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Test Bank for Financial Accounting: Tools for Business Decision Making (7th Edition) by Paul D. Kimmel

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  • ISBN-10:  1118162285 / ISBN-13:  9781118162286
  • Ebook Details

    • Format: Downloadable ZIP Fille
    • Resource Type : Testbank
    • Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
    • Delivery: Instant Download

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    SKU: 6130 Categories: ,

    Table of content:

    1 Introduction to Financial Statements 2
    Knowing the Numbers 3
    LO 1: Study the forms of business organization and the uses of accounting information 4
    Forms of Business Organization 4
    Users and Uses of Financial Information 5
    Ethics in Financial Reporting 7
    LO 2: Explain the three principal types of business activity 8
    Financing Activities 9
    Investing Activities 9
    Operating Activities 9
    LO 3: Describe the four financial statements and how they are prepared 11
    Income Statement 11
    Retained Earnings Statement 12
    Balance Sheet 13
    Statement of Cash Flows 14
    Interrelationships of Statements 15
    Other Elements of an Annual Report 18
    A Look at IFRS 42
    2 A Further Look at Financial Statements 46
    Just Fooling Around? 45
    LO 1: Identity the sections of a classified balance sheet 46
    Current Assets 46
    Long-Term Investments 48
    Property, Plant, and Equipment 48
    Intangible Assets 48
    Current Liabilities 50
    Long-Term Liabilities 50
    Stockholders’ Equity 50
    LO 2: Use ratios to evaluate a company’s profitability, liquidity, and solvency 51
    Ratio Analysis 51
    Using the Income Statement 52
    Using a Classified Balance Sheet 53
    Using the Statement of Cash Flows 57
    LO 3: Discuss financial reporting concepts 58
    The Standard-Setting Environment 58
    Qualities of Useful Information 59
    Assumptions in Financial Reporting 60
    Principles in Financial Reporting 61
    Cost Constraint 62
    A Look at IFRS 87
    3 The Accounting Information System 90
    Accidents Happen 91
    LO 1: Analyze the effect of business transactions on the basic accounting equation 92
    Accounting Transactions 92
    Analyzing Transactions 93
    Summary of Transactions 99
    LO 2: Explain how accounts, debits, and credits are used to record business transactions 100
    Debits and Credits 101
    Debit and Credit Procedures 101
    Stockholders’ Equity Relationships 104
    Summary of Debit/Credit Rules 105
    LO 3: Indicate how a journal is used in the recording process 106
    The Recording Process 106
    The Journal 106
    LO 4: Explain how a ledger and posting help in the recording process 109
    The Ledger 109
    Chart of Accounts 109
    Posting 110
    The Recording Process Illustrated 111
    Summary Illustration of Journalizing and Posting 117
    LO 5: Prepare a trial balance 119
    Limitations of a Trial Balance 119
    A Look at IFRS 148
    4 Accrual Accounting Concepts 46
    Keeping Track of Groupons 151
    LO 1: Explain the accrual basis of accounting and the reasons for adjusting entries 152
    The Revenue Recognition Principle 152
    The Expense Recognition Principle 152
    Accrual versus Cash Basis of Accounting 153
    The Need for Adjusting Entries 154
    Types of Adjusting Entries 155
    LO 2: Prepare adjusting entries for deferrals 156
    Prepaid Expenses 156
    Unearned Revenues 160
    LO 3: Prepare adjusting entries for accruals 163
    Accrued Revenues 163
    Accrued Expenses 164
    Summary of Basic Relationships 167
    LO 4: Prepare an adjusted trial balance and closing entries 170
    Preparing the Adjusted Trial Balance 170
    Preparing Financial Statements 171
    Quality of Earnings 172
    Closing the Books 175
    Summary of the Accounting Cycle 177
    LO *5: Appendix 4A: Describe the purpose and the basic form of a worksheet 182
    A Look at IFRS 212
    5 Merchandising Operations and the Multiple-Step Income Statement 150
    Buy Now, Vote Later 215
    LO 1: Describe merchandising operations and inventory systems 216
    Operating Cycles 216
    Flow of Costs 217
    LO 2: Record purchases under a perpetual inventory system 219
    Freight Costs 221
    Purchase Returns and Allowances 221
    Purchase Discounts 222
    Summary of Purchasing Transactions 223
    LO 3: Record sales under a perpetual inventory system 224
    Sales Returns and Allowances 225
    Sales Discounts 226
    LO 4: Prepare a multiple-step income statement and a comprehensive income statement 227
    Single-Step Income Statement 227
    Multiple-Step Income Statement 228
    Comprehensive Income Statement 231
    LO 5: Determine cost of goods sold under a periodic inventory system 233
    LO 6: Compute and analyze gross profit rate and profit margin 234
    Gross Profit Rate 234
    Profit Margin 235
    LO *7: Appendix 5A: Record purchases and sales of inventory under a periodic inventory system 239
    Recording Merchandise Transactions 239
    Recording Purchases of Merchandise 239
    Freight Costs 240
    Recording Sales of Merchandise 240
    Comparison of Entries—Perpetual vs. Periodic 241
    A Look at IFRS 264
    6 Reporting and Analyzing Inventory 266
    “Where Is That Spare Bulldozer Blade?” 267
    LO 1: Discuss how to classify and determine inventory 268
    Classifying Inventory 268
    Determining Inventory Quantities 269
    LO 2: Apply inventory cost flow methods and discuss their financial effects 271
    Specific Identification 272
    Cost Flow Assumptions 273
    Financial Statement and Tax Effects of Cost Flow Methods 277
    Using Inventory Cost Flow Methods Consistently 280
    LO 3: Explain the statement presentation and analysis of inventory 281
    Presentation 281
    Lower-of-Cost-or-Market 281
    Analysis 283
    Analysts’ Adjustments for LIFO Reserve 284
    LO *4: Appendix 6A: Apply inventory cost flow methods to perpetual inventory records 287
    First-In, First-Out (FIFO) 287
    Last-In, First-Out (LIFO) 288
    Average-Cost 289
    LO *5: Appendix 6B: Indicate the effects of inventory errors on the financial statements 289
    Income Statement Effects 289
    Balance Sheet Effects 290
    A Look at IFRS 314
    7 Fraud, Internal Control, and Cash 316
    Minding the Money in Madison 317
    LO 1: Define fraud and the principles of internal control 318
    Fraud 318
    The Sarbanes-Oxley Act 318
    Internal Control 319
    Principles of Internal Control Activities 320
    Limitations of Internal Control 326
    LO 2: Apply internal control principles to cash 327
    Cash Receipts Controls 328
    Cash Disbursements Controls 330
    LO 3: Apply the control features of a bank account 333
    Electronic Funds Transfer (EFT) System 333
    Bank Statements 333
    Reconciling the Bank Account 334
    LO 4: Explain the reporting of cash and the basic principles of cash management 340
    Reporting Cash 340
    Managing and Monitoring Cash 341
    Cash Budgeting 344
    LO *5: Appendix 7A: Explain the operation of a petty cash fund 347
    Establishing the Petty Cash Fund 347
    Making Payments from Petty Cash 347
    Replenishing the Petty Cash Fund 348
    A Look at IFRS 371
    8 Reporting and Analyzing Receivables 374
    What’s Cooking? 375
    LO 1: Explain how companies recognize accounts receivable 376
    Types of Receivables 376
    Recognizing Accounts Receivable 376
    LO 2: Describe how companies value accounts receivable and record their disposition 378
    Valuing Accounts Receivable 378
    Disposing of Accounts Receivable 385
    LO 3: Explain how companies recognize, value, and dispose of notes receivable 387
    Determining the Maturity Date 388
    Computing Interest 388
    Recognizing Notes Receivable 388
    Valuing Notes Receivable 389
    Disposing of Notes Receivable 389
    LO 4: Describe the statement presentation of receivables and the principles of receivables management 391
    Financial Statement Presentation of Receivables 391
    Managing Receivables 392
    Evaluating Liquidity of Receivables 394
    Accelerating Cash Receipts 396
    A Look at IFRS 419
    9 Reporting and Analyzing Long-Lived Assets 422
    A Tale of Two Airlines 423
    LO 1: Explain the accounting for plant asset expenditures 424
    Determining the Cost of Plant Assets 424
    Expenditures During Useful Life 427
    To Buy or Lease? 428
    LO 2: Apply depreciation methods to plant assets 429
    Factors in Computing Depreciation 430
    Depreciation Methods 430
    Revising Periodic Depreciation 435
    Impairments 436
    LO 3: Explain how to account for the disposal of plant assets 437
    Sale of Plant Assets 437
    Retirement of Plant Assets 438
    LO 4: Identity the basic issues related to reporting intangible assets 439
    Accounting for Intangible Assets 440
    Types of Intangible Assets 440
    LO 5: Discuss how long-lived assets are reported and analyzed 443
    Presentation 443
    Analysis 444
    LO *6: Appendix 9A: Compute periodic depreciation using the declining-balance method and the units-of-activity method 449
    Declining-Balance Method 449
    Units-of-Activity Method 450
    A Look at IFRS 475
    10 Reporting and Analyzing Liabilities 478
    And Then There Were Two 479
    LO 1: Explain how to account for current liabilities 480
    What Is a Current Liability? 480
    Notes Payable 480
    Sales Taxes Payable 481
    Unearned Revenues 481
    Current Maturities of Long-Term Debt 482
    Payroll and Payroll Taxes Payable 483
    LO 2: Describe the major characteristics of bonds 485
    Types of Bonds 486
    Issuing Procedures 486
    Determining the Market Price of Bonds 486
    LO 3: Explain how to account for bond transactions 489
    Issuing Bonds at Face Value 489
    Discount or Premium on Bonds 489
    Issuing Bonds at a Discount 490
    Issuing Bonds at a Premium 492
    Redeeming Bonds at Maturity 493
    Redeeming Bonds before Maturity 493
    LO 4: Discuss how liabilities are reported and analyzed 495
    Presentation 495
    Analysis 496
    LO *5: Appendix 10A: Apply the straight-line method of amortizing bond discount and bond premium 502
    Amortizing Bond Discount 502
    Amortizing Bond Premium 503
    LO *6: Appendix 10B: Apply the effective-interest method of amortizing bond discount and bond premium 504
    Amortizing Bond Discount 505
    Amortizing Bond Premium 506
    LO *7: Appendix 10C: Describe the accounting for long-term notes payable 507
    A Look at IFRS 534
    11 Reporting and Analyzing Stockholders’ Equity 536
    Oh Well, I Guess I’ll Get Rich 537
    LO 1: Discuss the major characteristics of a corporation 538
    Characteristics of a Corporation 538
    Forming a Corporation 541
    Stockholder Rights 541
    Stock Issue Considerations 542
    Corporate Capital 544
    LO 2: Explain how to account for the issuance of common and preferred stock, and the purchase of treasury stock 545
    Accounting for Common Stock 545
    Accounting for Preferred Stock 546
    Treasury Stock 547
    LO 3: Explain how to account for cash dividends and describe the effect of stock dividends and stock splits 549
    Cash Dividends 549
    Dividend Preferences 552
    Stock Dividends 553
    Stock Splits 555
    LO 4: Discuss how stockholders’ equity is reported and analyzed 557
    Retained Earnings 557
    Retained Earnings Restrictions 558
    Balance Sheet Presentation of Stockholders’ Equity 558
    Analysis of Stockholders’ Equity 560
    Debt versus Equity Decision 562
    LO *5: Appendix 11A: Prepare entries for stock dividends 565
    A Look at IFRS 587
    12 Statement of Cash Flows 590
    Got Cash? 591
    LO 1: Discuss the usefulness and format of the statement of cash flows 592
    Usefulness of the Statement of Cash Flows 592
    Classification of Cash Flows 592
    Significant Noncash Activities 593
    Format of the Statement of Cash Flows 594
    LO 2: Prepare a statement of cash flows using the indirect method 595
    Indirect and Direct Methods 596
    Indirect Method—Computer Services Company 596
    Step 1: Operating Activities 598
    Summary of Conversion to Net Cash Provided by Operating Activities–Indirect Method 601
    Step 2: Investing and Financing Activities 603
    Step 3: Net Change in Cash 604
    LO 3: Use the statement of cash flows to evaluate a company 607
    The Corporate Life Cycle 607
    Free Cash Flow 609
    LO *4: Appendix 12A: Prepare a statement of cash flows using the direct method 611
    Step 1: Operating Activities 613
    Step 2: Investing and Financing Activities 617
    Step 3: Net Change in Cash 618
    LO *5: Appendix 12B: Use the T-account approach to prepare a statement of cash flows 618
    A Look at IFRS 643
    13 Financial Analysis: The Big Picture 646
    It Pays to Be Patient 647
    LO 1: Apply the concept of sustainable income and quality of earnings 648
    Sustainable Income 648
    Quality of Earnings 652
    LO 2: Apply horizontal analysis and vertical analysis 654
    Horizontal Analysis 655
    Vertical Analysis 657
    LO 3: Analyze a company’s performance using ratio analysis 660
    Price-Earnings Ratio 660
    Liquidity Ratios 660
    Solvency Ratios 661
    Profitability Ratios 661
    LO *4: Appendix 13A: Evaluate a company comprehensively using ratio analysis 666
    Liquidity Ratios 668
    Solvency Ratios 670
    Profitability Ratios 672
    A Look at IFRS 699
    A Specimen Financial Statements: Apple Inc. A-1
    B Specimen Financial Statements: Columbia Sportswear Company B-1
    C Specimen Financial Statements: VF Corporation C-1
    D Specimen Financial Statements: Amazon.com, Inc. D-1
    E Specimen Financial Statements: Wal-Mart Stores, Inc. E-1
    F Specimen Financial Statements: Louis Vuitton F-1
    G Time Value of Money G-1
    LO 1: Compute interest and future values G-1
    Nature of Interest G-1
    Future Value of a Single Amount G-3
    Future Value of an Annuity G-4
    LO 2: Compute present values G-7
    Present Value Variables G-7
    Present Value of a Single Amount G-7
    Present Value of an Annuity G-9
    Time Periods and Discounting G-11
    Present Value of a Long-Term Note or Bond G-11
    LO 3: Use a financial calculator to solve time value of money problems G-13
    Present Value of a Single Sum G-14
    Present Value of an Annuity G-15
    Useful Applications of the Financial Calculator G-15
    H Reporting and Analyzing Investments H-1
    LO 1: Explain how to account for debt investments H-1
    Why Corporations Invest H-1
    Accounting for Debt Investments H-3
    LO 2: Explain how to account for stock investments H-4
    Holdings of Less than 20% H-4
    Holdings Between 20% and 50% H-5
    Holdings of More than 50% H-6
    LO 3: Discuss how debt and stock investments are reported in the financial statements H-7
    Categories of Securities H-7
    Balance Sheet Presentation H-10
    Presentation of Realized and Unrealized Gain or Loss H-11
    Statement of Cash Flows Presentation H-12
    Company Index I-1
    Subject Index I-5

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