Advanced Accounting, 3e

by Halsey, Hopkins

ISBN: 978-1-61853-190-2 | Copyright 2017

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Welcome to the Third edition of Advanced Accounting. Our goal in writing this book was to satisfy the needs of today’s accounting students by providing the most contemporary, relevant, engaging, and student-oriented textbook available. We think that we have accomplished that objective by maintaining a conceptually rigorous discussion of the material in an intuitive and student-friendly style. Prior to writing this book, we both taught advanced financial accounting for many years, and we both felt that the structure and format of available textbooks contributed to the difficulties that our students have had in learning the material. several examples come to mind:

  1. Too many issues discussed simultaneously. Taken individually, consolidation issues can be difficult for students to grasp. The learning process is made all the more difficult when a particular topic (intercompany sales of assets, for example) is presented using alternative methods of pre-consolidation equity investment bookkeeping (e.g., equity, partial equity, and cost). Our experience—and the experience of many of our focus group participants—indicates that students are generally confused by the mixing of bookkeeping approaches in the main-chapter discussion of most textbooks. To address this issue, we present only two pre-consolidation bookkeeping approaches: equity method and cost method. In each consolidations-related chapter, we begin the consolidations-related discussion with the equity method because it provides the clearest and easiest-to-understand linkage between the parent’s pre-consolidation financial statements and the consolidated financial statements. We then use a page-edge border to very clearly mark the pages in which we discuss cost-method consolidations procedures. By clearly distinguishing between the two approaches, we make it much easier for instructors and students to know exactly which approach we are covering. In addition, this makes tailoring the material much easier. For example, if an instructor wishes to only cover the equity method of pre-consolidation bookkeeping, the easy-to-follow chapter set-up makes this possible.
  2. Mechanics versus intuition. After completing our courses and entering the working world, our former students have encountered many different consolidation approaches used by their employers and clients. Given the diversity of processes and procedures in practice, we adjusted our own teaching styles to emphasize an intuitive understanding of the concepts over the rote memorization of static journal-entry approaches. unfortunately, the available textbooks were mostly written with a mechanical perspective. in writing this text, we incorporated our teaching-based observations. In each chapter, we initially focus on conceptual explanations and discuss mechanics only after we convey an intuitive perspective on each topic. In addition, to help students immediately identify each of the various consolidation entries, we consistently color-code the C-E-A-D-I consolidation entries throughout the chapter discussion, the consolidation-entry listings, and in the consolidation worksheets.
  3. Connection between fund-base statements and government-wide statements. Most texts combine, in a single chapter, fund-based accounting and government-wide financial statements, and do not demonstrate how government-wide statements are generated from fund-based accounting. We address this issue by covering these topics in two separate chapters, and we focus on the adjustments necessary to create government-wide financial statements described in the reconciliations from fund statements to government-wide statements. We present this material within the context of an actual new england town. The town is large enough to demonstrate the accounting concepts, yet small enough to avoid obscuring the learning process with unnecessary complexity.
  4. Not written for students. Many texts are written using overly technical language. Our text, while rigorous, is written in a student-friendly, conversational style that makes the material much easier for students to comprehend and apply.

This book is the product of extensive market research including focus groups, market surveys, class tests, manuscript reviews, and interviews with faculty from across the country. We are grateful for the feedback from faculty who reviewed, and students who studied, early drafts of our text.

For overviews of the textbook, table of contents, features and end of chapter material, please watch the videos below.

The following clip provides an overview of the textbook prepared by the author and the series of videos created about the textbook.



The key pedagogical features utilized throughout the book are reviewed in the following video.


A quick review of the TOC and approach of the textbook is highlighted in the following video.



The End of Chapter material and Assignments are reviewed in the following video.


Target Audience

Advanced Accounting is intended for use in undergraduate and graduate accounting programs that include a course in advanced accounting as part of the curriculum. This book is especially written for advanced accounting courses in which an intuitive understanding of the material, in addition to accounting mechanics, is emphasized. Feedback from students who used our text, and subsequently completed the uniform CPA exam, has been extremely positive. They report that they felt well-prepared for the portions of the exam relating to advanced financial accounting topics.

The examples in this textbook reinforced well the theoretical concepts discussed in the chapters. The understanding I gained after using this textbook helped prepare me well for some of the toughest material in the CPA Exam.

Jon Slebodnick—Audit Associate, Deloitte

Emphasis on Intuition

We introduce topics by discussing the intuition behind accounting standards before discussing the mechanics of the accounting process. In addition, we intentionally deemphasize memorization of journal entry mechanics. We believe that this approach allows students to better understand the material and to develop relevant transferrable knowledge.

The advanced accounting textbook provided a clear and concise presentation of not only how certain accounting concepts are applied, but also why they are important and pertain to us directly.

Dan Brown—Audit Associate, PriceWaterhouseCoopers

Easy-to-Remember Mnemonic

Although our text emphasizes the intuition underlying the consolidation process, we also introduce the C-E-A-D-I (pronounced “seedy”) consolidation journal entry sequence to assist students in learning the mechanics of consolidation. The sequence systematically eliminates the book value of subsidiary equity (C, E), establishes the fair value adjustments for subsidiary net assets (A, D), and eliminates intercompany transactions and balances (I). Over the years, we’ve observed that this easy-to-remember mnemonic improves students’ understanding of consolidations and allows for easier recall of each step of the consolidation adjustment process.

FASB Codification Throughout

We wrote our text after implementation of the FASB’s Codification and we integrated the Codification throughout, including end-of-chapter problem assignments. Unlike many advanced accounting textbooks, we cite passages of the Codification frequently so that students can become familiar with the actual language of the standards, not just the authors' summary of the standards. This also allows students to easily find the relevant passages on their own. In addition, to familiarize students with the Codification search engine and to better develop their research skills, we also include numerous FASB Codification-related research assignments in our end-of-chapter problem sets.

CPA Exam Questions

The primary purpose of the Advanced Accounting course at most universities it to prepare accounting majors for the CPA exam. To provide students with relevant practice, we have included a number of multiple choice questions in each chapter that have been adapted from past CPA exams. We are grateful to the AiCPA for granting us permission to use former CPA exam questions for this purpose.

IFRS Coverage

Accounting students must become familiar with IFRS. Fortunately, the current accounting standards relating to the main topic of the book business combinations and consolidation were written jointly by the FASB and the IASB, and are 99% equivalent. In addition, other standards (e.g., segment reporting) are similar, but have key differences. In the text, we discuss the IFRS equivalent of accounting standards and highlight the differences between the two sets of accounting standards when they occur. These discussions are identified with the IFRS icon.

Relevance and Engagement

Advanced accounting is a challenging topic. We have adopted a number of techniques in our book to make the material relevant and engaging to students. These techniques include:

Focus Companies for Each Chapter

Each chapter incorporates a “focus company” for special emphasis and demonstration. We chose companies that illustrate the topic of the chapter so that students can learn the material within context. In addition, our chapters on governmental accounting are written around a small new england town that is large enough to effectively communicate the concepts of governmental accounting, yet small enough not to obscure those concepts in unnecessary complexity. The following are the focus companies we use to introduce our topics:

Consolidation chapters
AT&T, Coca-Cola, Cummins, Krispy Kreme, Alcoa, Walt Disney
Foreign currency, derivatives and consolidation of foreign subsidiaries
Coca-Cola
Government and NFP
Town of Acton, MA and the American Red Cross
Segments
3M Company
Partnerships
Boardwalk Pipeline Partners, LLP

Real company Data in Text and Assignments

We believe that an important part of the learning process involves the application of concepts to realworld data. We include references to actual footnotes in the body of our text and also include a number of end-of-chapter problems that are written around actual footnote disclosures. These problems allow students to think about accounting concepts more broadly (i.e., less mechanically) and from the perspective of the users of financial statements.

This book was very engaging and simple to follow, which made for a more enjoyable class! The examples and exhibits do a great job supporting the text to better retain the information.

Moises Numa— Audit Associate, Deloitte

Class-Tested Content

The following is a typical example:

Practice Insight Boxes

We provide a number of Practice insight Boxes resulting from interviews with practicing accountants and financial managers. These boxes provide students with insight into issues that accountants face in the real world, and with a glimpse into the types of decisions that practicing accountants must make. The following is a typical example:

Mid-Chapter and Chapter-End Reviews

Advanced accounting concepts can be challenging. To reinforce concepts presented in each chapter and to ensure student comprehension, we include topic reviews that require students to recall and apply the financial accounting techniques and concepts described in each chapter.

Readability

Our text is written with rigorous content, but in a student-friendly conversational style that facilitates the learning process. Previous textbooks by the authors have met with extremely positive reviews for writing quality, and students who have used our textbook comment on the relative ease with which they are able to assimilate the material.



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Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. iv)
Table of Contents (pg. xii)
Chapter 01: Accounting for Intercorporate Investments (pg. 2)
AT&T (pg. 3)
Review of Asset Acquisition Accounting (pg. 5)
Types of Business Combinations (pg. 6)
Topic Review 1 (pg. 8)
Accounting for an Investment Using the Equity Method (Basics) (pg. 9)
Accounting for the Purchase of an Equity Investment (pg. 9)
Accounting for the Equity Investment Subsequent to Its Purchase (pg. 10)
Topic Review 2 (pg. 12)
Accounting for an Investment Using the Equity Method (Advanced Topics) (pg. 12)
When Should the Equity Method Be Used? (pg. 12)
Topic Review 3 (pg. 14)
Accounting for Equity Investments When the Purchase Price Exceeds Book Value (pg. 14)
Topic Review 4 (pg. 17)
Accounting for the Effects on Equity Investments of Intercompany Sales of Inventory (pg. 17)
Topic Review 5 (pg. 19)
Equity Method Accounting When Less Than 100% of the Investee Is Owned (pg. 19)
Topic Review 6 (pg. 22)
Discontinuance of the Equity Method (pg. 22)
Accounting for a Change to and from the Equity Method (pg. 23)
Topic Review 7 (pg. 25)
Required Disclosures for Equity Method Investments (pg. 26)
Criticism of the Equity Method (pg. 26)
Chapter Summary (pg. 27)
Comprehensive Review (pg. 29)
Questions (pg. 29)
Multiple Choice (pg. 31)
Exercises (pg. 34)
Problems (pg. 40)
Topic Review (pg. 43)
Comprehensive Review Solution (pg. 45)
Chapter 02: Introduction to Business Combinations and the Consolidation Process (pg. 46)
Coca-Cola (pg. 47)
When Does “Control” Exist? (pg. 49)
Topic Review 1 (pg. 51)
Consolidation on the Date of Acquisition (pg. 51)
The Intuition Underlying the Consolidation Process (pg. 52)
Acquisition-Date Consolidation (Purchase Price Equals Book Value) (pg. 55)
Acquisition-Date Consolidation (Purchase Price Greater than Book Value) (pg. 57)
Topic Review 2 (pg. 63)
Recognizing and Measuring the Identifiable Assets Acquired and the Liabilities Assumed (pg. 64)
Recognition Principle (pg. 64)
Measurement Principle and Fair Value Estimation (pg. 65)
Topic Review 3 (pg. 72)
Topic Review 4 (pg. 73)
Disclosure Example: Tyson Foods’ Acquisition of Hillshire Brands (pg. 75)
Chapter Summary (pg. 78)
Comprehensive Review (pg. 79)
Appendix 2A: Measuring Assets Acquired and Liabilities Assumed (Advanced) (pg. 79)
Topic Review 5 (pg. 81)
Appendix 2B: Deferred Taxes and Business Combinations (pg. 84)
Questions (pg. 88)
Multiple Choice (pg. 90)
Exercises (pg. 94)
Problems (pg. 98)
Topic Review (pg. 105)
Comprehensive Review Solution (pg. 106)
Chapter 03: Consolidated Financial Statements Subsequent to the Date of Acquisition (pg. 108)
Cummins Inc. (pg. 109)
Post-Acquisition Consolidation when the Parent uses the Equity Method of Investment Bookkeeping (pg. 111)
Review of the Equity Method of Pre-Consolidation Bookkeeping (pg. 112)
Topic Review 1 (pg. 114)
The Consolidation Process Subsequent to the Date of Acquisition—Equity Method (pg. 115)
Example of Consolidation Subsequent to the Date of Acquisition—Equity Method (pg. 116)
Consolidated Financial Statements (pg. 122)
Topic Review 2 (pg. 125)
Post-Acquisition Consolidation when the Parent uses the Cost Method of Investment Bookkeeping (pg. 125)
Cost Method of Pre-Consolidation Bookkeeping (pg. 126)
The Consolidation Process Subsequent to the Date of Acquisition—Cost Method (pg. 128)
Example of Consolidation Subsequent to the Date of Acquisition—Cost Method (pg. 130)
Topic Review 3 (pg. 132)
Accounting for Goodwill (pg. 133)
Recognition of Goodwill (pg. 133)
Amortization of Intangible Assets and Goodwill Impairment Evaluation (pg. 134)
Topic Review 4 (pg. 141)
Accounting for a Bargain Acquisition (pg. 141)
Chapter Summary (pg. 142)
Comprehensive Review—Equity Method (pg. 143)
Comprehensive Review—Cost Method (pg. 144)
Appendix 3A: Complete Listing of Required Disclosures (pg. 145)
Appendix 3B: Common Control Business Combinations and the Pooling-of-Interests Method (pg. 146)
Questions (pg. 150)
Multiple Choice (pg. 152)
Exercises (pg. 156)
Problems (pg. 163)
Topic Review (pg. 176)
Comprehensive Review—Equity Method Solution (pg. 179)
Comprehensive Review—Cost Method Solution (pg. 180)
Chapter 04: Consolidated Financial Statements and Intercompany Transactions (pg. 182)
Krispy Kreme Doughnuts, Inc. (pg. 183)
Accounting for Intercompany Sales of Inventory—Equity Method (pg. 186)
Intuition Behind the Elimination of Intercompany Sales and Deferral of Profit—Equity Method (pg. 187)
Intercompany Inventory Transactions and Consolidating Entries—Equity Method (pg. 189)
Upstream versus Downstream Transactions for Wholly Owned (i.e., 100%) Subsidiaries—Equity Method (pg. 193)
How Much Gross Profit Do We Defer? (pg. 194)
Continuous Sales of Inventories (pg. 194)
Example of the Continuous Intercompany Sale and Resale of Inventories—Equity Method (pg. 195)
Topic Review 1 (pg. 197)
Accounting for Intercompany Sales of Inventory—Cost Method (pg. 198)
Example of the Continuous Intercompany Sale and Resale of Inventories—Cost Method (pg. 200)
Topic Review 2 (pg. 202)
Accounting for the Intercompany Sales of Noncurrent Assets Between the Investor and the Investee(s)—Equity Method (pg. 203)
Accounting for the Intercompany Sale of Non-Depreciable Assets—Equity Method (pg. 203)
Accounting for the Intercompany Sale of Depreciable Assets—Equity Method (pg. 207)
Topic Review 3 (pg. 217)
Accounting for the Intercompany Sales of Noncurrent Assets Between the Investor and the Investee(S)—Cost Method (pg. 218)
Accounting for the Intercompany Sale of Non-Depreciable Assets—Cost Method (pg. 218)
Accounting for the Intercompany Sale of Depreciable Assets—Cost Method (pg. 221)
Topic Review 4 (pg. 226)
Chapter Summary (pg. 227)
Comprehensive Review—Equity Method (pg. 228)
Comprehensive Review—Cost Method (pg. 230)
Appendix 4A: Consolidation When the Parent Uses the Partial Equity Method to Account for Its Equity Investment (pg. 231)
Questions (pg. 233)
Multiple Choice (pg. 234)
Exercises (pg. 238)
Problems (pg. 243)
Topic Review (pg. 262)
Comprehensive Review—Equity Method Solution (pg. 266)
Comprehensive Review—Cost Method Solution (pg. 271)
Chapter 05: Consolidated Financial Statements with Less than 100% Ownership (pg. 276)
Alcoa, Inc. (pg. 277)
Basics of Consolidating Noncontrolling Interests (pg. 279)
Consolidation on Date of Acquisition—Parent Owns 80% of the Subsidiary (pg. 280)
Post-Acquisition Consolidation And Noncontrolling Interests—Equity Method (pg. 283)
Allocation of Profit to Controlling and Noncontrolling Interests and Consolidation Subsequent to Acquisition—Parent Owns 80% of the Subsidiary—Equity Method (pg. 284)
Topic Review 1 (pg. 289)
Intercompany Profit Elimination in Consolidated Financial Statements in the Presence of Noncontrolling Interests—Equity Method (pg. 289)
TOPIC REVIEW 2 (pg. 297)
Intercompany Profit Elimination for Upstream Depreciable Asset Sales—Equity Method (pg. 298)
Comparison of Upstream to Downstream Transfers of Depreciable Assets (pg. 303)
Topic Review 3 (pg. 307)
Post-Acquisition Consolidation and Noncontrolling Interests—Cost Method (pg. 308)
Suggested integrated Approach for Mastering Complex Consolidations (pg. 313)
Step 1: Disaggregate and Document the Activity for the 100% AAP, the Controlling Interest AAP and the Noncontrolling Interest AAP (pg. 314)
Step 2: Calculate and Organize the Profits and Losses on Intercompany Transactions and Balances (pg. 318)
Step 3: Compute the Pre-Consolidation Equity Investment Account Beginning and Ending Balances Starting with the Stockholders’ Equity of the Subsidiary (pg. 320)
Step 4: Reconstruct the Activity in the Parent’s Pre-Consolidation Equity Investment T-Account for the Year of Consolidation (pg. 321)
Step 5: Independently Compute the Beginning and Ending Balances of Owners’ Equity Attributable to the Noncontrolling Interest Starting with the Owners’ Equity of the Subsidiary (pg. 322)
Step 6: Independently Calculate Consolidated Net Income, Controlling Interest Net Income and Noncontrolling Interest Net Income Starting with the Pre-Investment-Accounting Incomes of the Parent and Subsidiary (pg. 324)
Step 7: Complete the Consolidating Entries According to the C-E-A-D-I Sequence and Complete the Consolidation Worksheet (pg. 326)
Chapter Summary (pg. 328)
Comprehensive Review—Equity Method (pg. 329)
Comprehensive Review—Cost Method (pg. 330)
Appendix 5A: Business Combinations and Alternative Measurements of Noncontrolling Interest (pg. 332)
Measurement of Noncontrolling Interest in the United States Prior to SFAS 141(R) and ASC 805 (pg. 332)
Appendix 5B: Consolidated Earnings Per Share (EPS) (pg. 336)
Appendix 5C: Accounting for Changes in Ownership (pg. 337)
Accounting for an Acquisition Achieved in Stages (Step Acquisitions) (pg. 337)
Reductions of the Investor’s Ownership Interest in the Investee (pg. 340)
Topic Review 4 (pg. 342)
Required Disclosures (pg. 343)
Questions (pg. 343)
Multiple Choice (pg. 344)
Exercises (pg. 348)
Problems (pg. 354)
Topic Review (pg. 372)
Comprehensive Review Solution—Equity Method (pg. 375)
Comprehensive Review Solution—Cost Method (pg. 382)
Chapter 06: Consolidation of Variable Interest Entities and Other Intercompany Investments (pg. 390)
The Walt Disney Company (pg. 391)
Parent Investment in Variable Interest Entities (VIEs) (pg. 393)
Special Purpose Entities (SPEs) (pg. 393)
Comprehensive Consolidation Model in FASB ASC 810, Including Consolidation of VIEs (pg. 396)
Topic Review 1 (pg. 400)
Topic Review 2 (pg. 401)
Topic Review 3 (pg. 402)
Topic Review 4 (pg. 403)
Intercompany Investment in Affiliates’ Debt (pg. 410)
Direct Lending to an Affiliate (pg. 410)
Acquisition from Unaffiliated Entity of Investment in Affiliated Company’s Debt—Equity Method (pg. 412)
Topic Review 5 (pg. 417)
Acquisition from Unaffiliated Entity of Investment in Affiliated Company’s Debt—Cost Method (pg. 418)
Topic Review 6 (pg. 419)
Parent Investment in a Subsidiary with Preferred Stock Outstanding (pg. 420)
Effects of Subsidiary Preferred Stock on [C] and [E] Consolidation Entries (pg. 420)
Chapter Summary (pg. 422)
Comprehensive Review (pg. 423)
Questions (pg. 425)
Multiple Choice (pg. 426)
Exercises (pg. 429)
Problems (pg. 435)
Topic Review (pg. 442)
Comprehensive Review Solution (pg. 447)
Chapter 07: Accounting for Foreign Currency Transactions and Derivatives (pg. 456)
Coca-Cola (pg. 457)
Effect of Exchange Rates on the Income Statement and the Balance Sheet (pg. 459)
Accounting for Foreign Currency Transactions Gains and Losses (pg. 459)
Accounting for Foreign-Currency-Denominated Accounts Payable (pg. 460)
Accounting for Foreign-Currency-Denominated Accounts Receivable (pg. 462)
Foreign Currency Transaction Gains and Losses—Summary (pg. 462)
Topic Review (pg. 463)
Borrowing in a Foreign Currency (pg. 463)
Derivative Financial Instruments (pg. 465)
Types of Risks that Can Be Managed by Derivatives (pg. 465)
Hedging Instruments (pg. 465)
Accounting for Derivatives (pg. 467)
Hedge Accounting (pg. 467)
Fair Value Hedge (pg. 470)
Cash Flow Hedge (pg. 472)
Foreign Currency Hedge: Use of a Forward Contract to Hedge a Firm Commitment to Pay Foreign Currency18 (pg. 476)
Interest Rate Swap Example: Interest Rate Swap as a Hedge of a Fixed-Rate Instrument—Fair Value Hedge22 (pg. 478)
Fair Value Hedge of a Firm Foreign-Currency-Denominated Purchase Commitment with a Forward Contract (pg. 479)
Assumptions (pg. 479)
Cash Flow Hedge of a Foreign-Currency-Denominated Forecasted Sale with an Option Contract (pg. 480)
Chapter Summary (pg. 482)
Comprehensive Review (pg. 485)
Appendix 7A: Required Disclosures Relating to Derivatives (pg. 485)
Appendix 7B: Derivative Financial Instruments (pg. 486)
Hedging Instruments (pg. 486)
Fair Value Hedge Example: Use of Futures Contracts to HedgeZinc Inventory (pg. 488)
Cash Flow Example: Use of Options to Hedge an AnticipatedPurchase of Inventory (pg. 489)
Accounting for a Hedge of a Firm Commitment to PurchaseNickel with a Forward Contract (pg. 491)
Hedge of an Available-for-Sale Security with a Put Option (pg. 492)
Questions (pg. 493)
Multiple Choice (pg. 494)
Exercises (pg. 496)
Problems (pg. 500)
Topic Review (pg. 507)
Comprehensive Review Solution (pg. 508)
Chapter 08: Consolidation of Foreign Subsidiaries (pg. 510)
Coca-Cola (pg. 511)
Functional Currency (pg. 513)
The Translation Process (pg. 514)
Translation Example—Year of Acquisition (pg. 517)
Translation Example—Second Year After Acquisition (pg. 519)
Required Disclosures Relating to the Cumulative Translation Adjustment (pg. 523)
Topic Review 1 (pg. 524)
The Remeasurement of Foreign-Currency-Denominated Financial Statements (pg. 525)
Remeasurement Example (pg. 526)
Topic Review 2 (pg. 531)
Consolidation of Foreign Subsidiaries (pg. 532)
Example of Consolidation Subsequent to the Date of Acquisition—Equity Method (pg. 532)
Disposition of the Cumulative Translation Adjustment Upon Sale of the Subsidiary (pg. 535)
Example of Consolidation Subsequent to the Date of Acquisition—Cost Method (pg. 536)
Chapter Summary (pg. 538)
Comprehensive review (pg. 539)
Appendix 8A: Direct Computation of Translation Adjustment and Remeasurement Gain (Loss) (pg. 541)
Direct Computation of the Translation Adjustment (pg. 541)
Direct Computation of the Remeasurement Gain or Loss (pg. 542)
Appendix 8B: Hedging the Net Investment in a Foreign Subsidiary (pg. 543)
Example #1: Use of a Forward-Exchange Contract to Hedge aNet Investment in a Foreign Subsidiary (pg. 543)
Example #2: Use of a Non-Derivative to Hedge a Net Investmentin a Foreign Subsidiary (pg. 544)
Questions (pg. 545)
Multiple Choice (pg. 546)
Exercises (pg. 548)
Problems (pg. 558)
Topic Review (pg. 567)
Comprehensive Review Solution (pg. 569)
Chapter 09: Government Accounting: Fund-Based Financial Statements (pg. 570)
The Town of Acton, Massachusetts (pg. 571)
Appropriations and Budgets (pg. 575)
Appropriations and Estimated Revenues (pg. 575)
Fund Accounting (pg. 577)
Types of Funds (pg. 577)
Measurement Focus and Basis of Accounting for Governmental Funds (pg. 579)
Summary of Fund Types, Accounting Approaches, and Required Financial Statements (pg. 581)
Fund Accounting Journal Entries (pg. 581)
Topic Review 1 (pg. 590)
Fund Financial Statements (pg. 591)
Financial Statements for Governmental Funds (pg. 591)
Closing Entries (pg. 595)
Topic Review 2 (pg. 596)
Financial Statements for Proprietary Funds (pg. 596)
Financial Statements for Fiduciary Funds (pg. 599)
Chapter Summary (pg. 604)
Comprehensive Review (pg. 605)
Appendix 9A: Specialized Governmental Funds (pg. 606)
Special Revenue Funds (pg. 606)
Capital Projects Funds (pg. 607)
Debt Service Funds (pg. 608)
Permanent Funds (pg. 609)
Questions (pg. 610)
Multiple Choice (pg. 610)
Exercises (pg. 614)
Problems (pg. 615)
Topic Review (pg. 619)
Comprehensive Review Solution (pg. 622)
Chapter 10: Government Accounting: Government-Wide Financial Statements (pg. 626)
The Town of Acton, Massachusetts—continued (pg. 627)
Comprehensive Annual Financial Report (CAFR) (pg. 629)
MD&A and Auditor’s Report (pg. 630)
Government-Wide Financial Statements (pg. 633)
Primary Government (pg. 634)
Measurement Focus and Basis of Accounting (pg. 636)
Statement of Net Position (pg. 637)
Statement of Activities (pg. 643)
Topic Review (pg. 645)
Chapter Summary (pg. 648)
Comprehensive Review (pg. 650)
Questions (pg. 651)
Multiple Choice (pg. 652)
Exercises (pg. 654)
Problems (pg. 655)
Topic review (pg. 663)
Comprehensive Review Solution (pg. 664)
Chapter 11: Accounting for Not-for-Profit Organizations (pg. 666)
The American Red Cross (pg. 667)
Statement of Financial Position (pg. 669)
Statement of Financial Position Example (pg. 669)
Topic Review 1 (pg. 671)
Statement of Activities (pg. 671)
Format of the Statement of Activities (pg. 671)
Accounting for Contributions (pg. 672)
Statement of Activities Example (pg. 674)
Topic Review 2 (pg. 676)
Statement of Cash Flows (pg. 676)
Statement of Functional Expenses (pg. 678)
Chapter Summary (pg. 679)
Comprehensive Review (pg. 681)
Questions (pg. 681)
Multiple Choice (pg. 682)
Exercises (pg. 684)
Problems (pg. 686)
Topic Review (pg. 688)
Comprehensive Review Solution (pg. 689)
Chapter 12: Segment Disclosures and Interim Financial Reporting (pg. 690)
3M Company (pg. 691)
Reportable Operating Segments (pg. 693)
Reason for Operating Segment Disclosures (pg. 693)
Management Approach (pg. 694)
Definition of an Operating Segment (pg. 694)
Required Disclosures for an Operating Segment (pg. 696)
Example—3M’s Segment Disclosures (pg. 697)
Topic Review (pg. 701)
Interim Financial Reporting (pg. 701)
Inventories (pg. 701)
Costs Benefitting More than One Period (pg. 703)
Year-End Adjustments (pg. 704)
Seasonal Variation (pg. 705)
Income Tax Expense (pg. 705)
Changes to Accounting Principles and Estimates (pg. 706)
Interim Financial Statements Disclosures (pg. 706)
Chapter Summary (pg. 708)
Comprehensive Review (pg. 710)
Questions (pg. 710)
Multiple Choice (pg. 711)
Exercises (pg. 712)
Problems (pg. 713)
Topic Review (pg. 716)
Comprehensive Review Solution (pg. 717)
Chapter 13: Accounting for Partnerships (pg. 718)
Boardwalk Pipeline Partners, LP (pg. 719)
The Partnership Form of Organization and its Governance (pg. 721)
Accounting for the Formation of the Partnership (pg. 722)
Accounting for Changes in Partnership Ownership (Realignment) (pg. 725)
Revaluation of Net Assets Prior to Partnership Realignment (pg. 726)
Admission of New Partner by Purchasing the Partnership Interest from One or Both Partners (pg. 728)
Realignment via Contribution of Cash or Other Net Assets to the Partnership—Base Case (pg. 729)
Realignment via Contribution of Cash or Other Net Assets to the Partnership—Bonus and Goodwill Methods (pg. 730)
Topic Review (pg. 732)
Allocation of Profit (Loss), Drawing Accounts and the Capital Account (pg. 732)
Reconciliation of the Capital Account (pg. 733)
Allocation of Partnership Profit (Loss) (pg. 733)
Statement of Capital Account Balances (pg. 735)
Partnership Dissolution (pg. 737)
Accounting for the Liquidation of a Partnership (pg. 737)
Chapter Summary (pg. 745)
Comprehensive Review (pg. 747)
Questions (pg. 748)
Multiple Choice (pg. 748)
Exercises (pg. 751)
Problems (pg. 752)
Topic Review (pg. 754)
Comprehensive Review Solution (pg. 754)
Index (pg. 757)
Robert F. Halsey

Robert F. Halsey

Robert F. Halsey is Professor of Accounting and Associate Dean of the Undergraduate School at Babson College. He received his MBA and PhD from the University of Wisconsin.

Prior to obtaining his PhD he worked as the chief financial officer (CFO) of a privately held retailing and manufacturing company and as the vice president and manager of the commercial lending division of a large bank.

Professor Halsey teaches courses in financial and managerial accounting at both the graduate and undergraduate levels, including a popular course in financial statement analysis for second year MBA students. He has also taught numerous executive education courses for large multinational companies through Babson’s school of Executive Education as well as for a number of stock brokerage firms in the Boston area. He is regarded as an innovative teacher and has been recognized for outstanding teaching at both the University of Wisconsin and Babson College.

Professor Halsey co-authors Advanced Accounting published by Cambridge Business Publishers. Professor Halsey’s research interests are in the area of financial reporting, including firm valuation, financial statement analysis, and disclosure issues. He has publications in Advances in Quantitative Analysis of Finance and Accounting, The Journal of the American Taxation Association, Issues in Accounting Education, The Portable MBA in Finance and Accounting, the CPA Journal, AICPA Professor/Practitioner Case Development Program, and in other accounting and analysis journals.

Professor Halsey is an active member of the American Accounting Association and other accounting, analysis, and business organizations. He is widely recognized as an expert in the areas of financial reporting, financial analysis, and business valuation.


Patrick E. Hopkins

Patrick E. Hopkins

Patrick E. Hopkins, is a professor and Deloitte Foundation Accounting Faculty Fellow at Indiana University’s Kelley School of Business. Professor Hopkins received his B.S. and M.Acc. from the University of Florida and his Ph.D. from the University of Texas at Austin.

Prior to entering the accounting doctoral program, Professor Hopkins served as a senior consultant with the Emerging Business Services practice of Deloitte, Haskins and Sells in Miami, Florida. Professor Hopkins has been at IU since 1995, where he teaches undergraduate and graduate courses on financial reporting for mergers, acquisitions and changes in corporate structure. He also served as a Visiting Professor at Stanford University’s Graduate School of Business, where he taught courses on global financial reporting and on accounting for mergers, acquisitions and changes in corporate structure. During his career, Professor Hopkins won each of the top teaching awards in the Kelley School of Business, including the Trustees Teaching Award, the Schuyler F. Otteson Award, and the Sauvain Award. He also teaches in international and online executive MBA programs at Indiana University, and in the doctoral program at HHL University in Leipzig, Germany. Professor Hopkins is also a widely respected research scholar in the area of financial reporting, and investor and analyst judgment and decision making. His work has appeared in top accounting journals, including The Accounting Review, the Journal of Accounting Research, Contemporary Accounting Research, and Accounting Organizations and Society, and has been discussed in business press publications, including Barron’s, CFO, and The Deal. He is the past winner of the American Accounting Association’s Financial Accounting and Reporting Section Best Research Paper Award, the Indiana University Outstanding Junior Faculty Award, and Kelley School of Business Outstanding Research Award.


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Errata
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