Test Bank for Financial Accounting, 12th Edition by Jerry J. Weygandt

Test Bank for Financial Accounting 12e 12th Edition by Jerry J. Weygandt, Paul D. Kimmel; Jill E. Mitchell. Full Chapters test bank are included (Chapter 1 to 13 + Appendix F,G,H,I,K) 1 Accounting in Action 1-1 Knowing the Numbers: Columbia Sportswear 1-1 1.1 Accounting Activities and Users 1-3 Three Activities 1-3 Data Analytics 1-4 Who Uses Accounting Data 1-5 1.2 The Building Blocks of Accounting 1-7 Ethics in Financial Reporting 1-8 Generally Accepted Accounting Principles 1-9 Measurement Principles 1-10 Assumptions 1-10 1.3 The Accounting Equation 1-13 Assets 1-13 Liabilities 1-13 Stockholders’ Equity 1-14 1.4 Analyzing Business Transactions 1-15 Accounting Transactions 1-16 Transaction Analysis 1-17 Summary of Transactions 1-21 1.5 The Four Financial Statements 1-22 Income Statement 1-23 Retained Earnings Statement 1-25 Balance Sheet 1-25 Statement of Cash Flows 1-25 Financial Statements: Order of Preparation 1-26 ESG Reporting: Beyond the Four Financial Statements 1-27 Appendix 1A: Career Opportunities in Accounting 1-28 Public Accounting 1-29 Private Accounting 1-29 Governmental Accounting 1-29 Forensic Accounting 1-30 “Show Me the Money” 1-30 2 The Recording Process 2-1 Accidents Happen: MF Global Holdings 2-1 2.1 Accounts, Debits, and Credits 2-3 Debits and Credits 2-3 Debit and Credit Procedures 2-4 Stockholders’ Equity Relationships 2-7 Summary of Debit/Credit Rules 2-8 2.2 The Journal 2-9 The Recording Process 2-9 The Journal 2-10 2.3 The Ledger and Posting 2-12 The Ledger 2-12 Posting 2-14 Chart of Accounts 2-15 The Recording Process Illustrated 2-16 Summary Illustration of Journalizing and Posting 2-22 2.4 The Trial Balance 2-24 Limitations of a Trial Balance 2-25 Locating Errors 2-25 Dollar Signs and Underlining 2-25 3 Adjusting the Accounts 3-1 Keeping Track of Groupons: Groupon 3-1 3.1 Accrual-Basis Accounting and Adjusting Entries 3-2 Fiscal and Calendar Years 3-3 Accrual- versus Cash-Basis Accounting 3-4 Recognizing Revenues and Expenses 3-4 The Need for Adjusting Entries 3-6 Types of Adjusting Entries 3-7 3.2 Adjusting Entries for Deferrals 3-8 Prepaid Expenses 3-8 Unearned Revenues 3-13 3.3 Adjusting Entries for Accruals 3-16 Accrued Revenues 3-17 Accrued Expenses 3-18 Summary of Basic Relationships 3-22 3.4 Adjusted Trial Balance and Financial Statements 3-24 Preparing the Adjusted Trial Balance 3-25 Preparing Financial Statements 3-25 Appendix 3A: Adjusting Entries for the Alternative Treatment of Deferrals 3-28 Prepaid Expenses 3-29 Unearned Revenues 3-30 Summary of Additional Adjustment Relationships 3-31 Appendix 3B: Financial Reporting Concepts 3-31 Qualities of Useful Information 3-32 Assumptions in Financial Reporting 3-33 Principles in Financial Reporting 3-33 Cost Constraint 3-34 4 Completing the Accounting Cycle 4-1 Everyone Likes to Win: Rhino Foods 4-1 4.1 The Worksheet 4-3 Steps in Preparing a Worksheet 4-4 Preparing Financial Statements from a Worksheet 4-6 Preparing Adjusting Entries from a Worksheet 4-8 4.2 Closing the Books 4-8 Preparing Closing Entries 4-9 Posting Closing Entries 4-11 Preparing a Post-Closing Trial Balance 4-12 4.3 The Accounting Cycle and Correcting Entries 4-15 Summary of the Accounting Cycle 4-15 Reversing Entries—An Optional Step 4-15 Correcting Entries—An Avoidable Step 4-15 4.4 The Classified Balance Sheet 4-19 Current Assets 4-19 Long-Term Investments 4-21 Property, Plant, and Equipment 4-21 Intangible Assets 4-22 Current Liabilities 4-23 Long-Term Liabilities 4-24 Stockholders’ (Owners’) Equity 4-24 Appendix 4A: Reversing Entries 4-25 Reversing Entries Example 4-26 5 Accounting for Merchandising Operations 5-1 Buy Now, Vote Later: REI 5-1 5.1 Merchandising Operations and Inventory Systems 5-3 Operating Cycles 5-3 Flow of Costs 5-4 5.2 Recording Purchases Under a Perpetual System 5-7 Freight Costs 5-8 Purchase Returns and Allowances 5-9 Purchase Discounts 5-10 Summary of Purchasing Transactions 5-11 5.3 Recording Sales Under a Perpetual System 5-11 Sales Returns and Allowances 5-13 Sales Discounts 5-14 Data Analytics and Credit Sales 5-15 5.4 The Accounting Cycle for a Merchandising Company 5-16 Adjusting Entries 5-16 Closing Entries 5-17 Summary of Merchandising Entries 5-17 5.5 Preparing the Multiple-Step Income Statement 5-19 Multiple-Step Income Statement 5-19 Single-Step Income Statement 5-22 Classified Balance Sheet 5-22 Appendix 5A: Merchandising Company Worksheet 5-24 Using a Worksheet 5-24 Appendix 5B: Periodic Inventory System 5-25 Determining Cost of Goods Sold Under a Periodic System 5-26 Recording Merchandise Transactions 5-27 Recording Purchases of Merchandise 5-27 Recording Sales of Merchandise 5-28 Journalizing and Posting Closing Entries 5-29 Using a Worksheet 5-30 Data Analytics in Action 5-54 6 Inventories 6-1 “Where Is That Spare Bulldozer Blade?”: Caterpillar 6-1 6.1 Classifying and Determining Inventory 6-2 Classifying Inventory 6-3 Determining Inventory Quantities 6-4 6.2 Inventory Methods and Financial Effects 6-7 Specific Identification 6-7 Cost Flow Assumptions 6-8 Financial Statement and Tax Effects of Cost Flow Methods 6-13 Using Inventory Cost Flow Methods Consistently 6-15 6.3 Effects of Inventory Errors 6-17 Income Statement Effects 6-17 Balance Sheet Effects 6-18 6.4 Inventory Presentation and Analysis 6-19 Presentation 6-19 Lower-of-Cost-or-Net Realizable Value 6-19 Financial Analysis and Data Analytics 6-20 Appendix 6A: Inventory Cost Flow Methods in Perpetual Inventory Systems 6-24 First-In, First-Out (FIFO) 6-24 Last-In, First-Out (LIFO) 6-25 Average-Cost 6-25 Appendix 6B: Estimating Inventories 6-26 Gross Profit Method 6-27 Retail Inventory Method 6-27 Data Analytics in Action 6-50 7 Fraud, Internal Control, and Cash 7-1 Minding the Money in Madison: Barriques 7-2 7.1 Fraud and Internal Control 7-3 Fraud 7-3 The Sarbanes-Oxley Act 7-3 Internal Control 7-4 Principles of Internal Control Activities 7-5 Data Analytics and Internal Controls 7-10 Limitations of Internal Control 7-11 7.2 Cash Controls 7-12 Cash Receipts Controls 7-12 Cash Disbursements Controls 7-15 Petty Cash Fund 7-16 7.3 Control Features of a Bank Account 7-19 Making Bank Deposits 7-20 Writing Checks 7-20 Electronic Banking 7-21 Bank Statements 7-22 Reconciling the Bank Account 7-23 7.4 Reporting Cash 7-28 Cash Equivalents 7-29 Restricted Cash 7-29 Data Analytics in Action 7-49 8 Accounting for Receivables 8-1 What’s Cooking?: Nike 8-1 8.1 Recognition of Accounts Receivable 8-3 Types of Receivables 8-3 Recognizing Accounts Receivable 8-3 8.2 Valuation and Disposition of Accounts Receivable 8-5 Valuing Accounts Receivable 8-5 Disposing of Accounts Receivable 8-13 8.3 Notes Receivable 8-15 Determining the Maturity Date 8-16 Computing Interest 8-16 Recognizing Notes Receivable 8-17 Valuing Notes Receivable 8-17 Disposing of Notes Receivable 8-17 8.4 Presentation and Analysis of Receivables 8-20 Presentation 8-20 Analysis 8-21 Data Analytics and Receivables Management 8-22 Data Analytics in Action 8-42 9 Plant Assets, Natural Resources, and Intangible Assets 9-1 A Tale of Two Airlines: American Airlines 9-1 9.1 Plant Asset Expenditures 9-3 Determining the Cost of Plant Assets 9-3 Expenditures During Useful Life 9-6 9.2 Depreciation Methods 9-8 Factors in Computing Depreciation 9-9 Depreciation Methods 9-9 Depreciation and Income Taxes 9-16 Revising Periodic Depreciation 9-16 Impairments 9-17 9.3 Plant Asset Disposals 9-18 Sale of Plant Assets 9-18 Retirement of Plant Assets 9-20 9.4 Natural Resources and Intangible Assets 9-21 Natural Resources 9-21 Depletion 9-21 Intangible Assets 9-22 Accounting for Intangible Assets 9-23 Types of Intangible Assets 9-23 Research and Development Costs 9-26 9.5 Statement Presentation and Analysis 9-27 Presentation 9-27 Analysis 9-28 Appendix 9A: Exchange of Plant Assets 9-29 Loss Treatment 9-29 Gain Treatment 9-30 Data Analytics in Action 9-51 10 Liabilities 10-1 And Then There Were Two: Maxwell Car Company 10-1 10.1 Accounting for Current Liabilities 10-3 What Is a Current Liability? 10-3 Notes Payable 10-3 Sales Taxes Payable 10-4 Unearned Revenues 10-5 Current Maturities of Long-Term Debt 10-6 Payroll and Payroll Taxes Payable 10-6 10.2 Characteristics of Bonds 10-9 Types of Bonds 10-9 Issuing Procedures 10-10 Bond Trading 10-10 Determining the Market Price of a Bond 10-11 10.3 Accounting for Bond Transactions 10-14 Issuing Bonds at Face Value 10-14 Discount or Premium on Bonds 10-14 Issuing Bonds at a Discount 10-15 Issuing Bonds at a Premium 10-17 Redeeming Bonds at Maturity 10-19 Redeeming Bonds Before Maturity 10-19 10.4 Accounting for Long-Term Notes Payable 10-20 Mortgage Notes Payable 10-20 Lease Liabilities 10-21 10.5 Presentation and Analysis 10-23 Presentation 10-23 Analysis 10-23 Debt and Equity Financing 10-26 Appendix 10A: Straight-Line Amortization 10-28 Amortizing Bond Discount 10-28 Amortizing Bond Premium 10-29 Appendix 10B: Effective-Interest Amortization 10-30 Amortizing Bond Discount 10-31 Amortizing Bond Premium 10-32 11 Corporations: Organization, Stock Transactions, and Stockholders’ Equity 11-1 Oh Well, I Guess I’ll Get Rich: Meta 11-1 11.1 Corporate Form of Organization 11-3 Characteristics of a Corporation 11-3 Forming a Corporation 11-6 Stockholder Rights 11-7 Stock Issue Considerations 11-8 Corporate Capital 11-10 11.2 Accounting for Common, Preferred, and Treasury Stock 11-12 Accounting for Common Stock 11-12 Accounting for Preferred Stock 11-14 Accounting for Treasury Stock 11-15 11.3 Accounting for Dividends and Stock Splits 11-19 Cash Dividends 11-19 Dividend Preferences 11-21 Stock Dividends 11-24 Stock Splits 11-26 11.4 Reporting and Analyzing Stockholders’ Equity 11-28 Retained Earnings 11-28 Retained Earnings Restrictions 11-29 Balance Sheet Presentation of Stockholders’ Equity 11-30 Analysis of Stockholders’ Equity 11-31 Appendix 11A: Stockholders’ Equity Statement 11-33 Appendix 11B: Book Value per Share 11-34 Book Value per Share Example 11-35 Book Value versus Market Price 11-35 Data Analytics in Action 11-58 12 Statement of Cash Flows 12-1 Got Cash?: Microsoft 12-2 12.1 Usefulness and Format of the Statement of Cash Flows 12-3 Usefulness of the Statement of Cash Flows 12-3 Classification of Cash Flows 12-3 Significant Noncash Activities 12-4 Format of the Statement of Cash Flows 12-5 12.2 Preparing the Statement of Cash Flows— Indirect Method 12-6 Indirect and Direct Methods 12-7 Indirect Method—Computer Services Company 12-7 Step 1: Operating Activities 12-9 Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method 12-12 Step 2: Investing and Financing Activities 12-13 Step 3: Net Change in Cash 12-15 12.3 Analyzing the Statement of Cash Flows 12-17 Free Cash Flow 12-17 Appendix 12A: Statement of Cash Flows—Direct Method 12-19 Step 1: Operating Activities 12-21 Step 2: Investing and Financing Activities 12-25 Step 3: Net Change in Cash 12-27 Appendix 12B: Worksheet for the Indirect Method 12-27 Preparing the Worksheet 12-28 Appendix 12C: Statement of Cash Flows—T-Account Approach 12-32 Data Analytics in Action 12-58 13 Financial Analysis: The Big Picture 13-1 It Pays to Be Patient: Warren Buffett 13-2 13.1 Sustainable Income and Quality of Earnings 13-3 Sustainable Income 13-3 Quality of Earnings 13-7 13.2 Horizontal Analysis and Vertical Analysis 13-9 Horizontal Analysis 13-10 Vertical Analysis 13-12 13.3 Ratio Analysis 13-15 Liquidity Ratios 13-16 Solvency Ratios 13-17 Profitability Ratios 13-17 Financial Analysis and Data Analytics 13-18 Comprehensive Example of Ratio Analysis 13-18 Appendix a Specimen Financial Statements: Apple Inc. A- 1 Appendix B Specimen Financial Statements: PepsiCo, Inc. B- 1 Appendix c Specimen Financial Statements: The Coca-Cola Company C- 1 Appendix d Specimen Financial Statements: A, Inc. D- 1 Appendix E Specimen Financial Statements: Walmart Inc. E- 1 Appendix F Time Value of Money F- 1 F.1 Interest and Future Values F- 2 Nature of Interest F- 2 Future Value of a Single Amount F- 3 Future Value of an Annuity F- 5 F.2 Present Values F- 8 Present Value Variables F- 8 Present Value of a Single Amount F- 9 Present Value of an Annuity F- 11 Time Periods and Discounting F- 13 Present Value of a Long-Term Note or Bond F- 13 F.3 Capital Budgeting Situations F- 16 F.4 Using Technological Tools F- 18 Present Value of a Single Sum F- 19 Present Value of an Annuity F- 20 Future Value of a Single Sum F- 21 Future Value of an Annuity F- 22 Internal Rate of Return F- 22 Useful Applications F- 23 Appendix G Reporting and Analyzing Investments G- 1 G.1 Accounting for Debt Investments G- 2 Why Corporations Invest G- 2 Accounting for Debt Investments G- 2 G.2 Accounting for Stock Investments G- 4 Holdings of Less Than 20% G- 5 Holdings Between 20% and 50% G- 6 Holdings of More Than 50% G- 7 G.3 Reporting Investments in Financial Statements G- 9 Debt Securities G- 9 Equity Securities G- 12 Balance Sheet Presentation G- 13 Presentation of Realized and Unrealized Gain or Loss G- 14 Company Index I- 1 Subject Index I- 3 Rapid Review: Chapter Content Appendix H Payroll Accounting H- 1 H.1 Recording the Payroll H- 1 Determining the Payroll H- 2 Recording the Payroll H- 5 H.2 Employer Payroll Taxes H- 8 FICA Taxes H- 8 Federal Unemployment Taxes H- 8 State Unemployment Taxes H- 9 Recording Employer Payroll Taxes H- 10 Filing and Remitting Payroll Taxes H- 10 Appendix I Subsidiary Ledgers and Special Journals I- 1 I.1 Subsidiary Ledgers I- 1 Subsidiary Ledger Example I- 2 Advantages of Subsidiary Ledgers I- 3 I.2 Special Journals I- 4 Sales Journal I- 4 Cash Receipts Journal I- 7 Purchases Journal I- 10 Cash Payments Journal I- 12 Effects of Special Journals on the General Journal I- 15 Cybersecurity: A Final Comment I- 16 Appendix J Accounting for Partnerships J- 1 J.1 Forming a Partnership J- 1 Characteristics of Partnerships J- 1 Organizations with Partnership Characteristics J- 3 Advantages and Disadvantages of Partnerships J- 4 The Partnership Agreement J- 5 Accounting for a Partnership Formation J- 5 J.2 Accounting for Partnership Net Income or Net Loss J- 6 Dividing Net Income or Net Loss J- 6 Partnership Financial Statements J- 10 J.3 Accounting for Partnership Liquidation J- 11 No Capital Deficiency J- 11 Capital Deficiency J- 13 J.4 Admission and Withdrawal of Partners J- 15 Admission of a Partner J- 15 Withdrawal of a Partner J- 19 Appendix K Other Significant Liabilities K- 1 K.1 Contingent Liabilities K- 1 Reporting a Contingent Liability K- 2 Disclosure of Contingent Liabilities K- 3