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Financial Accounting in an Economic Context, 9th Edition

Book Description

By focusing on three elemental themes -- economic factors, measurement issues, and decision-making perspective -- Jamie Pratt's Financial Accounting in an Economic Context, 9th Edition provides a clear understanding of the relevance of principles applied in the real world. Virtually every concept refers to a real company, a real situation, or a real event. Pratt 9e takes an integrative look at accounting and finance by considering the impact of economics, internal controls, international standard, ethics, decision-making, and earnings management. A complete financial picture can be drawn using the tools presented in this text. This text enables MBA and undergraduate students to develop an understanding of the impact that economic events have on business. New elements in the ninth edition sharpen the text's economic decision-making foundation and is available with Quantum's intelligent adaptive learning and assessment software.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Brief Contents
  5. Contents
  6. Preface
  7. Acknowledgments
  8. About the Author
  9. PART 1: An Overview of Financial Accounting
    1. CHAPTER 1: Financial Accounting and Its Economic Context
      1. 1.1 Financial Reporting and Investment Decisions
      2. 1.2 The Demand for Financial Information: A User's Orientation
      3. 1.3 The Economic Environment in which Financial Reports Are Prepared and Used
      4. 1.4 Corporate Governance
      5. 1.5 International Perspective: Movement toward a Single Global Financial Reporting System
      6. APPENDIX 1A
      7. SUMMARY OF KEY POINTS
      8. KEY TERMS
      9. INTERNET RESEARCH EXERCISE
      10. ISSUES FOR DISCUSSION
    2. CHAPTER 2: The Financial Statements
      1. 2.1 Capital Flows and Operating, Investing, and Financial Activities
      2. 2.2 The Classified Balance Sheet
      3. 2.3 The Income Statement
      4. 2.4 The Statement of Shareholders' Equity
      5. 2.5 The Statement of Cash Flows
      6. 2.6 Relationships among the Financial Statements
      7. 2.7 International Perspective: An Example of International Financial Reporting Standards
      8. REVIEW PROBLEM
      9. SUMMARY OF KEY POINTS
      10. KEY TERMS
      11. INTERNET RESEARCH EXERCISE
      12. BRIEF EXERCISES
      13. EXERCISES
      14. PROBLEMS
      15. ISSUES FOR DISCUSSION
  10. PART 2: Measurement, Mechanics, and Use of Financial Statements
    1. CHAPTER 3: The Measurement Fundamentals of Financial Accounting
      1. 3.1 Assumptions of Financial Accounting
      2. 3.2 Valuations on the Balance Sheet
      3. 3.3 The Principles of Financial Accounting Measurement
      4. 3.4 Two Exceptions to the Basic Principles: Materiality and Conservatism
      5. 3.5 International Perspective: Fundamental Differences between U.S. GAAP and IFRS
      6. SUMMARY OF KEY POINTS
      7. KEY TERMS
      8. INTERNET RESEARCH EXERCISE
      9. BRIEF EXERCISES
      10. EXERCISES
      11. PROBLEMS
      12. ISSUES FOR DISCUSSION
    2. CHAPTER 4: The Mechanics of Financial Accounting
      1. 4.1 Economic Events
      2. 4.2 The Fundamental Accounting Equation
      3. 4.3 Business Transactions, the Accounting Equation, and the Financial Statements
      4. 4.4 The Journal Entry
      5. 4.5 Recognizing Gains and Losses
      6. 4.6 Periodic Adjustments
      7. 4.7 Reporting Difficulties Faced by Multinational Companies
      8. APPENDIX 4A
      9. T-Account Analysis and Preparing the Statement of Cash Flows
      10. OPERATING ITEMS
      11. REVIEW PROBLEM
      12. SUMMARY OF KEY POINTS
      13. KEY TERMS
      14. INTERNET RESEARCH EXERCISE
      15. BRIEF EXERCISES
      16. EXERCISES
      17. PROBLEMS
      18. ISSUES FOR DISCUSSION
    3. CHAPTER 5: Using Financial Statement Information
      1. 5.1 Control and Prediction
      2. 5.2 Framework for Using Financial Statements to Predict Future Earnings and Cash Flows
      3. 5.3 Elements of Financial Statement Analysis
      4. 5.4 Assessing the Business Environment
      5. 5.5 Reading and Studying the Financial Statements and Footnotes
      6. 5.6 Assessing Earnings Quality
      7. 5.7 Analyzing the Financial Statements
      8. 5.8 Predict Future Earnings and/or Cash Flow
      9. 5.9 Annual Report Information and Predicting Stock Prices
      10. 5.10 International Perspective: Financial Statement Analysis in an International Setting
      11. APPENDIX 5A
      12. Shareholder Value, ROE, and Cash Flow Analyses
      13. Determinants of Value Creation: Analyzing Return on Equity
      14. Shareholder Value Creation and the ROE Model: Macy's vs. Kohl's
      15. Cash Flow Analysis
      16. Cash Flow Profiles
      17. Projecting Future Financial Statements
      18. REVIEW PROBLEM
      19. SUMMARY OF KEY POINTS
      20. KEY TERMS
      21. INTERNET RESEARCH EXERCISE
      22. BRIEF EXERCISES
      23. EXERCISES
      24. PROBLEMS
      25. ISSUES FOR DISCUSSION
  11. PART 3: Assets: A Closer Look
    1. CHAPTER 6: The Current Asset Classification, Cash, and Accounts Receivable
      1. 6.1 The Current Asset Classification
      2. 6.2 Cash
      3. 6.3 Accounts Receivable
      4. 6.4 Accounts Receivable from a User's Perspective
      5. 6.5 International Perspective: Receivables, Foreign Currencies, and Hedging
      6. ROE EXERCISE: Management of Working Capital and Receivables and Return on Equity
      7. REVIEW PROBLEM
      8. SUMMARY OF KEY POINTS
      9. KEY TERMS
      10. INTERNET RESEARCH EXERCISE
      11. BRIEF EXERCISES
      12. EXERCISES
      13. PROBLEMS
      14. ISSUES FOR DISCUSSION
    2. CHAPTER 7: Merchandise Inventory
      1. 7.1 The Relative Size of Inventories
      2. 7.2 Accounting for Inventory: Four Important Issues
      3. 7.3 Acquiring Inventory: What Costs to Capitalize?
      4. 7.4 Carrying Inventory: Perpetual Method
      5. 7.5 Selling Inventory: Which Cost Flow Assumption?
      6. 7.6 Ending Inventory: Applying the Lower-of-Cost-or-Market Rule
      7. 7.7 The Lower-of-Cost-or-Market Rule and Hidden Reserves
      8. 7.8 International Perspective: Japanese Business and Inventory Accounting
      9. ROE EXERCISE: Management of Inventory and Return on Equity
      10. REVIEW PROBLEM
      11. SUMMARY OF KEY POINTS
      12. KEY TERMS
      13. INTERNET RESEARCH EXERCISE
      14. BRIEF EXERCISES
      15. EXERCISES
      16. PROBLEMS
      17. ISSUES FOR DISCUSSION
    3. CHAPTER 8: Investments in Equity Securities
      1. 8.1 Equity Securities Classified as Current
      2. 8.2 Trading and Available-for-Sale Securities
      3. 8.3 Long-Term Equity Investments
      4. ROE EXERCISE: Managing Investments in Equity Securities and Return on Equity
      5. APPENDIX 8A
      6. Consolidated Financial Statements
      7. REVIEW PROBLEM I
      8. REVIEW PROBLEM II
      9. SUMMARY OF KEY POINTS
      10. KEY TERMS
      11. INTERNET RESEARCH EXERCISE
      12. BRIEF EXERCISES
      13. EXERCISES
      14. PROBLEMS
      15. ISSUES FOR DISCUSSION
    4. CHAPTER 9: Long-Lived Assets
      1. 9.1 The Relative Size of Long-Lived Assets
      2. 9.2 Long-Lived Asset Accounting: General Issues and Financial Statement Effects
      3. 9.3 An Overview of Long-Lived Asset Accounting
      4. 9.4 Acquisition: What Costs to Capitalize?
      5. 9.5 Postacquisition Expenditures: Betterments or Maintenance?
      6. 9.6 Cost Allocation: Amortizing Capitalized Costs
      7. 9.7 Disposal: Retirements, Impairments, Sales, and Trade-Ins
      8. 9.8 Intangible Assets
      9. 9.9 Copyrights, Patents, and Trademarks
      10. 9.10 The Costs of Developing Computer Software
      11. 9.11 Goodwill
      12. 9.12 Organizational Costs
      13. 9.13 Research and Development Costs
      14. 9.14 IFRS vs. U.S. GAAP: Revaluations to Fair Market Value
      15. ROE EXERCISE: Managing Long-Lived Assets and Return on Equity
      16. REVIEW PROBLEM
      17. SUMMARY OF KEY POINTS
      18. KEY TERMS
      19. INTERNET RESEARCH EXERCISE
      20. BRIEF EXERCISES
      21. EXERCISES
      22. PROBLEMS
      23. ISSUES FOR DISCUSSION
  12. PART 4: Liabilities and Shareholders' Equity: A Closer Look
    1. CHAPTER 10: Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies
      1. 10.1 What Is a Liability?
      2. 10.2 The Relative Size of Liabilities on the Balance Sheet
      3. 10.3 Reporting Liabilities on the Balance Sheet: Economic Consequences
      4. 10.4 Current Liabilities
      5. 10.5 Determinable Current Liabilities
      6. 10.6 Contingencies and Contingent Liabilities
      7. 10.7 Provisions vs. Contingent Liabilities: The “Devil Is in the Details”
      8. ROE EXERCISE: Managing Current Liabilities
      9. APPENDIX 10A
      10. Retirement Costs: Pensions and Postretirement Healthcare and Insurance
      11. Pensions
      12. Defined Contribution Plan
      13. Defined Benefit Plan
      14. Postretirement Healthcare and Insurance Costs
      15. APPENDIX 10B
      16. Deferred Income Taxes
      17. The Concept of Deferred Income Taxes
      18. Accounting Entries for Deferred Income Taxes
      19. Deferred Income Taxes: Additional Issues
      20. The Conservatism Ratio
      21. REVIEW PROBLEM
      22. SUMMARY OF KEY POINTS
      23. KEY TERMS
      24. INTERNET RESEARCH EXERCISE
      25. BRIEF EXERCISES
      26. EXERCISES
      27. PROBLEMS
      28. ISSUES FOR DISCUSSION
    2. CHAPTER 11: Long-Term Liabilities: Notes, Bonds, and Leases
      1. 11.1 The Relative Size of Long-Term Liabilities
      2. 11.2 The Economic Consequences of Reporting Long-Term Liabilities
      3. 11.3 Basic Definitions and Different Contractual Forms
      4. 11.4 Effective Interest Rate
      5. 11.5 Accounting for Long-Term Obligations: The Effective Interest Method
      6. 11.6 Accounting for Long-Term Notes Payable
      7. 11.7 Bonds Payable
      8. 11.8 Financial Instruments, Fair Market Values, and Off-Balance Sheet Risks
      9. 11.9 Leases
      10. 11.10 International Perspective: The Importance of Debt Financing in Other Countries
      11. ROE EXERCISE: Managing Long-Term Debt
      12. APPENDIX 11A
      13. The Determination of Bond Prices
      14. APPENDIX 11B
      15. Investing in Bonds
      16. APPENDIX 11C
      17. Interest Rate Swaps and Hedging
      18. REVIEW PROBLEM
      19. Cash Flow Calculations
      20. Journal Entry Calculations
      21. Discount Balance and Balance Sheet Value of Bonds Payable
      22. SUMMARY OF KEY POINTS
      23. KEY TERMS
      24. INTERNET RESEARCH EXERCISE
      25. BRIEF EXERCISES
      26. EXERCISES
      27. PROBLEMS
      28. ISSUES FOR DISCUSSION
    3. CHAPTER 12: Shareholders’ Equity
      1. 12.1 The Relative Importance of Liabilities, Contributed Capital, and Earned Capital
      2. 12.2 Debt and Equity Distinguished
      3. 12.3 The Economic Consequences Associated with Accounting for Shareholders' Equity
      4. 12.4 Accounting for Shareholders' Equity
      5. 12.5 Accounting for Common and Preferred Stock Issuances
      6. 12.6 The Statement of Shareholders' Equity
      7. 12.7 International Perspective: The Rise of International Equity Markets
      8. ROE EXERCISE: Return on Equity and Value Creation
      9. REVIEW PROBLEM
      10. SUMMARY OF KEY POINTS
      11. KEY TERMS
      12. INTERNET RESEARCH EXERCISE
      13. BRIEF EXERCISES
      14. EXERCISES
      15. PROBLEMS
      16. ISSUES FOR DISCUSSION
  13. PART 5: Income and Cash Flows
    1. CHAPTER 13: The Complete Income Statement
      1. 13.1 The Economic Consequences Associated with Income Measurement and Disclosure
      2. 13.2 The Measurement of Income: Different Measures for Different Objectives
      3. 13.3 A Complete Income Statement: Disclosure and Presentation
      4. 13.4 Intraperiod Tax Allocation
      5. 13.5 Earnings-Per-Share Disclosure
      6. 13.6 Income Statement Categories: Useful for Decisions but Subjective
      7. 13.7 International Perspective: Investments and Income Statement Disclosure
      8. ROE EXERCISE: Using the Right Earnings Number
      9. REVIEW PROBLEM
      10. SUMMARY OF KEY POINTS
      11. KEY TERMS
      12. INTERNET RESEARCH EXERCISE
      13. BRIEF EXERCISES
      14. EXERCISES
      15. PROBLEMS
      16. ISSUES FOR DISCUSSION
    2. CHAPTER 14: The Statement of Cash Flows
      1. 14.1 The Definition of Cash
      2. 14.2 A General Description of the Statement of Cash Flows
      3. 14.3 How the Statement of Cash Flows Can Be Used
      4. 14.4 The Statement of Cash Flows: Economic Consequences
      5. 14.5 Deriving Cash Flow from Accrual Financial Statements
      6. 14.6 The Complete Statement of Cash Flows
      7. 14.7 Analyzing the Statement of Cash Flows: An Application
      8. 14.8 International Perspective: The Statement of Cash Flows
      9. REVIEW PROBLEM
      10. SUMMARY OF KEY POINTS
      11. KEY TERMS
      12. INTERNET RESEARCH EXERCISE
      13. BRIEF EXERCISES
      14. EXERCISES
      15. PROBLEMS
      16. ISSUES FOR DISCUSSION
    3. APPENDIX A: The Time Value of Money
      1. Interest: The Price of Money
      2. Time Value
      3. Time Value Computations
      4. Computing Implicit Rates of Return and Interest Rates
      5. Present Value and Financial Accounting
      6. EXERCISES
      7. PROBLEMS
    4. APPENDIX B: Quality of Earnings Cases: A Comprehensive Review
      1. Case 1: Liberty Manufacturing
      2. Case 2: Microline Corporation
      3. Case 3: Technic Enterprises and Sonar-Sun Inc.
      4. Case 4: Avery Corporation
      5. Case 5: Zenith Creations
      6. Case 6: Pierce and Snowden
  14. Glossary
  15. Subject Index
  16. Company Index