MANAGERIAL ACCOUNTING

1 SIXTH EDITIONACCOUNTINGMANAGERIAL TOOLS FOR BUSINESS DECISION Page 2 7/25/11 7:55 PM Page 2 7/25/11 7:55 PM user-F392/Users/user-F392/Desktop/Users/ user-F392/DesktopThis page intentionally left blankJerry J. Weygandt PhD, CPAU niversity of Wisconsin MadisonMadison, WisconsinPaul D. Kimmel PhD, CPAU niversity of Wisconsin Milwaukee Milwaukee, WisconsinDonald E. Kieso PhD, CPAN orthern Illinois UniversityDeKalb, IllinoisJohn Wiley & Sons, 8/12/11 2:14 PM Page iDedicated tothe Wiley sales representativeswho sell our books and service our adopters in a professional and ethical manner, and toEnid, Merlynn, and DonnaVice President & Executive PublisherGeorge HoffmanAssociate PublisherChristopher DeJohnSenior Acquisitions EditorMichael McDonaldOperations ManagerYana MermelSenior Content EditorBrian KaminsSenior Content EditorEd BrislinDevelopment EditorTerry Ann TatroProject ManagerAaron RiccioContent ManagerDorothy SinclairSenior Production EditorValerie VargasAssociate Director of MarketingAmy ScholzMarketing ManagerKarolina Zarychta HonsaLead Product DesignerAllison MorrisProduct DesignerGreg ChaputInteractive Product DesignerDaniela DiMaggioDesign DirectorHarry NolanSenior DesignerMaureen EideDesignerKristine CarneyProduction Management ServicesIngrao

2 AssociatesSenior Illustration EditorAnna MelhornSenior Photo EditorMary Ann PriceSenior Editorial AssistantJacqueline KeppingSenior Marketing AssistantCourtney LuzziCover DesignMaureen EideCover PhotoRobert Zaleski/Aurora PhotosThis book was set in New Aster by Aptara , Inc. and printed and bound by RR Donnelley. Thecover was printed by RR 2012 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, withouteither the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.

3 222 Rosewood Drive,Danvers, MA 01923, website Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 RiverStreet, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website order books or for customer service, please call 1-800-CALL WILEY (225-5945).Jerry J. Weygandt, PhD, CPA; Paul D. Kimmel, PhD, CPA; and Donald E. Kieso, PhD, CPA MANAGERIAL ACCOUNTING , Sixth EditionISBN-13 978-1-118-09689-5 Printed in the United States of 8/22/11 8:49 AM Page iiFrom the AuthorsDear Student,Why This Course?Remember your biology course in high school? Did you haveone of those invisible man models (or maybe something more high-tech than that)that gave you the opportunity to look inside the human body?

4 This accountingcourse offers something similar: To understand a business, you have to understand the financial insides of a business organization. A MANAGERIAL ACCOUNTING course willhelp you understand the essential financial components of businesses. Whether you are looking at a large multinational company like Microsoftor Starbucksor a single-owner software consulting business or coffee shop, knowing the fundamentals of MANAGERIAL ACCOUNTING will help you understand what is happening. As an employee, a manager, an investor, a business owner, or a director ofyour own personal finances any of which roles you willhave at some point in your life you will make betterdecisions for having taken this This Book?

5 Hundreds of thousands of studentshave used this textbook. Your instructor has chosen it foryou because of its trusted authors haveworked hard to keep the book fresh, timely, and textbook contains features to help you learn best, whatever your learning style. To understand what your learning style is, spend about 10 minutes to take the learningstyle quiz at the book s companion website. Then, look at page xi for how you can applyan understanding of your learningstyle to this course. When you know more about yourown learning style, browse through pages xii xiii. These pages describe the main featuresyou will find in this textbook and explain their To Succeed?

6 We ve asked many students and many instructors whether thereis a secret for success in this course. The nearly unanimous answer turns out to be notmuch of a secret: Do the homework. This is one course where doing is learning, andthe more time you spend on the homework assignments using the various toolsthat this textbook provides the more likely you are to learn the essential concepts,techniques, and methods of ACCOUNTING . Besides the textbook itself, the textbookcompanion website offers various support luck in this course. We hope you enjoy the experience and that you put to gooduse throughout a lifetime of success the knowledge you obtain in this course.

7 We aresure you will not be J. WeygandtPaul D. KimmelDonald E. Kiesoiii Whether you are looking at a large multinational company like Microsoft orStarbucks or a single-owner softwareconsulting business or coffee shop,knowing the fundamentals of managerialaccounting will help you understandwhat is happening. 8/16/11 9:52 AM Page iiiYour Team for Successin AccountingWiley ACCOUNTING is your partner in ACCOUNTING education. We want to be the first publisher you think of when it comes to quality content, reliabletechnology, innovative resources, professional training, and unparalleled support for youraccounting Wiley ACCOUNTING Team for Success is comprised of three distinctive advantages that you won t find with any other publisher: Author Commitment Wiley Faculty Network WileyPLUSA uthor Commitment:A Proven Author Team of Inspired TeachersThe Team for Success authors bringyears of industry and academicexperience to the development of each textbook that relatesaccounting concepts to real-worldexperiences.

8 This cohesive team brings continuity ofwriting style, pedagogy, and problem material to each course from Principles to Intermediate so youand your students can seamlessly progress from introductory through advanced courses in ACCOUNTING . The authors understand the mindset and time limitations of today s students. They demonstrate an intangible ability to effectively deliver complexinformation so it is clear and understandable whilestaying one step ahead of emerging global trends in business. 8/12/11 2:14 PM Page ivWiley Faculty Network:A Team of Educators Dedicated to Your Professional DevelopmentThe Wiley Faculty Network (WFN)is a global group of seasonedaccounting professionals whoshare best practices in teachingwith their peers.

9 Our Virtual GuestLecture Series provides the opportunity you need forprofessional development in an online environmentthat is relevant, convenient, and collaborative. Thequality of these seminars and workshops meets thestrictest standards, so we are proud to be able to offer valuable CPE credits to attendees. With 24 faculty mentors in ACCOUNTING , it s easy to find help with your most challenging curriculumquestions just ask our experts!WileyPLUS:An Experienced Team of Support ProfessionalsThe WileyPLUSA ccountManagers understand thetime constraints of busyinstructors who want to provide the best resourcesavailable to their students with minimal headachesand planning time.

10 They know how intimidating new software can be, so they are sure to make the transition easy and painless. Account Managers act as your personal contact and expert resource for training, course set-up, andshortcuts throughout the WileyPLUS experience. Your success as an educator directly correlates to student success, and that s our goal. The WileyAccounting Team for Success truly strives for YOUR success! Partner with us today! 8/12/11 2:14 PM Page vAuthor CommitmentCollaboration. Innovation. decades of success as authors of textbooks like this one, Jerry Weygandt, Paul Kimmel, and Don Kieso understand thatteaching ACCOUNTING goes beyond simply presenting data.