Preface xxi
Chapter l
Ethical Issues in Advanced Accounting
Ethical Standards for Preparers ofFinancial Statements and Financial Reports
Significant Events in the Establishment of Ethical Standards for Management
Accountants and Financial Executives
Analysis of Ethical Standards for Management Accountants and Financial
Executives
Concluding Observations
Appendix l: Standards of Ethical Conduct for Management Accountants
Competence
Confidentiality
Integrity
Objectivity
Resolution of Ethical Conflict
Appendix 2: FEl Code of Ethics
Appendix 3: AlCPA Code of Professional Conduct
Composition, Applicability, and Compliance
Other Guidance
Section l: Principles
Section ll: Rules
Definitions
Rules
Appendix A: Council Resolution Designating Bodies to Promulgate Technical
Standards
Appendix B: Council Resolution Conceming Form of Organization and
Name
Review Questions
Exercise
Cases
Scope of Chapter
Organization ofa General Partnership
Characteristics of a General Partnership
Deciding Between a General Partnership and a Corporation
Is the General Partnership a Separate Entity?
The Partnership Contract
Ledger Accounts for Partners
Loans to and from Partners
Valuation of Investments by Partners
Income-Sharing Plans for General Partnerships
Partners' Equity in Assets versus Share in Earnings
Division of Net Income or Loss
Financial Statements for a General Partnership
Correction of Partnership Net Income of Prior Years
Changes in Ownership of General Partnerships
Accounting for Changes in Partners
Accounting and Managerial Issues
Admission of a New Partner
Acquisition of an Interest by Payment to One or More Partners
Investment in Partnership by New Partner
Bonus or Goodwill Allowed to Existing Partners
Bonus or Goodwill Allowed to New Partner
Retirement of a Partner
Limited Liability Partnerships
Limited Partnerships
Accounting for Limited Partnerships
Financial Statements for Limited Partnerships
SEC Enforcement Actions Dealing with Wrongful Application ofAccounting
Standards for Partnerships
Review Questions
Exercises
Cases
Problems
Scope of Chapter
Liquidation of a Partnership
The Meaning of Liquidation
Division of Losses and Gains during Liquidation
Distribution of Cash or Other Assets to Partners
Payments to Partners after All Noncash Assets Realized
Equity of Each Partner Is Sufficient to Absorb Loss from Realization
Equity of One Partner Is Not Sufficient to Absorb That Partner's Share of Loss
from Realization
Equities ofTwo Partners Are Not Sufficient to Absorb Their Shares ofLoss
from Realization
Partnership Is Insolvent but Partners Are Solvent
Partnership Is Insolvent and Partners Are Insolvent
Installment Payments to Partners
General Principles Guiding Installment Payments
Determining Appropriate Installment Payments to Partners
Preparation of a Cash Distribution Program
Withholding of Cash for Liabilities and Liquidation Costs
Liquidation of Limited Liability Partnerships
Liquidation of Limited Partnerships
Incorporation of a General Partnership
Joint Ventures
Present-Day Joint Ventures
Accounting for a Corporate Joint Venture
Accounting for an Unincorporated Joint Venture
SEC Enforcement Actions Dealing with Wrongful Application ofAccounting
Standards for Joint Ventures
Review Questions
Exercises
Cases
Problems
Scope of Chapter
Branches and Divisions
Start-Up Costs of Opening New Branches
Accounting System for a Branch
Reciprocal Ledger Accounts
Expenses Incurred by Home Office and Allocated to Branches
Altemative Methods of Billing Merchandise Shipments to Branches
Separate Financial Statements for Branch and for Home Office
Combined Financial Statements for Home Office and Branch
Working Paper for Combined Financial Statements
Billing of Merchandise to Branches at Prices above Home Office Cost
Working Paper when Billings to Branches Are at Prices above Cost
Treatment of Beginning Inventories Priced above Cost
Reconciliation of Reciprocal Ledger Accounts
Transactions Between Branches
SEC Enforcement Action Dealing with Wrongful Application ofAccounting
Standards for Divisions
Review Questions
Exercises
Cases
Problems
Business Combindlions and Consolidated
Financial Statements
Chapter 5
Business Combinations
Scope of Chapter
Business Combinations: Why and How?
Antitrust Considerations
Methods forArranging Business Combinations
Establishing the Price for a Business Combination
Methods ofAccounting for Business Combinations
Pufehase Accounting
Determination of the Combinor
Computation of Cost of a Combinee
Allocation of Cost of a Combinee
lllustration of Purchase Accounting for Statutory Merger, with Goodwill
lllustration of Purchase Accounting for Acquisition of Net Assets, with
Bargain Purchase Excess
Pooling-of-lnterests Accounting
lllustration of Pooling-of-lnterests Accounting for Statutory Merger
Popularity of Pooling Accounting
Past Abuses of Pooling Accounting
Past Abuses of Purchase Accounting
Action by the AlCPA
Conditions Requiring Pooling Accounting
Financial Statements Following a Business Combination
Disclosure of Business Combinations in a Note to the Financial Statements
Comparison of Purchase and Pooling Accounting
Other Topics in Accounting for Business Combinations
Appraisal ofAccounting Standards for Business Combinations
Criticism of Purchase Accounting
Criticism of Pooling Accounting
FASB Study of Accounting for Business Combinations
SEC Enforcement Actions Dealing with Wrongful Application ofAccounting
Standards for Business Combinations
Review Questions
Exercises
Cases
Problems
Chapter 6
Consolidated Financial Statements: On Date of
Purchase-Type Business Ccmbination
Scope of Chapter
Parent Company-Subsidiary Relationships
Nature of Consolidated Financial Statements
Should All Subsidiaries Be Consolidated?
The Meaning of Controlling Interest 247
Criticism ofTraditional Concept of Control
FASB's Proposed Redefinition ofControl
Consolidation ofWholly Owned Subsidiary on Date ofPurchase-Type
Business Combination
Consolidation ofPartially Owned Subsidiary on Date of Purehase-Type
Business Combination
Nature of Minority Interest
Consolidated Balance Sheet for Partially Owned Subsidiary
Altemative Methods for Valuing Minority Interest and Goodwill
Bargain Purchase Excess in Consolidated Balance Sheet
Disclosure of Consolidation Policy
Advantages and Shortcomings of Consolidated Financial Statements
"Push-Down Accounting" for a Purchased Subsidiary
SEC Enforcement Actions Dealing with Wrongful Application ofAccounting
Standards for Consolidated Financial Statements
Review Questions
Exercises
Cases
Problems
Chapter 7
Consolidated Financial Statements: Subsequent to Date of
Purchase-Type Business Combination
Scope of Chapter
Accounting for Operating Results ofWholly Owned Purchased Subsidiaries
Equity Method
Cost Method
Choosing Between Equity Method and Cost Method
lllustration ofEquity Method for Wholly Owned Purchased Subsidiary for First
Year after Business Combination
lllustration ofEquity Method for Wholly Owned Purchased Subsidiary for
Second Year after Business Combination
Accounting for Operating Results ofPartially Owned Purchased Subsidiaries
lllustration of Equity Method for Partially Owned Purchased Subsidiary for First
Year after Business Combination
lllustration of Equity Method for Partially Owned Purchased Subsidiary for
Second Year after Business Combination
Concluding Comments on Equity Method ofAccounting
Appendix: Cost Method for Partially Owned Purchased Subsidiary
lllustration of Cost Method for Partially Owned Purchased Subsidiary for First
Year after Business Combination
lllustration of Cost Method for Partially Owned Purchased Subsidiary for
Second Year after Business Combination
Review Questions
Exercises
Cases
Problems
Chapter 8
Consolidated Financial Statements: Pooling-Type Business
Combination
Scope of Chapter
Consolidation ofWholly Owned Pooled Subsidiary on Date ofBusiness
Combination
Consolidation of Wholly Owned Pooled Subsidiary Subsequent to Date of Business
Combination
The Equity Method ofAccounting for Pooled Subsidiaries
Consolidation of Partially Owned Pooled Subsidiary on Date of Business
Combination
Consolidation of Partially Owned Pooled Subsidiary Subsequent to Date of Business
Combination
Accounting for Intercompany Transactions Not Involving Profit (Gain) or Loss
Loan on Notes or Open Account
Leases of Property under Operating Leases
Rendering of Services
Income Taxes Applicable to Intercompany Transactions
Summary: Intercompany Transactions and Balances
Review Questions
Exercises
Consolidated Financial Statements: Intercompany Profits
(Gains) and Losses
Scope of Chapter
Importance of Eliminating or Including Intercompany Profits (Gains)
and Losses
Intercompany Sales of Merchandise
Intercompany Sales of Merchandise at Cost
Unrealized Intercompany Profit in Ending Inventories
Intercompany Profit in Beginning and Ending Inventories
Intercompany Profit in Inventories and Amount of Minority Interest
Should Net Profit or Gross Profit Be Eliminated?
Intercompany Sales of Plant Assets
Intercompany Gain on Sale of Land
Intercompany Gain on Sale of Depreciable Plant Asset
Intercompany Lease of Property under Capita-TySales-Type Lease
Intercompany Sales of Intangible Assets
Acquisition ofAffiliate's Bonds
lllustration ofAcquisition ofAffiliate's Bonds
Accounting for Gain in Subsequent Years
Reissuance of Intercompany Bonds
lllustration ofEffect of Intercompany Profits (Gains) on
Minority Interest
Comprehensive lllustration of Working Paper for Consolidated Financial
Statements
Review Questions
Exercises
Cases
Problems
Consolidated Financial Statements:IncomeTaxes,Cash
Flows, and installmentAcquisitions
Scope of Chapter
Income Taxes in Business Combinations and Consolidations
Income Taxes Attributable to Current Fair Values of Purchased Identifiable
Net Assets
Income Taxes Attributable to Undistributed Eamings of Subsidiaries
Income Taxes Attributable to Intercompany Profits (Gains)
Consolidated Statement of Cash Flows
lllustration of Consolidated Statement of Cash Flows
Installment Acquisition of Subsidiary
lllustration of Installment Acquisition of Parent Company's
Controlling Interest
Parent Company's Joumal Entries for Installment Acquisition
Working Paper for Consolidated Financial Statements
Review Questions
Exercises
Cases
Problems
Consolidated Financial Statements: Special Problems
Scope of Chapter
Changes in Parent Company's Ownership Interest in a Subsidiary
Parent Company Acquisition of Minority Interest
Parent Company Sale of a Portion of Its Subsidiary Common
Stockholdings
Subsidiary's Issuance ofAdditional Shares ofCommon Stock to the
Public
Subsidiary's Issuance ofAdditional Shares ofCommon Stock to
Parent Company
Subsidiary with Preferred Stock Outstanding
lllustration of Minority Interest in Subsidiary with Preferred Stock
Preferred Stock Considerations Subsequent to Date of Business Combination
Stock Dividends Distributed by a Subsidiary
lllustration of Subsidiary Stock Dividend
Treasury Stock Transactions of a Subsidiary
lllustration of Treasury Stock Owned by Subsidiary on Date of Business
Combination
lllustration of Treasury Stock Acquired by Subsidiary Subsequent to
Business Combination
Indirect Shareholdings and Parent Company's Common Stock Owned by a
Subsidiary
Indirect Shareholdings
Parent Company's Common Stock Owned by a Subsidiary
Concluding Comments on Special Problems
Review Questions
Exercises
Cases
Problems
Accounting for Nonbusiness Organizations
Chapter l2
Governmental Entities: General Fund
Scope of Chapter
Objectives ofFinancial Reporting for Nonbusiness Organizations
Nature of Governmental Entities
Accounting Standards for Governmental Entities
The Govemmental Financial Reporting Entity
Funds: The Accounting Unit for Govemmental Entities
The Accrual Basis ofAccounting
Recording the Budget
Accounting for a Governmental Entity's General Fund
lllustration ofAccounting for a General Fund
Trial Balance at End of Fiscal Year for a General Fund
Financial Statements for a General Fund
Closing Entries for a General Fund
Review Questions
Exercises
Cases
Problems
Chapter 13 627
Governmental Entities: Other Governmental Funds
and Account Groups
Scope of Chapter
Other Governmental Funds
Accounting for Special Revenue Funds
Accounting for Capital Projects Funds
Accounting for Debt Service Funds
General Fixed Assets and General Long-Term Debt Account Groups
Accounting for General Fixed Assets Account Group
Accounting for General Long-Term Debt Account Group
Capital Leases of Govemmental Entities
Accounting for Special Assessment Bonds
Review Questions
Exercises
Cases
Problems
Chapter 14
Governmental Entities: Proprietary Funds, Fiduciary Funds,
and ComprehensiveAnnual Financial Report
Scope of Chapter
Proprietary Funds
Accounting for Enterprise Funds
Accounting for Intemal Service Funds
Applicability of FASB Pronouncements to Proprietary Funds
Fiduciary Funds
Accounting for Agency Funds
Accounting for Expendable and Nonexpendable Trust Funds
Accounting for Pension Trust Funds
Comprehensive Annual Financial Report of Governmental Entities
The GASB Govemmental Financial Reporting Model
Appraisal ofAccounting Standards for Govemmental Entities
Review Questions
Exercises
Cases
Problems
Chapter 15
Nonprofit Organizations
Scope of Chapter
Accounting Standards for Nonprofit Organizations
Characteristics of Nonprofit Organizations
Fund Accounting by Nonprofit Organizations
Unrestricted Fund
Restricted Fund
Endowment Fund
Agency Fund
Annuity and Lite Income Funds
Loan Fund
Plant Fund
Financial Statements of Nonprofit Organizations
Concluding Observations on Accounting for Nonprofit Organizations
Review Questions
Exercises
Cases
Problems
Chapter 16
Bankruptcy: Liquidation and Reorganization
Scope of Chapter
The Bankruptcy Code
Bankruptcy Liquidation
Debtor's (Voluntary) Petition
Creditors' (Involuntary) Petition
Unsecured Creditors with Priority
Property Claimed as Exempt
Role of Court in Liquidatiori
Role of Creditors
Role of Trustee
Discharge of Debtor
Role ofAccountant in Bankruptcy Liquidation
Financial Condition ofDebtor Enterprise: The Statement ofAffairs
Estimated Amounts to Be Recovered by Each Class of Creditors
Accounting and Reporting for Trustee
Bankruptcy Reorganization
Appointment of Trustee or Examiner
Plan of Reorganization
Accounting for a Reorganization
Disclosure of Reorganization
Evaluation ofBankruptcy Code
Review Questions
Exercises
Cases
Problems
Chapter 17
Estates and Trusts
Scope of Chapter
Legal and Accounting Aspects of Estates
Provisions of Uniform Probate Code Goveming Estates
Provisions of Revised Uniform Principal and Income Act Goveming
Estates
lllustration ofAccounting for an Estate
Legal and Accounting Aspects ofTrusts
Provisions ofUnifonn Probate Code Goveming Trusts
Provisions of Revised Uniform Principal and Income Act Goveming Trusts
lllustration ofAccounting for a Trust
Review Questions
Exercises
Cases
Problems
International Accounting
Chapter 18
International Accounting Standards; Accounting for
Foreign CurrencyTransactions
Scope of Chapter
International Accounting Standards
Intemational Accounting Standards Committee
Intemational Organization of Securities Commissions
Accounting for Foreign Currency Transactions
FASB Statement No. 52
Transactions Involving Forergn Currencies
Purchase of Merchandise from a Foreign Supplier
Transaction Gains and Losses
Sale of Merchandise to a Foreign Customer
Loan Payable in a Foreign Currency
Loan Receivable in a Foreign Currency
Conclusions Regarding Transactions Involving Foreign Currencies
Forward Exchange Contracts
Intenlational Accounting Standard 27
Disclosures Regarding Foreign Currency Transactions
Chapter 19
Translation of Foreign Currency Financial Statements
Scope of Chapter
Functional Currency
Altemative Methods for Translating Foreign Entities' Financial Statements
Standards for Translation Established by the Financial Accounting Standards
Board
Remeasurement of a Foreign Entity's Accounts
Hlustration of Remeasurement of a Foreign Entity's Account Balances
Transactions or Events for Year l
Translation of a Foreign Entity's Financial Statements
Other Aspects of Foreign Currency Translation
Intemational Accounting Standard 27
Appraisal of Accounting Standards for Foreign Currency Translation
Review Questions
Exercises
Cases
Problems
Chapter 20
Segments; Interim Reports; Reporting for the SEC
Scope of Chapter
Segment Reporting
Background of Segment Reporting
Proposal to Improve Segment Reporting
Allocation of Nontraceable Expenses to Operating Segments
SEC Requirements for Segment Information
Reporting the Disposal of a Business Segment
Intemational Accounting Standard l4
Interim Financial Reports
Problems in Interim Financial Reports
APB Opinion No. 28
Reporting Accounting Changes in Interim Periods
Conclusions on Interim Financial Reports
SEC Enforcement Actions Dealing with Wrongful Application
ofAccounting Standards for Interim Financial Reports
Reporting for the SEC
Nature of Reporting to the SEC
Organization and Functions of the SEC
Interaction Between SEC and FASB
Integration Project and Other Recent Activities of SEC
Appendix: Excerpts from 1995 Annual Report for The Walt Disney Company
Review Questions
Exercises
Cases
Problems
Glossary
Index
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