Activity 1 – chapters 1,2,14
Choose a major publicly traded corporation, then go to the corporate’s site and retrieve the
information needed for this assignment. Provide information about the history of the
corporation and its current product offerings. Provide a screenshot of the corporate’s latest reported income statement. Organize the income statement in an Excel file to enable you to
verify the arithmetic in the income statement, and explain your verifications. Also, explain the
nature of each item in the income statement. At least 5 scholarly references are required which
should include the corporate’s site as the source of the data. In-text citations are required
throughout the document. All submissions should be in one Word file.
CONNECT FEATURES
Interactive Presentations
Interactive Presentations cover each chapter’s
core learning objectives with narrated, animated
presentations that pause frequently to check for
comprehension. Interactive Presentations harness
the full power of technology to appeal to all learning
styles. Interactive Presentations are a great way to
improve online or hybrid sections, but also extend the
learning opportunity for traditional classes, such as in
facilitating a “fl ipped classroom.”
End-of-Chapter Material
McGraw-Hill Education redesigned the student
interface for our end-of-chapter assessment content.
The new interface provides improved answer
acceptance to reduce students’ frustration with
formatting issues (such as rounding) and, for select
questions, provides an expanded table that guides
students through the process of solving the problem.
Many questions have been redesigned to more fully
test students’ mastery of the content.
Guided Examples
Guided Examples provide narrated and animated
step-by-step walkthroughs of algorithmic versions
of assigned exercises. This allows students to
identify, review, or reinforce the concepts and
activities covered in class. Guided Examples provide
immediate feedback and focus on the areas where
students need the most guidance.
Connect generates comprehensive reports and graphs that provide instructors with an instant view of the
performance of individual students, a specifi c section, or multiple sections. Since all content is mapped to
learning objectives, Connect reporting is ideal for accreditation or other administrative documentation.
General Ledger
New to 5e are General Ledger problems that offer
students the ability to see how transactions post from
the general journal all the way through the fi nancial
statements. General Ledger (GL) questions provide
auto-grading in the same intelligent design as our
end-of-chapter content. Critical thinking and analysis
components are added to each GL problem to ensure
understanding of the entire process.
POWERFUL PERFORMANCE REPORTING
Connect Insight
The fi rst and only analytics tool of its kind,
Connect Insight is a series of visual data displays
that are each framed by an intuitive question and
provide at-a-glance information regarding how an
instructor’s class is performing. Connect Insight is
available through Connect titles.
Excel Simulations
Assignable within Connect Accounting, Excel
Simulations allow students to practice their Excel
skills—such as basic formulas and formatting—within
the context of accounting. These questions feature
animated, narrated Help and Show Me tutorials (when
enabled). These simulations are auto-graded and
provide instant feedback to the student.
Managerial Accounting 5thedition
John J. Wild
University of Wisconsin at Madison
Ken W. Shaw
University of Missouri at Columbia
To my students and family, especially Kimberly, Jonathan, Stephanie and Trevor.
To my wife Linda and children Erin, Emily and Jacob.
MANAGERIAL ACCOUNTING, FIFTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2016 by McGraw-Hill Education.
All rights reserved. Printed in the United States of America. Previous editions © 2013, 2011, and 2009. No part of this pub-
lication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without
the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage
or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5
ISBN 978-1-259-17649-4
MHID 1-259-17649-5
Senior Vice President, Products & Markets: Kurt L. Strand
Vice President, General Manager, Products & Markets: Marty Lange
Vice President, Content Design & Delivery: Kimberly Meriwether David
Managing Director: Tim Vertovec
Marketing Director: Brad Parkins
Brand Manager: Steve Schuetz
Director, Product Development: Rose Koos
Director of Digital Content: Patricia Plumb
Lead Product Developer: Ann Torbert
Product Developer: Lindsey Schauer
Marketing Manager: Michelle Nolte
Digital Product Analyst: Xin Lin
Director, Content Design & Delivery: Linda Avenarius
Program Manager: Daryl Horrocks
Content Project Managers: Lori Koetters, Brian Nacik
Buyer: Carol A. Bielski
Design: Debra Kubiak
Content Licensing Specialists: DeAnna Dausener, Keri Johnson
Cover Image: Yuri_Arcurs/Getty Images
Compositor: Aptara®, Inc.
Printer: R.R. Donnelley
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Control Number: 2014957125
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate
an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of
the information presented at these sites.
www.mhhe.com
Managerial Accounting, 5e
Adapting to the Needs of Today’s Students
Enhancements in technology have changed how we live
and learn. Working with learning resources across devices,
whether smartphones, tablets, or laptop computers,
empowers students to drive their own learning by putting
increasingly intelligent technology into their hands.
Whether the goal is to become an accountant, a business-
person, or simply an informed consumer of accounting
information, Managerial Accounting (MA) has helped gen-
erations of students succeed. Its leading-edge accounting
content, paired with state-of-the-art technology, supports
student learning and elevates understanding of key
accounting principles.
MA excels at engaging students with content that will help
them see the relevance of accounting. Its chapter- opening
vignettes showcase dynamic, successful entrepreneurial indi-
viduals and companies and highlight the usefulness of
accounting to business owners. This edition’s featured com-
panies—Apple, Google, and Samsung— capture student
interest with their products, and their annual reports serve
as a pathway for learning financial statements. New in this
edition, Need-to-Know illustrations in each chapter demon-
strate how to apply key accounting procedures. They are
supported by guided video presentations.
MA also delivers innovative technology to help student per-
formance. Connect Accounting provides students with a
media-rich eBook version of the textbook and offers instant
grading and feedback for assignments that are completed
online. Our system for completing exercise and problem
material takes accounting content to the next level, deliver-
ing assessment material in a more intuitive, less restrictive
format that adapts to the needs of today’s students.
This technology features:
• an auto-calculation feature that allows students to focus
on concepts rather than rote tasks.
• a smart (auto-fill) drop-down design.
• a general journal interface that looks and feels more
like that found in practice.
The end result is content that better prepares students for
the real world.
Connect Accounting also includes digitally based, interactive,
adaptive learning tools that provide an opportunity to
engage students more effectively by offering varied
instructional methods and more personalized learning
paths that build on different learning styles, interests, and
abilities.
The revolutionary technology of the LearnSmart Advantage
Series—consisting of LearnSmart® and SmartBook®—is
available only from McGraw-Hill Education. These prod-
ucts are based on an intelligent learning system that uses a
series of adaptive questions to pinpoint each student’s
knowledge gaps and then provides an optimal learning
path. Students spend less time in areas they already know
and more time in areas they don’t. The result: Students
study more efficiently, learn faster, and retain more knowl-
edge. Valuable reports provide insights into how students
are progressing through textbook content and informa-
tion useful for shaping in-class time or assessment.
Interactive Presentations teach each chapter’s core learn-
ing objectives in a rich, multimedia format, bringing the
content to life. Your students will come to class prepared
when you assign Interactive Presentations. Students can
also review the Interactive Presentations as they study.
Further, Guided Examples provide students with narrated,
animated, step-by-step walk-throughs of algorithmic ver-
sions of assigned exercises. Students appreciate the Guided
Examples, which help them learn accounting and complete
assignments outside of class.
A General Ledger (GL) application, new to 5e, offers stu-
dents the ability to see how transactions post from the
general journal all the way through the financial state-
ments. It uses the intuitive, less restrictive format used for
other homework, and it adds critical thinking components
to each GL question, to ensure understanding of the entire
process.
The first and only analytics tool of its kind, Connect
Insight® is a series of visual data displays—each framed by
an intuitive question—to provide at-a-glance information
about how your class is doing. Connect Insight provides a
quick analysis on five key dimensions, available at a
moment’s notice from a tablet device: How are my stu-
dents doing? How is my section doing? How is this student
doing? How are my assignments going? and How is this
assignment going?
v
“This is an excellent book that is well-written and contains excellent illustrations. It
has the best online supplements of any of the texts that I have reviewed. . . . This is an
excellent book that I would recommend to all of my colleagues.”
—KAREN CRISONINO, County College of Morris
vi
JOHN J. WILD is a distinguished pro-
fessor of accounting at the University of
Wisconsin at Madison. He previously held
appointments at Michigan State University
and the University of Manchester in England.
He received his BBA, MS, and PhD from the
University of Wisconsin.
Professor Wild teaches accounting
courses at both the undergraduate and
graduate levels. He has received numerous
teaching honors, including the Mabel W. Chipman Excellence-in-
Teaching Award, the departmental Excellence-in-Teaching Award,
and the Teaching Excellence Award from the 2003 and 2005 busi-
ness graduates at the University of Wisconsin. He also received the
Beta Alpha Psi and Roland F. Salmonson Excellence-in-Teaching
Award from Michigan State University. Professor Wild has received
several research honors and is a past KPMG Peat Marwick National
Fellow and is a recipient of fellowships from the American
Accounting Association and the Ernst and Young Foundation.
Professor Wild is an active member of the American Accounting
Association and its sections. He has served on several committees of
these organizations, including the Outstanding Accounting Educator
Award, Wildman Award, National Program Advisory, Publications,
and Research Committees. Professor Wild is author of Fundamental
Accounting Principles, Financial Accounting, Financial and
Managerial Accounting, and College Accounting, each published by
McGraw-Hill Education. His research articles on accounting and
analysis appear in The Accounting Review; Journal of Accounting
Research; Journal of Accounting and Economics; Contemporary
Accounting Research; Journal of Accounting, Auditing and Finance;
Journal of Accounting and Public Policy; and other journals. He is
past associate editor of Contemporary Accounting Research and has
served on several editorial boards including The Accounting Review.
Professor Wild is a recognized expert in accounting and financial
analysis, and is known for his teaching innovations within an active
learning classroom environment.
In his leisure time, Professor Wild enjoys hiking, sports, travel,
people, and spending time with family and friends.
KEN W. SHAW is an associate professor
of accounting and the Deloitte Professor of
Accounting at the University of Missouri. He
previously was on the faculty at the University
of Maryland at College Park. He has also taught
in international programs at the University of
Bergamo (Italy) and the University of Alicante
(Spain). He received an accounting degree from
Bradley University and an MBA and PhD from
the University of Wisconsin. He is a Certified
Public Accountant with work experience in public accounting.
Professor Shaw teaches accounting at the undergraduate and
graduate levels. He has received numerous School of Accountancy,
College of Business and university-level teaching awards. He was
voted the “Most Influential Professor” by three School of
Accountancy graduating classes, and is a two-time recipient of the
O’Brien Excellence in Teaching Award. He is the advisor to his
school’s chapter of the Association of Certified Fraud Examiners.
Professor Shaw is an active member of the American Accounting
Association and its sections. He has served on many committees of
these organizations and presented his research papers at national
and regional meetings. Professor Shaw’s research appears in the
Journal of Accounting Research; The Accounting Review;
Contemporary Accounting Research; Journal of Financial and
Quantitative Analysis; Journal of the American Taxation Association;
Strategic Management Journal; Journal of Accounting, Auditing,
and Finance; Journal of Financial Research; and other journals. He
has served on the editorial boards of Issues in Accounting Education;
Journal of Business Research; and Research in Accounting
Regulation. Professor Shaw is co-author of Fundamental Accounting
Principles, Financial and Managerial Accounting, and College
Accounting, all published by McGraw-Hill Education.
In his leisure time, Professor Shaw enjoys tennis, cycling, music,
and coaching his children’s sports teams.
About the Authors
Dear Colleagues and Friends,
As we roll out the new edition of Managerial Accounting, we thank each of you
who provided suggestions to improve the textbook and its teaching resources.
This new edition reflects the advice and wisdom of many dedicated reviewers,
symposium and workshop participants, students, and instructors. Throughout
the revision process, we steered this textbook and its teaching tools in the man-
ner you directed. As you’ll find, the new edition offers a rich set of features—
especially digital features—to improve student learning and assist instructor
teaching and grading. We believe you and your students will like what you find in
this new edition.
Many talented educators and professionals have worked hard to create the mate-
rials for this product, and for their efforts, we’re grateful. We extend a special
thank-you to our contributing and technology supplement authors, who have
worked so diligently to support this product:
Contributing Author: Kathleen O’Donnell, Onondaga Community College
Accuracy Checkers: Dave Krug, Johnson County Community College; Mark
McCarthy, East Carolina University; Helen Roybark, Radford University; Barbara
Schnathorst; and Beth Woods
LearnSmart Author: April Mohr, Jefferson Community and Technical College, SW
Interactive Presentations: Jeannie Folk, College of DuPage
PowerPoint Presentations: Beth Kane, Northwestern University
Instructor Resource Manual: Patricia Walczak, Lansing Community College
Test Bank Contributors: Anna Boulware, St. Charles Community College, and
Brenda J. McVey, University of Mississippi
Digital Contributor, Connect Content, General Ledger Problems, and
Exercise PowerPoints: Kathleen O’Donnell, Onondaga Community College
In addition to the invaluable help from the colleagues listed above, we thank the
entire MA, 5e, team at McGraw-Hill Education: Tim Vertovec, Steve Schuetz,
Michelle Nolte, Lindsey Schauer, Lori Koetters, Ann Torbert, Brad Parkins, Patricia
Plumb, Xin Lin, Kevin Moran, Debra Kubiak, Carol Bielski, Keri Johnson, DeAnna
Dausener, Sarah Evertson, Ben Pearsall, Brian Nacik, Ron Nelms, and Daryl
Horrocks. We could not have completed this new edition without your efforts.
John J. Wild Ken W. Shaw
vii
Easy to Use. Proven Effective.
McGraw-Hill CONNECT ACCOUNTING
McGraw-Hill Connect Accounting is a digital teaching and learning environment that gives students the means to bet-
ter connect with their coursework, with their instructors, and with the important concepts they will need to know for
success now and in the future. With Connect Accounting, instructors can easily deliver assignments, quizzes, and tests
online. Students can review course material and practice important skills.
McGraw-Hill Connect Accounting provides all of the following learning and teaching resources:
• SmartBook, powered by LearnSmart • Auto-graded Excel simulations
• Auto-graded online homework • Interactive Presentations
• General ledger problems • Guided Examples
In short, Connect Accounting offers students powerful tools and features that optimize their time and energy, enabling
them to focus on learning.
SmartBook, Powered by LearnSmart
McGraw-Hill LearnSmart® is the market-leading adaptive study resource that is proven
to strengthen memory recall, increase class retention, and boost grades. LearnSmart
allows students to study more efficiently because they are made aware of what they know and don’t know.
SmartBook®, which is powered by LearnSmart, is the first and only adaptive reading experience designed to change the
way students read and learn. It creates a personalized reading experience by highlighting the most impactful concepts a
student needs to learn at that moment in time. As a student engages with SmartBook, the reading experience continu-
ously adapts by highlighting content based on what the student knows and doesn’t know. This ensures that the focus is
on the content he or she needs to learn, while simultaneously promoting long-term retention of material.
Use SmartBook’s real-time reports to quickly identify the concepts that require more attention from individual students—
or the entire class. The end result? Students are more engaged with course content, can better prioritize their time, and
come to class ready to participate.
viii
Tailored to You.
Online Assignments
Connect Accounting helps students learn more efficiently by pro-
viding feedback and practice material when they need it, where
they need it. Connect grades homework automatically and gives
immediate feedback on any questions students may have missed.
Our assignable, gradable end-of-chapter content includes a gen-
eral journal application that looks and feels more like what you
would find in a general ledger software package. Also, select ques-
tions have been redesigned to test students’ knowledge more fully. They now include tables for students to work through
rather than requiring that all calculations be done off-line. McGraw-Hill’s redesigned student interface provides a real-world
feel to interactive assignments and end-of-chapter assessment content. This robust accounting software allows for flexibility
in learning styles and provides opportunities for courses to be delivered in traditional, online, and blended settings.
General Ledger Problems
New General Ledger problems for select questions enable students to see how transactions post from the general journal
all the way through the financial statements. It provides a much-improved experience for students working with account-
ing cycle questions. Students’ work in the general journal is automati-
cally posted to the ledger, navigation is much simpler, scrolling is no
longer an issue, and students can easily link back to their original en-
tries simply by clicking the ledger if edits are needed. Many questions
now have critical thinking components added, to maximize students’
foundational knowledge of accounting concepts and principles.
ix
Interactive Presentations
Interactive Presentations provide engaging narratives of all chapter
learning objectives in an assignable interactive online format. They
follow the structure of the text and are organized to match the specific
learning objectives within each chapter. While the Interactive
Presentations are not meant to replace the textbook, they provide ad-
ditional explanation and enhance-
ment of material from the text
chapter, allowing students to
learn, study, and practice at their
own pace, with instant feedback.
Guided Examples
The Guided Examples in Connect
Accounting provide a narrated,
animated, step-by-step walk-
through of select exercises simi-
lar to those assigned. These
short presentations, which can
be turned on or off by instruc-
tors, provide reinforcement
when students need it most.
Excel Simulations
Simulated Excel questions, assignable within Connect Accounting, allow stu-
dents to practice their Excel skills—such as basic formulas and formatting—
within the context of accounting. These questions feature animated, narrated
Help and Show Me tutorials (when enabled), as well as automatic feedback and
grading for both students and professors.
Easy to Use. Proven Effective.
McGraw-Hill CONNECT ACCOUNTING Features
Simple Assignment Management and
Smart Grading
With Connect Accounting, creating assignments is easier than ever, enabling in-
structors to spend more time teaching and less time managing. Simple assignment
management and smart grading allow you to:
• Create and deliver assignments easily with selectable end-of-chapter questions
and Test Bank items.
• Have assignments scored automatically, giving students immediate feedback on
their work and side-by-side comparisons with correct answers.
• Access and review each response, manually change grades, or leave comments
for students to review.
• Reinforce classroom concepts with practice assignments and instant quizzes
and exams.
Powerful Instructor and Student Reports
Connect Accounting keeps instructors informed about how each student, section,
and class is performing, allowing for more productive use of lecture and office
hours. The progress-tracking function enables you to:
• View scored work immediately and track individual or group performance
with assignment and grade reports.
• Access an instant view of student or class performance relative to learning
objectives.
• Collect data and generate reports required by many accreditation
organizations, such as AACSB and AICPA.
x
ennttt RReRepopo trtrtss
For more information about Connect Accounting, go to http://connect.mheducation.com,
or contact your local McGraw-Hill Higher Education representative.
Connect Insight
The first and only analytics tool of its kind, McGraw-Hill Connect® Insight is a
series of visual data displays—each framed by an intuitive question—to pro-
vide at-a-glance information about how your class is doing.
Connect Insight provides a quick analysis on five key insights, available at a
moment’s notice from your tablet device:
• How are my students doing? • How are my assignments going?
• How is my section doing? • How is this assignment going?
• How is this student doing?
Instructor Library
The Connect Accounting Instructor Library is a repository for additional resources to improve student engagement in and
out of class. You can select and use any asset that enhances your lecture. The Connect Accounting Instructor Library
includes:
• Presentation slides. • Test Bank.
• Animated PowerPoint exhibits and exercises. • Instructor’s Resource Manual.
• Solutions Manual.
The Connect Accounting Instructor Library also allows you to upload your own files.
Tailored to You.
Other Technology Offered by McGraw-Hill
Tegrity Campus: Lectures 24/7
Tegrity Campus is a service that makes class time available 24/7 by automatically capturing every
lecture. With a simple one-click start-and-stop process, you capture all computer screens and cor-
responding audio in a format that is easily searchable, frame by frame. Students can replay any
part of any recorded class with easy-to-use browser-based viewing on a PC, Mac, or mobile device.
Help turn your students’ study time into learning moments immediately supported by your lecture. With Tegrity Campus,
you also increase intent listening and class participation by easing students’ concerns about note-taking.
To learn more about Tegrity, watch a two-minute Flash demo at http://tegritycampus.mhhe.com.
McGraw-Hill Campus
McGraw-Hill Campus® is a new one-stop teaching and learning experience available to users of
any learning management system. This institutional service allows faculty and students to enjoy
single sign-on (SSO) access to all McGraw-Hill Higher Education materials, including the award-
winning McGraw-Hill Connect platform, from directly within the institution’s website. To learn more about McGraw-Hill
Campus, visit http://mhcampus.mhhe.com.
Custom Publishing through Create
McGraw-Hill CreateTM is a self-service website that allows instructors to create custom course materials by drawing upon
McGraw-Hill’s comprehensive, cross-disciplinary content. Instructors can add their own content quickly and easily and tap
into other rights-secured, third-party sources as well, then arrange the content in a way that makes the most sense for their
course.
Through Create, you can:
• Combine material from different sources and even upload your own content.
• Personalize your product with the course name and information.
• Choose the best format for your students—color print, black-and-white print, or eBook.
• Edit and update your course materials as often as you’d like.
Begin creating now at www.mcgrawhillcreate.com.
ALEKS: A Superior, Student-Friendly Accounting Experience
Artificial intelligence: Fills knowledge gaps.
Cycle of learning and assessment: Increases learning momentum and engages students.
Customizable curriculum: Aligns with your course syllabi and textbooks.
Dynamic, automated reports: Monitors detailed student and class progress.
To learn more, visit www.aleks.com/highered/business.
CourseSmart
CourseSmart is a way for faculty to find and review eTextbooks. It’s also a great option for
students who are interested in accessing their course materials digitally and saving money.
CourseSmart offers thousands of the most commonly adopted textbooks across hundreds of
courses from a wide variety of higher education publishers. With the CourseSmart eTextbook,
students can save up to 45 percent off the cost of a print book, reduce their impact on the environment, and access pow-
erful web tools for learning. CourseSmart is an online eTextbook, which means users access and view their textbook
online when connected to the Internet. Students can also print sections of the book for maximum portability.
CourseSmart eTextbooks are available in one standard online reader with full text search, notes and highlighting, and
e-mail tools for sharing notes between classmates. For more information on CourseSmart, go to www.coursesmart.com.
xi
McGraw-Hill Customer Experience Group Contact Information
At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services
don’t stop after you purchase our products. You can contact our Product Specialists 24 hours a day to get product train-
ing online. Or you can search the knowledge bank of Frequently Asked Questions on our support website. For customer
support, call 800-331-5094 or visit www.mhhe.com/support.
Innovative Textbook Features . . .
xii
Using Accounting for Decisions
Whether we prepare, analyze, or apply accounting informa-
tion, one skill remains essential: decision making. To help de-
velop good decision-making habits and to illustrate the
relevance of accounting, we use a pedagogical framework we
call the Decision Center. This framework encompasses a vari-
ety of approaches and subject areas, giving students insight
into every aspect of business decision making; see the four
nearby examples for the different types of decision boxes, in-
cluding those that relate to ethics. Answers to Decision Maker
and Ethics boxes are at the end of each chapter.
“Authors do a good job of relating material to real-life situations and putting
students in the decision-maker role.”
—MORGAN ROCKETT, Moberly Area Community College
Decision Insight
Make or Buy IT Companies apply make or buy decisions to their ser-
vices. Many now outsource their information technology activities.
Information technology companies provide infrastructure and services to en-
able businesses to focus on their key activities. It is argued that outsourcing
saves money and streamlines operations, and without the headaches. ■
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Production Manager You invite three friends to a restaurant. When the dinner check arrives, David, a …