The Ultimate Accountants' Reference, 3 rd Edition INCLUDING GAAP, IRS AND SEC REGULATIONS, LEASES, AND MORE STEVEN M. BRAGG WILEY JOHN WILEY & SONS, INC.
vi 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 The Trust Indenture Act of 1939 The Investment Company Act of 1940 The Investment Advisers Act of 1940 Regulation FD Regulation M-A Regulation S-K Regulation S-T Regulation S-X (Requirements for Financial Statement Reporting) Staff Accounting Bulletins Staff Accounting Bulletin 99: Materiality Forms to be Filed with the SEC Summary 34 34 35 35 36 36 37 38 44 46 47 47 5 Laws; Impacting Accounting 5.1 Introduction 5.2 Ethics 5.3 Employment Eligibility 5.4 Garnishments 5.5 Health Insurance 5.6 Pensions 5.7 Taxes 5.8 Wages and Overtime 5.9 Other Laws Impacting Accounting 5.10 Summary 48 48 48 50 51 52 53 54 56 58 59 Part Three Accounting Reports 6 The Balance Sheet and Statement of Stockholders' Equity 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 Introduction Uses of the Balance Sheet and Statement of Stockholders' Equity The Balance Sheet Format Asset Definitions Liability Definitions Stockholders' Equity Definitions The Statement of Stockholders' Equity Format Accounting Treatment of Offsets to Assets and Liabilities Critique of the Balance Sheet Summary 61 63 63 63 64 66 67 68 69 69 70 72
vii 7 The income Statement 73 7.1 Introduction 73 7.2 Format of the Income Statement 73 7.3 Expenses Listed in the Cost of Goods Sold 75 7.4 Reporting Earnings per Share 76 7.5 Treatment of Gains and Losses. 77 7.6 Treatment of Accounting Changes 77 7.7 Treatment of Discontinued Operations 78 7.8 Treatment of Extraordinary Items 78 7.9 Treatment of Other Comprehensive Income 79 7.10 Treatment of Prior Period Adjustments 79 7.11 Summary 80 8 The Statement of Cash Flows 81 8.1 Introduction 81 8.2 Operating Activities 82 8.3 Investing Activities 82 8.4 Financing Activities 82 8.5 The Format of the Statement of Cash Flows 83 8.6 Exemptions from the Statement of Cash Flows 84 8.7 Presentation of Consolidated Entities 84 8.8 Treatment of Foreign Currency Transactions 84 8.9 Summary 84 9 Footnotes 86 9.1 Introduction 87 9.2 Disclosure of Accounting Changes 88 9.3 Disclosure of Accounting Policies 88 9.4 Disclosure of Asset Impairments 88 9.5 Disclosure of Bad Debt Recognition 89 9.6 Disclosure of Barter Revenue 89 9.7 Disclosure of Bill and Hold Transactions 89 9.8 Disclosure of Business Combinations 90 9.9 Disclosure of Callable Obligations 90 9.10 Disclosure of Capital Structure 90 9.11 Disclosure of Cash Deposits in Excess of FDIC Insurance Limits 91 9.12 Disclosure of Cash Restrictions 91 9.13 Disclosure of Change in Reported Method of Investment 91 9.14 Disclosure of Changes in Investment Fair Value after Balance Sheet Date 92
viii 9.15 Disclosure of Collateral 92 9.16 Disclosure of Collective Bargaining Agreements 92 9.17 Disclosure of Commitments 92 9.18 Disclosure of Compensating Balances 93 9.19 Disclosure of Consignment Revenue 93 9.20 Disclosure of Contingent Asset Purchase Obligation 93 9.21 Disclosure of Contingent Liabilities 94 9.22 Disclosure of Continued Existence Doubts 94 9.23 Disclosure of Contract Revenue Recognition 95 9.24 Disclosure of Customers 95 9.25 Disclosure of Derivative Use Objectives 95 9.26 Disclosure of Discontinued Operations 96 9.27 Disclosure of Dividends 97 9.28 Disclosure of Earnings per Share 97 9.29 Disclosure of Employee Stock Ownership Plan 97 9.30 Disclosure of Employment Contract Liabilities 98 9.31 Disclosure of Error Corrections 98 9.32 Disclosure of Gain Contingencies 98 9.33 Disclosure of Gain or Loss on an Asset Sale 99 9.34 Disclosure of Geographic Risk 99 9.35 Disclosure of Goodwill 99 9.36 Disclosure of Income Taxes 100 9.37 Disclosure of Increase in Value of a Written-down Held-to-Maturity Investment 100 9.38 Disclosure of Industry Risk 100 9.39 Disclosure of Installment Sales 101 9.40 Disclosure of Intangibles 101 9.41 Disclosure of Inventory 101 9.42 Disclosure of Investment Restrictions 101 9.43 Disclosure of Investments 102 9.44 Disclosure of Lease Termination Costs 103 9.45 Disclosure of Leases by Lessees 103 9.46 Disclosure of Life Insurance Proceeds 104 9.47 Disclosure of Litigation 104 9.48 Disclosure of Loan Acceleration 105 9.49 Disclosure of Loan Extinguishment 105 9.50 Disclosure of Loan Guarantees 105 9.51 Disclosure of Loan Restructuring 106 9.52 Disclosure of Loans 106
ix 9.53 Disclosure of Nonstandard Reported Method of Investment 106 9.54 Disclosure of Par Value Change 107 9.55 Disclosure of Postemployment Benefits 107 9.56 Disclosure of Prior Period Adjustments 107 9.57 Disclosure of Purchasing Commitments 108 9.58 Disclosure of Reduction in Equity Method Investment 108 9.59 Disclosure of Reduction in the Market Value of Equity Investments 109 9.60 Disclosure of Related-Party Loans 109 9.61 Disclosure of Revenue Recognition Policy 109 9.62 Disclosure of Royalty Payments 110 9.63 Disclosure of the Sale of Held-to-Maturity Investments 110 9.64 Disclosure of Sales Return Allowance 111 9.65 Disclosure of Sales with Significant Rights of Return 111 9.66 Disclosure of Segment Information 111 9.67 Disclosure of Shifts between Securities Accounts 111 9.68 Disclosure of Significant Risks 112 9.69 Disclosure of Stock Compensation 112 9.70 Disclosure of Stock Options 112 9.71 Disclosure of a Stock Repurchase Program 114 9.72 Disclosure of a Stock Sale 114 9.73 Disclosure of Stock Splits 114 9.74 Disclosure of Stock Subscriptions 115 9.75 Disclosure of Subsequent Events 115 9.76 Disclosure of Taxation Disputes 115 9.77 Disclosure of Unused Credit Facilities 116 9.78 Disclosure of Warrants Issued 11 6 9.79 Disclosure of Warranty Expense Allowance 116 9.80 Disclosure of Warranty Revenue Recognition, 117 9.81 Summary 117 10 Internal Management Reports 118 10.1 Introduction 118 10.2 Status Reports 118 10.3 Margin Reports 121 10.4 Cash Reports 125 10.5 Sales and Expense Reports 126 10.6 Payroll Reports 126 10.7 Graphical Report Layouts 129 10.8 Summary 132
x 11 Foreign Currency Translation 133 11.1 Introduction 133 11.2 The Current Rate Translation Method 133 11.3 Example of the Current Rate Method 134 11.4 The Remeasurement Method 135 11.5 Example of the Remeasurement Method, 136 11.6 Decision Tree 137 11.7 Translation of Foreign Currency Transactions 137 11.8 Exchange Rates Used for Calculations 139 11.9 Intercompany Transactions 140 11.10 Summary 140 Part Four Elements of the Balance Sheet and Income Statement 141 12 Cash, Prepaid Expenses, and Investments 143 12.1 Introduction 143 12.2 Cash 143 12.3 Prepaid Expenses 144 12.4 Accounting for Marketable Equity Securities 144 12.5 Transfers between Available-for-Sale and Trading Investments 146 12.6 Accounting for Investments in Debt Securities 147 12.7 Transfers of Debt Securities among Portfolios 148 12.8 Accounting for Gains or Losses on Securities 148 12.9 Recognition of Deferred Tax Effects on Changes in Investment Valuations 149 12.10 The Equity Method of Investment Accounting 150 12.11 Summary 152 13 Inventory 153 13.1 Introduction 153 13.2 Types of Inventory 154 13.3 The Inventory Tracking System 154 13.4 The Physical Inventory Procedure 157 13.5 Inventory Management 159 13.6 Inventory Purchasing 159 13.7 Inventory Receiving 160 13.8 Inventory Storage 160 13.9 Production Issues Impacting Inventory 161 13.10 The Bill of Materials 162
xi 13.11 Product Design 162 13.12 Customer Service 163 13.13 Inventory Disposition 163 13.14 Goods in Transit 163 13.15 Accounting for Inventories 164 13.16 Overhead Costs Allocable to Inventory 166 13.17 Lower of Cost or Market Rule 166 13.18 Specific Identification Inventory Valuation Method 167 13.19 First-ln, First-Out (FIFO) Inventory Valuation Method 168 13.20 Last-in, First-out (LIFO) Inventory Valuation Method 1 70 13.21 Dollar Value LIFO Inventory Valuation Method 1 71 13.22 Link Chain Method 174 13.23 Weighted-Average Inventory Valuation Method 1 75 13.24 Type of Inventory Valuation System to Use 1 76 13.25 Summary 179 14 Accounts Receivable 180 14.1 Introduction 180 14.2 Definition of Accounts Receivable 180 14.3 The Accounts Receivable Transaction Flow 181 14.4 Credit Card Accounts Receivable 181 14.5 Collateral, Assignments, and Factoring 181 14.6 Sales Returns 182 14.7 Early Payment Discounts 183 14.8 Reporting of Long-Term Receivables 183 14.9 Treatment of Bad Debts 184 14.10 Receivables Ownership Decision 185 14.11 Summary 186 15 Fixed Assets 187 15.1 Introduction 187 15.2 The Capitalization Limit 187 15.3 Fixed Asset Purchases 188 15.4 Fixed Asset Improvements 192 15.5 Capitalization of Interest 193 15.6 Fixed Asset Dispositions 193 15.7 Inbound Fixed Asset Donations 195 15.8 Outbound Fixed Asset Donations 195 15.9 Construction in Progress 195 15.10 Accounting for Land 196 15.11 Accounting for Leasehold Improvements 196
xii 15.12 The Depreciation Base 197 15.13 Depreciation Issues 197 15.14 Straight-Line Depreciation 198 15.15 Double Declining Balance Depreciation 198 15.16 Sum of the Years Digits Depreciation 199 15.17 Units of Production Depreciation Method 199 15.18 Asset Impairment 200, 15.19 Intangible Assets 201 15.20 The Asset Acquisition Capitalization or Expense Decision 203 15.21 Summary 203 16 Current Liabilities and Contingencies 204 16.1 Introduction 204 16.2 The Accounts Payable Transaction Flow 204 16.3 Accounting for the Period-End Cutoff 206 16.4 Current Liabilities Presentation 206 16.5 Current Liabilities Advances 206 16.6 Current Liabilities Bonuses 207 16.7 Current Liabilities Commissions 207 16.8 Current Liabilities Compensated Absences 207 16.9 Current Liabilities Debt 207 16.10 Current Liabilities Employee Terminations 208 16.11 Current Liabilities Property Taxes 208 16.12 Current Liabilities Royalties 209 16.13 Current Liabilities Wages 209 16.14 Current Liabilities Warranty Claims 209 16.15 Contingencies 210 16.16 Contingencies Debt Covenant Violation 210 16.17 Contingencies Debt Guarantees 210 16.18 Contingencies Guaranteed Minimum Option Price 210 16.19 Summary 211 17 Debt 212 17.1 Introduction 212 17.2 Overview of Bonds 212 17.3 Debt Classification 213 17.4 Interest Risk Management 214 17.5 Bonds Sold at a Discount or Premium to Their Face Value 223 17.6 Effective Interest Method 225 1 7.7 Debt Issued with No Stated Interest Rate 226
xiii 17.8 Debt Issuance Costs 226 17.9 Notes Issued with Attached Rights 227 17.10 Notes Issued for Property 228 17.11 Extinguishment of Debt 228 17.12 Scheduled Bond Retirement 230 17.13 Convertible Debt - 230 17.14 Convertible Debt Issued in the Money 231 17.15 Convertible Debt Accrued but Unpaid Interest on Converted Debt 232 17.16 Convertible Debt Subsequent Change in Offering to Induce Conversion 232 17.17 Debt Issued with Stock Warrants 232 17.18 Accounting for Interest Risk Management Activities 233 17.19 Decision Points during the Lifetime of a Bond 238 17.20 Summary. 238 18 Equity 239 18.1 Introduction 239 18.2 Legal Capital and Capital Stock 239 18.3 Convertible Preferred Stock 240 18.4 Stock Splits 241 18.5 Stock Subscriptions 242 18.6 Retained Earnings 242 18.7 Stock Warrants ' 243 18.8 Dividends 244 18.9 Treasury Stock 245 18.10 Stock Appreciation Rights 248 18.11 Employee Stock Ownership Plans 248 18.12 Summary 250 19 Stock Options 251 19.1 Introduction 251 19.2 Option Accounting 251 19.3 Compensation Expense Recognition 255 19.4 Options Measurement Using SFAS 123 Requirements 256 19.5 Stock Option Recordkeeping 257 19.6 Summary 258 20 Revenue 259 20.1 Introduction 259 20.2 Revenue Recognition Concepts 259
xiv 20.3 Revenue Recognition Scenarios 260 20.4 Bill and Hold Revenue Transactions 261 20.5 Recording Revenues at Gross or Net 262 20.6 Reducing Revenue by Cash Paid to Customers 263 20.7 Long-Term Construction Contracts 264 20.8 Service Revenues 266 20.9 Recognition of Losses on Service Contracts 267 20.10 Recording Initiation Fees as Service Revenue 269 20.11 Recording Out-of-Pocket Expense Reimbursements 269 20.12 Sales When Collection Is Uncertain 269 20.13 Repossession of Goods under Installment Sales 271 20.14 Revenue Recognition When Right of Return Exists 271 20.15 Revenue Recognition for Accretion and Appreciation 272 20.16 Summary 272 21 Research and Development 273 21.1 Introduction 273 21.2 Definition of Research and Development 273 21.3 Accounting for In-House R&D Costs 274 21.4 Accounting for Acquired R&D Costs 275 21.5 Accounting for R&D Costs Contracted to Another Party 275 21.6 R&D Costs in the Software Industry 275 21.7 Summary 276 22 Leases 277 22.1 Introduction 277 22.2 Accounting for Leases Lessee 277 22.3 Accounting for Leases Lessor, 280 22.4 Accounting for Operating Leases Lessor 280 22.5 Accounting for Sales-Type Leases Lessor 280 22.6 Accounting for Direct Financing Leases Lessor 282 22.7 Lease Terminations 284 22.8 Lease Extensions 284 22.9 Subleases 285 22.10 Sale-Leaseback Transactions 285 22.11 Summary 286 23 Earnings per Share 287 23.1 Introduction 287 23.2 Earnings per Share Presentation Requirements 287 23.3 Earnings per Share for a Simple Capital Structure 288 23.4 Diluted Earnings per Share ' 289
xv 23.5 Treasury Stock Method 290 23.6 If-Converted Method 290 23.7 Earnings per Share Disclosures 291 23.8 Summary 291 24 Segment Reporting v 292 24.1 Introduction ^ 292 24.2 Segment Reporting Requirements 292 24.3 Testing for Reportable Segments 293 24.4 Segment Aggregation 294 24.5 Cost and Asset Allocation Issues 295 24.6 Segment-Related Disclosures 295 24.7 Summary 296 25 Interim Reporting 297 25.1 Introduction 297 25.2 Requirements for Interim Reporting 297 25.3 Interim Reporting Guidelines 297 25.4 Interim-Period Disclosures 300 25.5 Summary 301 26 Accounting Changes and Correction of Errors 302 26.1 Introduction 302 26.2 Definitions 302 26.3 Changes in Accounting Principle 303 26.4 Changes in Accounting Estimate 303 26.5 Changes in Reporting Entity 304 26.6 Correction of Errors 304 26.7 Disclosure of Accounting Changes and Correction of Errors 304 26.8 Summary 305 Part Five Accounting Management 307 27 Best Practices 309 27.1 Introduction 309 27.2 Best Practices 309 27.3 Best Practices Process Flowcharts 329 27.4 Summary 333 28 Budgeting 334 28.1 Introduction 334 28.2 The System of Interlocking Budgets 334 28.3 A Sample Budget 342
xvi 29 30 31 28.4 The Flex Budget 28.5 Capital Budgeting Traditional Method 28.6 The Budgeting Process 28.7 Budgetary Control Systems 28.8 Summary Closing the Books 29.1 Introduction 29.2 The Current State of the Financial Statements 29.3 Interim Reports 29.4 General Improvements for Closing the Books 29.5 Closing Activities Prior to Period-End 29.6 Closing Activities Subsequent to Period-End 29.7 Closing Activities Subsequent to Statement Issuance 29.8 The Closing Checklist 29.9 Results of Closing Improvements 29.10 The Instantaneous Close 29.11 Closing the Books of a Public Company 29.12 Summary Control Systems 30.1 Introduction 30.2 The Need for Control Systems 30.3 Types of Fraud 30.4 Order Entry and Credit Controls 30.5 Inventory Controls 30.6 Accounts Payable Controls 30.7 Billing Controls 30.8 Cash Receipts Controls 30.9 Payroll Controls 30.10 Closing Controls 30.11 Key Controls 30.12 When to Eliminate Controls 30.13 Summary Cost Accounting 31.1 Introduction 31.2 The Purpose of Cost Accounting Information 31.3 Input: Data Collection Systems 31.4 Processing: Data Summarization Systems 31.5 Processing: Job Costing 357 358 364 369 371 372 372 373 375 375 376 378 379 380 381 381 385 390 392 392 392 393 395 398 402 405 405 409 413 417 441 442 443 443 443 444 447 450
xvn 32 33 Part Six 34 35 31.6 Processing: Process Costing 31.7 Processing: Standard Costing 31.8 Processing: Direct Costing 31.9 Processing: Throughput Costing 31.10 Processing: Activity-Based Costing 31.11 Processing: Target Costing 31.12 Processing: By-Product and Joint Product Costing 31.13 Outputs: Cost Variances 31.14 Summary Financial Analysis 32.1 Introduction 32.2 The Cost of Capitah 32.3 Breakeven Analysis 32.4 Eliminating Unprofitable Products 32.5 Risk Analysis 32.6 Business Cycle Forecasting 32.7 Summary Records Management 33.1 Introduction 33.2 RecordKeeping Costs 33.3 Recordkeeping Policies and Procedures 33.4 Required Tax Records 33.5 Summary Financial Management Customer Credit 34.1 Introduction 34.2 Types of Credit 34.3 Selling Terms 34.4 Credit Examination 34.5 Collection Techniques 34.6 Summary Financing 35.1 Introduction 35.2 Management of Financing Issues 35.3 Bank Relations 35.4 Accounts Payable Payment Delay 35.5 Accounts Receivable Collection Acceleration 454 457 460 462 465 467 469 474 477 478 478 478 482 484 487 488 489 490 490 490 491 495 498 499 501 501 501 503 504 507 509 511 511 511 512 513 514
xviii 35.6 35.7 35.8 35.9 Credit Cards Employee Tradeoffs Equity Factoring 514 515 515 516 35.10 Field Warehouse Financing 516 35.11 Floor Planning 517 35.12 Inventory Reduction 517 35.13 Lease 518 35.14 Lease, Synthetic 518 35.15 Line of Credit 519 35.16 Loan, Asset-Based 519 35.17 Loan, Bond 520 35.18 Loan, Bridge 521 35.19 Loan, Economic Development Authority 521 35.20 Loan, Long-Term 521 35.21 Loan, Short-Term 522 35.22 Private Investment in Public Equity 522 35.23 Preferred Stock 523 35.24 Sale and Leaseback 523 35.25 Summary 523 36 Cash Management 524 36.1 Introduction 524 36.2 The Cash Forecasting Model 524 36.3 Measuring Cash Forecast Accuracy 528 36.4 Cash Forecasting Automation 528 36.5 Cash Management Controls 530 36.6 The Benefits of Cash Concentration 533 36.7 Cash Concentration Strategies 534 36.8 Pooling Concepts 535 36.9 Physical Sweeping 536 36.10 Notional Pooling 538 36.11 Investment Criteria 539 36.12 Investment Options 539 36.13 Investment Strategies 542 36.14 Risk Reduction Strategies 544 36.15 Summary 545 37 Foreign Exchange Management 546 37.1 Introduction 546 37.2 Foreign Exchange Quote Terminology 546
xix 37.3 The Nature of Foreign Exchange Risk 547 37.4 Data Collection for Foreign Exchange Risk Management 547 37.5 Foreign Exchange Hedging Strategies 548 37.6 Hedge Accounting, - 557 37.7 Foreign Exchange Hedge Controls 563 37.8 Foreign Exchange Hedge Policies 564 37.9 Recordkeeping for Foreign Exchange Hedging Activities 566 37.10 Summary 566 38 Risk Management 567 38.1 Introduction 567 38.2 Risk Management Policies 567 38.3 Manager of Risk Management 568 38.4 Risk Management Procedures 569 38.5 Types of Insurance Companies 572 38.6 Claims Administration 573 38.7 Insurance Files 574 38.8 Annual Risk Management Report 575 38.9 Summary 576 Part Seven Other Accounting Topics 577 39 Mergers and Acquisitions 579 39.1 Introduction 579 39.2 Evaluating Acquisition Targets 579 39.3 Valuing an Acquisition Target 595 39.4 Types of Acquisitions 608 39.5 The Purchase Method 616 39.6 The Cost Method 620 39.7 The Equity Method 620 39.8 The Consolidation Method 622 39.9 Push-Down Accounting 623 39.10 Leveraged Buyouts 623 39.11 Spin-Off Transactions 624 39.12 Summary 624 40 The Initial Public Offering 625 40.1 Introduction 625 40.2 Reasons to Go Public 625 40.3 Reasons Not to Go Public 626 40.4 The Cost of an IPO 628
xx 40.5 Preparing for the IPO 628 40.6 Finding an Underwriter 630 40.7 Registering for and Completing the IPO 633 40.8 Alternatives for Selling Securities 635 40.9 Listing on an Exchange 637 40.10 Restrictions on Stock in a Publicly Traded Company 644 40.11 Summary 645 41 Going Private 646 41.1 Introduction 646 41.2 The Going-Private Transaction 646 41.3 Rule13E-3 646 41.4 Shareholder Count Manipulation 647 41.5 Filling Out Schedule 13E-3 647 41.6 Form 15 650 41.7 Summary 650 42 Bankruptcy 651 42.1 Introduction 651 42.2 Applicable Bankruptcy Laws 651 42.3 Players in the Bankruptcy Drama 652 42.4 Creditor and Shareholder Payment Priorities 653 42.5 The Bankruptcy Sequence of Events 653 42.6 Tax Liabilities in a Bankruptcy 659 42.7 Special Bankruptcy Rules 660 42.8 Alternatives to Bankruptcy 660 42.9 Summary 661 43 Taxation 662 43.1 Introduction 662 43.2 The Strategy of Tax Planning 663 43.3 Accumulated Earnings Tax 664 43.4 Alternative Minimum Tax 664 43.5 Barter 665 43.6 Bonuses and Awards 665 43.7 Cash Method of Accounting 666 43.8 Change of Accounting Method 667 43.9 Change of Tax Year 667 43.10 Club Dues 668
xxi 43.11 Consignment Revenue 669 43.12 Deferred Compensation 669 43.13 Depreciation 671 43.14 Distributions 673 43.15 Estimated Taxes 674 43.16 Financial Reporting of Tax Liabilities 674 43.17 Foreign Earned Income 676 43.18 Gifts (Business) 676 43.19 Goodwill and Other Intangibles 677 43.20 Hybrid Methods of Accounting 677 43.21 Imputed Interest Expense 678 43.22 Installment Sales 678 43.23 Inventory Valuation 679 43.24 Life Insurance 681 43.25 Like-Kind Exchanges 682 43.26 Losses 682 43.27 Nexus 683 43.28 Organizational Expenses 684 43.29 Partnership Taxation 684 43.30 Passive Activity Losses 686 43.31 Property Taxes 687 43.32 Retirement Plans 687 43.33 S Corporations,. 692 43.34 Sales and Use Taxes 693 43.35 Sales Returns/Bad Debts 694 43.36 Social Security Tax 694 43.37 Stock Appreciation Rights 695 43.38 Stock Options 695 43.39 Tax Rate, Corporate 697 43.40 Tax Year 697 43.41 Transfer Pricing 700 43.42 Unemployment Taxes 702 43.43 Warranty Expenses 703 43.44 Summary 703 The Chart of Accounts 704 A.1 Three-Digit Account Code Structure 704 A.2 Five-Digit Account Code Structure 706 A.3 Seven-Digit Account Code Structure 707
xxii B Journal Entries B.1 Acquisitions B.2 Bill and Hold Transactions- B.3 Bank Reconciliation B.4 Current Liabilities B.5 Debt, Convertible B.6 Debt Extinguishment B.7 Debt Issued with Stock Warrants B.8 Debt Security Transfers Among Portfolios B.9 Dividends B.10 Effective Interest Method B.11 Employee Stock Ownership Plan (ESOP) B.12 Equity Method of Accounting for Investments B.13 Equity Security Transfers between Available-for-Sale and Trading Portfolios B.14 Fixed Assets B.15 Foreign Currency B.16 Intangible Assets B.17 Inventory Adjustments B.18 Inventory in Transit B.19 Inventory Valuation B.20 Investments in Debt Securities B.21 Leases Lessee Accounting B.22 Leases Lessor Accounting B.23 Long-Term Construction Contracts B.24 Marketable Equity Securities B.25 Notes and Bonds B.26 Options B.27 Pensions B.28 Receivables B.29 Revenue Recognition When Right of Return Exists B.30 Revenue, Installment B.31 Revenue, Service B.32 Sale-Leaseback Transactions B.33 Stock B.34 Stock Appreciation Rights (SAR) B.35 Stock Subscriptions B.36 Taxes B.37 Treasury Stock B.38 Warrants 710 712 714 714 714 716 718 719 720 721 723 723 724 725 726 728 729 730 731 732 732 734 734 736 737 738 740 741 742 744 744 745 746 746 748 749 749 750 752
D E Interest Tables C.1 C.2 C.3 C.4 C.5 Ratios Simple Interest Table Compound Interest (Future Amount of 1 at Compound Interest Due in N Periods) Compound Interest (Present Value of 1 Due in N Periods) Present Value of Ordinary Annuity of 1 per Period Future Amount of Ordinary Annuity of 1 per Period Due Diligence Checklist E. 1 E. 2 E. 3 E. 4 E..5 E. 6 E. 7 E.,8 E..9 E,.10 E..11 E.12 E.13 E.14 E.15 E.16 E.17 Industry Overview Corporate Overview Organization and General Corporate Issues Capitalization and Significant Subsidiaries Cultural Issues General Cultural Issues Management Employees Revenue Assets Liabilities Financial Statements Internet Software Development Product Development Marketing Sales Other _ xxiii 753 753 753 754 759 759 760 767 767 767 768 769 770 770 770 771 771 771 772 772 772 773 773 773 774 Index 775