Accounting Principles, Volume 2

Our top selling introductory accounting product Accounting Principles helps students succeed with its proven pedagogical framework, technical currency and an unparalleled robust suite of study and practice resources. It has been praised for its outstanding visual design, excellent writing style and clarity of presentation. The new eighth edition provides more opportunities to use technology and new features that empower students to apply what they have learned in the classroom to the world outside the classroom.

9 Long-Lived Assets 9-1

Capitalizing on Education 9-2

Property, Plant, and Equipment 9-3

Determining the Cost of Property, Plant, and Equipment 9-3

Depreciation 9-7

Factors in Calculating Depreciation 9-8

Depreciation Methods 9-9

Comparison of Depreciation Methods 9-13

Partial Period Depreciation 9-13

Depreciation and Income Tax 9-15

Revising Periodic Depreciation 9-16

Capital Expenditures During Useful Life 9-17

Impairments 9-17

Cost Model Versus Revaluation Model 9-18

Changes in Depreciation Method, Estimated Useful Life, or Residual Value 9-19

Revised Depreciation Calculations 9-19

Disposal of Property, Plant, and Equipment 9-21

Steps in Recording Disposals of Property, Plant, and Equipment 9-21

Retirement of Property, Plant, and Equipment 9-22

Sale of Property, Plant, and Equipment 9-24

Exchanges of Property, Plant, and Equipment 9-25

Natural Resources 9-28

Cost 9-29

Depletion 9-29

Disposal 9-30

Intangible Assets and Goodwill 9-31

Accounting for Intangible Assets 9-31

Intangible Assets with Finite Lives 9-32

Intangible Assets with Indefinite Lives 9-33

Goodwill 9-34

Statement Presentation and Analysis 9-35

Presentation 9-35

Analysis 9-36

10 Current Liabilities and Payroll 10-1

Butterflies Bring About Better Banknotes 10-2

Determinable (Certain) Current Liabilities 10-3

Accounts Payable 10-3

Unearned Revenues 10-4

Operating Line of Credit and Bank Overdraft 10-5

Short-Term Notes Payable 10-5

Sales Taxes 10-6

Property Taxes 10-7

Current Maturities of Long-Term Debt 10-8

Uncertain Liabilities 10-9

Provisions 10-9

Contingencies 10-13

Payroll 10-15

Employee Payroll Costs 10-16

Employer Payroll Costs 10-18

Recording the Payroll 10-19

Financial Statement Presentation 10-23

Appendix 10A: Payroll Deductions 10-24

Mandatory Payroll Deductions 10-24

Using Payroll Deduction Tables 10-26

11 Financial Reporting Concepts 11-1

Disclosing Accounting Policies Is a Good Policy 11-2

The Conceptual Framework of Accounting 11-3

The Objective of Financial Reporting 11-5

Elements of Financial Statements 11-6

Qualitative Characteristics of Useful Financial Information 11-7

Fundamental Characteristics 11-8

Enhancing Qualitative Characteristics 11-9

Application of the Qualitative Characteristics 11-10

Differences in Qualitative Characteristics Under IFRS and ASPE 11-11

Recognition and Measurement Criteria 11-12

General Recognition 11-13

Revenue Recognition 11-13

Variable Consideration 11-19

Expense Recognition 11-27

Measurement of Elements 11-28

Violation of Recognition and Measurement Concepts: Errors and Intentional Misstatements 11-29

Foundational Concepts, Assumptions, and Constraints 11-31

Concepts and Assumptions 11-32

Constraints 11-34

Summary of Conceptual Framework 11-34

12 Accounting for Partnerships 12-1

Partnering for Success 12-1

Partnership Form of Organization 12-3

Characteristics of Partnerships 12-3

Advantages and Disadvantages of Partnerships 12-4

Partnership Agreement 12-5

Forming a Partnership 12-6

Dividing Partnership Profit or Loss 12-8

Profit and Loss Ratios 12-9

Salaries, Interest, and Remainder in a Fixed Ratio 12-9

Closing Entries 12-12

Partnership Financial Statements 12-13

Admission of a Partner 12-15

Purchase of a Partner’s Interest 12-15

Investment of Assets in a Partnership 12-16

Withdrawal of a Partner 12-20

Payment from Partners’ Personal Assets 12-20

Payment from Partnership Assets 12-21

Death of a Partner 12-23

Liquidation of a Partnership 12-24

No Capital Deficiency 12-25

Capital Deficiency 12-26

13 Introduction to Corporations 13-1

The Advantages of Incorporation 13-1

The Corporate Form of Organization 13-3

Characteristics of a Corporation 13-3

Operating a Corporation 13-5

Share Capital 13-8

Share Issue Considerations 13-8

Common Shares 13-10

Preferred Shares 13-11

Corporate Income Statements 13-14

Cash Dividends 13-16

Necessary Conditions to Pay Cash Dividends 13-16

Entries for Cash Dividends 13-16

Preferred Share Cash Dividends 13-18

Reporting Retained Earnings 13-19

Statement of Retained Earnings (ASPE Only) 13-19

Closing Entries for a Corporation 13-20

Statement Presentation and Analysis 13-22

Presentation of Shareholders’ Equity 13-22

Analysis 13-23

14 Corporations: Additional Topics and IFRS 14-1

Flying High as a Public Company 14-1

Stock Dividends and Stock Splits 14-3

Stock Dividends 14-3

Stock Splits 14-5

Comparison of Effects 14-5

Reacquisition of Shares 14-7

Reacquisition below Average per Share Amount 14-8

Reacquisition above Average per Share Amount 14-8

Comprehensive Income 14-10

Continuing and Discontinued Operations 14-11

Other Comprehensive Income 14-12

Accounting Changes 14-15

Changes in Accounting Estimates 14-15

Changes in Accounting Policies 14-15

Correction of Prior Period Errors 14-16

Reporting Changes in Shareholders’ Equity 14-18

Summary of Shareholders’ Equity Transactions 14-18

Statement of Changes in Shareholders’ Equity 14-19

Analyzing Shareholders’ Equity 14-21

Earnings Performance 14-21

Dividends Record 14-24

15 Non-Current Liabilities 15-1

A New Lease on Aircraft Accounting 15-1

Bonds Payable 15-3

Types of Bonds 15-5

Bond Issuance 15-5

Bond Trading 15-7

Bond Pricing 15-8

Discount or Premium on Bonds 15-12

Accounting for Bond Issues 15-13

Issuing Bonds at Face Value 15-14

Issuing Bonds at a Discount 15-14

Issuing Bonds at a Premium 15-18

Issuing Bonds at a Discount Versus at a Premium 15-22

Bond Interest Accruals 15-22

Accounting for Bond Retirements 15-24

Redeeming Bonds at Maturity 15-24

Redeeming Bonds before Maturity 15-25

Instalment Notes Payable 15-26

Fixed Principal Payments 15-26

Blended Payments 15-27

Current and Non-Current Portions 15-28

Lease Liabilities 15-30

Accounting for Lease Arrangements 15-30

Statement Presentation and Analysis 15-33

Presentation 15-33

Analysis 15-33

16 Investments 16-1

Growing through Strategic Investments 16-1

Classifying Investments 16-3

Non-Strategic Investments 16-3

Strategic Investments 16-5

Accounting for Debt Investments Reported at Amortized Cost 16-6

Money-Market Instruments 16-7

Bonds 16-9

Accounting for Fair Value Investments 16-14

Fair Value through Profit or Loss: Equity Investments (Common Shares) 16-15

Fair Value through Profit or Loss: Debt Investments (Bonds) 16-16

Fair Value through Other Comprehensive Income 16-18

Accounting for Strategic Investments 16-21

Equity Method 16-23

Cost Method 16-24

Reporting of Investments 16-26

Balance Sheet 16-26

Income Statement and Statement of Comprehensive Income 16-27

Summary of Investments 16-28

17 The Cash Flow Statement 17-1

Going with the Cash Flow 17-1

Reporting of Cash Flows 17-3

Usefulness of the Cash Flow Statement 17-3

Content of the Cash Flow Statement 17-3

Preparing the Statement of Cash Flows—Indirect Method 17-7

Indirect Method 17-8

Preparing the Cash Flow Statement—Direct Method 17-26

Direct Method 17-26

Using the Information in the Financial Statements 17-32

Free Cash Flow 17-33

18 Financial Statement Analysis 18-1

From Fashion Trends to Earnings Trends 18-1

Basics of Financial Statement Analysis 18-3

Comparative Analysis 18-4

Tools of Analysis 18-4

Horizontal Analysis 18-6

Balance Sheet 18-7

Income Statement 18-8

Vertical Analysis 18-10

Balance Sheet 18-10

Income Statement 18-12

Liquidity Ratios 18-14

Current Ratio 18-14

Acid-Test Ratio 18-15

Receivables Turnover 18-16

Inventory Turnover 18-17

Operating Cycle 18-18

Liquidity Conclusion 18-18

Summary of Liquidity Ratios 18-19

Solvency Ratios 18-20

Debt to Total Assets 18-20

Interest Coverage 18-21

Free Cash Flow 18-21

Solvency Conclusion 18-22

Summary of Solvency Ratios 18-22

Profitability Ratios 18-24

Gross Profit Margin 18-24

Profit Margin 18-24

Asset Turnover 18-25

Return on Assets 18-25

Return on Equity 18-25

Earnings per Share (EPS) 18-26

Price-Earnings (PE) Ratio 18-26

Payout Ratio 18-27

Profitability Conclusion 18-27

Summary of Profitability Ratios 18-28

Limitations of Financial Statement Analysis 18-31

Alternative Accounting Policies 18-31

Comprehensive Income 18-31

Quality of Information 18-32

Economic Factors 18-32

Appendix A Specimen Financial Statements: Aritzia Inc. A-1

Appendix B Sales Taxes B-1

Appendix PV Present Value Concepts PV-1

Company Index / Subject Index I-1

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