PART 1 FINANCIAL REPORTING & FINANCIAL STATEMENTS: OBJECTIVES,

APPENDIX A Starbucks Corporation’s Annual Report (Excerpts) A-1