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A01_HORN6833_06_SE_FM.indd 1 1/20/17 4:12 PM
Horngren’s
Financial & Managerial
Accounting
SIXTH EDITION
Tracie Miller-Nobles
Austin Community College
Brenda Mattison
Tri-County Technical College
Ella Mae Matsumura

University of Wisconsin-Madison
A01_HORN6833_06_SE_FM.indd 1 12/22/16 2:16 AM

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Library of Congress Cataloging-in-Publication Data
Names: Miller-Nobles, Tracie, author. | Mattison, Brenda, author. |
Matsumura, Ella Mae, author.
Title: Horngren’s financial & managerial accounting / Tracie Miller-Nobles,
Austin Community College, Brenda Mattison, Tri-County Technical College,
Ella Mae Matsumura, University of Wisconsin-Madison.
Other titles: Financial and managerial accounting
Description: Sixth Edition. | New York : Pearson, [2017] | Revised edition of
the authors’ Horngren’s financial & managerial accounting, [2016]
Identifiers: LCCN 2016056826 | ISBN 9780134486833
Subjects: LCSH: Accounting. | Managerial accounting.
Classification: LCC HF5636 .M55 2017 | DDC 658.15/11--dc23
LC record available at https://lccn.loc.gov/2016056826
1 17
ISBN-13: 978-0-13-448683-3
ISBN-10: 0-13-448683-8
A01_HORN6833_06_SE_FM.indd 2 12/28/16 1:44 PM

About the Authors
Tracie L. Miller-Nobles, CPA, received her bachelor’s and master’s

degrees in accounting from Texas A&M University and is currently pursuing her
Ph.D. in adult education also at Texas A&M University. She is an Associate Professor
at Austin Community College, Austin, TX. Previously she served as a Senior Lecturer
at Texas State University, San Marcos, TX, and has taught as an adjunct at University
of Texas-Austin. Tracie has public accounting experience with Deloitte Tax LLP and
Sample & Bailey, CPAs.
Tracie is a recipient of the following awards: American Accounting
Association J. Michael and Mary Anne Cook prize, Texas Society of CPAs Rising
Star TSCPA Austin Chapter CPA of the Year, TSCPA Outstanding Accounting
Educator, NISOD Teaching Excellence and Aims Community College Excellence
in Teaching. She is a member of the Teachers of Accounting at Two Year Colleges,
the American Accounting Association, the American Institute of Certified Public
Accountants, and the Texas State Society of Certified Public Accountants. She is
currently serving on the Board of Directors as secretary/webmaster of Teachers of
Accounting at Two Year Colleges and as a member of the American Institute of
Certified Public Accountants financial literacy committee. In addition, Tracie served
on the Commission on Accounting Higher Education: Pathways to a Profession.
Tracie has spoken on such topics as using technology in the classroom, motivating non-business majors to learn accounting, and incorporating active
learning in the classroom at numerous conferences. In her spare time she enjoys camping and hiking and spending time with friends and family.
Brenda L. Mattison, CMA, has a bachelor’s degree in education and a

master’s degree in accounting, both from Clemson University. She is currently an Accounting
Instructor at Tri-County Technical College in Pendleton, South Carolina. Brenda previously
served as Accounting Program Coordinator at TCTC and has prior experience teaching ac-
counting at Robeson Community College, Lumberton, North Carolina; University of South
Carolina Upstate, Spartanburg, South Carolina; and Rasmussen Business College, Eagan,

Minnesota. She also has accounting work experience in retail and manufacturing businesses
and is a Certified Management Accountant.

Brenda is a member of the American Accounting Association, Institute of Management
Accountants, South Carolina Technical Education Association, and Teachers of Accounting at
Two Year Colleges. She is currently serving on the Board of Directors as Vice President of
Conference Administration of Teachers of Accounting at Two Year Colleges.
Brenda previously served as Faculty Fellow at Tri-County Technical College. She has
presented at state, regional, and national conferences on topics including active learning, course
development, and student engagement.
In her spare time, Brenda enjoys reading and spending time with her family. She is also
an active volunteer in the community, serving her church and other organizations.
Ella Mae Matsumura, Ph.D. is a professor in the Department

of Accounting and Information Systems in the School of Business at the Univer-
sity of Wisconsin–Madison, and is affiliated with the university’s Center for Quick
Response Manufacturing. She received an A.B. in mathematics from the University
of California, Berkeley, and M.Sc. and Ph.D. degrees from the University of British
Columbia. Ella Mae has won two teaching excellence awards at the University of
Wisconsin–Madison and was elected as a lifetime fellow of the university’s Teaching
Academy, formed to promote effective teaching. She is a member of the university
team awarded an IBM Total Quality Management Partnership grant to develop cur-
riculum for total quality management education.
Ella Mae was a co-winner of the 2010 Notable Contributions to Management
Accounting Literature Award. She has served in numerous leadership positions in the
American Accounting Association (AAA). She was coeditor of Accounting Horizons
and has chaired and served on numerous AAA committees. She has been secretary-
treasurer and president of the AAA’s Management Accounting Section. Her past and current research articles focus on decision making, performance evalu-
ation, compensation, supply chain relationships, and sustainability. She coauthored a monograph on customer profitability analysis in credit unions.
iii

Brief Contents
Chapter 1 Accounting and the Business Environment 1
Chapter 2 Recording Business Transactions 56
Chapter 3 The Adjusting Process 119
Chapter 4 Completing the Accounting Cycle 185
Chapter 5 Merchandising Operations 249
Chapter 6 Merchandise Inventory 326
Chapter 7 Internal Control and Cash 380
Chapter 8 Receivables 432
Chapter 9 Plant Assets, Natural Resources, and Intangibles 488
Chapter 10 Investments 545
Chapter 11 Current Liabilities and Payroll 578
Chapter 12 Long-Term Liabilities 619
Chapter 13 Stockholders' Equity 671
Chapter 14 The Statement of Cash Flows 732
Chapter 15 Financial Statement Analysis 800
Chapter 16 Introduction to Managerial Accounting 859
Chapter 17 Job Order Costing 907
Chapter 18 Process Costing 961
Chapter 19 Cost Management Systems: Activity-Based, Just-in-Time, and Quality Management Systems 1028
Chapter 20 Cost-Volume-Profit Analysis 1087
Chapter 21 Variable Costing 1142
Chapter 22 Master Budgets 1183
Chapter 23 Flexible Budgets and Standard Cost Systems 1265
Chapter 24 Responsibility Accounting and Performance Evaluation 1324
Chapter 25 Short-Term Business Decisions 1373
Chapter 26 Capital Investment Decisions 1426
App dix A—Present Value Tables and Future Value Tables A-1
en
App dix B—Accounting Information Systems B-1
en
GLOSSARY G-1

N E I-1
I
D
X

HOTO CRE TS P-1
P
DI

iv

Contents
Ch e
apt
1 How Do You Use the Debt Ratio to Evaluate Business
r
Performance? 81
Accounting and the Business Environment 1

■ Review 83

Why Is Accounting Important? 2
■

■ Assess Your Progress 90

Decision Makers: The Users of Accounting Information 3
■

Accounting Matters 4 ■ Critical Thinking 113
■

What Are the Organizations and Rules That Govern
Accounting? 6
Ch e 3

Governing Organizations 6
apt
r

Generally Accepted Accounting Principles 6 The Adjusting rocess 119

P

The Economic Entity Assumption 6
What Is the Difference Between Cash Basis Accounting and
The Cost Principle 9
Accrual Basis Accounting? 120

The Going Concern Assumption 10

The Monetary Unit Assumption 10 What Concepts and Principles Apply to Accrual Basis

International Financial Reporting Standards 10 Accounting? 122

Ethics in Accounting and Business 10 The Time Period Concept 122

The Revenue Recognition Principle 122
What Is the Accounting Equation? 11

The Matching Principle 123

Assets 12

Liabilities 12 What Are Adjusting Entries, and How Do We Record

Equity 12 Them? 124

How Do You Analyze a Transaction? 13 Deferred Expenses 125

Accrued Expenses 132

Transaction Analysis for Smart Touch Learning 13

Accrued Revenues 136

How Do You Prepare Financial Statements? 19

What Is the Purpose of the Adjusted Trial Balance, and How

Income Statement 20
Do We Prepare It? 140

Statement of Retained Earnings 20

Balance Sheet 21 What Is the Impact Of Adjusting Entries On the Financial

Statement of Cash Flows 22 Statements? 142

How Do You Use Financial Statements to Evaluate Business How Could a Worksheet Help in Preparing Adjusting Entries
Performance? 24 and the Adjusted Trial Balance? 144

Kohl’s Corporation 24
A EN 3A: Alternative Treatment of Recording Deferred

Return on Assets (ROA) 24
PP
DIX
Expenses and Deferred Revenues 146

■ Review 26

■

What Is an Alternative Treatment of Recording Deferred
Expenses and Deferred Revenues? 146
■

■ Critical Thinking 52

Deferred Expenses 146
■

Deferred Revenues 148
2

Ch e ■ Review 149
apt
r
■

Recording Business Transactions 56 ■ Assess Your Progress 156
■

What Is an Account? 57 ■ Critical Thinking 179
■

Assets 57
4

Liabilities 57
Ch e

Equity 59
apt
r

Chart of Accounts 59
Completing the Accounting Cycle 185

Ledger 60

How Do We Prepare Financial Statements? 186
What Is Double-Entry Accounting? 61

Relationships Among the Financial Statements 187

The T-Account 61

Classified Balance Sheet 188

Increases and Decreases in the Accounts 61

Expanding the Rules of Debit and Credit 62 How Could a Worksheet Help in Preparing Financial

The Normal Balance of an Account 62 Statements? 191

Determining the Balance of a T-Account 63 Section 5—Income Statement 191

Section 6—Balance Sheet 191
How Do You Record Transactions? 64

Section 7—Determine Net Income or Net Loss 192

Source Documents—The Origin of the Transactions 64

Journalizing and Posting Transactions 65 What Is the Closing Process, and How Do We Close the

The Ledger Accounts After Posting 75 Accounts? 193

The Four-Column Account: An Alternative to the T-Account 77 Closing Temporary Accounts—Net Income for the Period 194

What Is the Trial Balance? 79 Closing Temporary Accounts—Net Loss for the Period 197

Closing Temporary Accounts—Summary 197

Preparing Financial Statements from the Trial Balance 79

Correcting Trial Balance Errors 80 How Do We Prepare a Post-Closing Trial Balance? 200

v

What Is the Accounting Cycle? 201 ■ Review 281
■

How Do We Use the Current Ratio to Evaluate Business ■ Assess Your Progress 294
■

Performance? 203 ■ Critical Thinking 319

■

A EN 4A: Reversing Entries: An Optional Step 205
6
PP
DIX

What Are Reversing Entries? 205 Ch e

apt
r
Accounting for Accrued Expenses 205
Merchandise nventory 326

Accounting Without a Reversing Entry 206
I

Accounting with a Reversing Entry 206
What Are the Accounting Principles and Controls
That Relate to Merchandise Inventory? 327
■ Review 208

Accounting Principles 327
■

■ Assess Your Progress 216 Control Over Merchandise Inventory 328
■

■ Critical Thinking 242 How Are Merchandise Inventory Costs Determined Under a
■

■ Comprehensive Problem 1 for Chapters 1–4 245 Perpetual Inventory System? 329

■

■ Comprehensive Problem 2 for Chapters 1–4 245 Specific Identification Method 331

First-In, First-Out (FIFO) Method 332
■

5

Last-In, First-Out (LIFO) Method 333

Ch e Weighted-Average Method 335

apt
r
Merchandising Operations 249 How Are Financial Statements Affected by Using Different

Inventory Costing Methods? 338
What Are Merchandising Operations? 250

Income Statement 338

The Operating Cycle of a Merchandising Business 250

Balance Sheet 339

Merchandise Inventory Systems: Perpetual and Periodic Inventory

Systems 252 How Is Merchandise Inventory Valued When Using the

How Are Purchases of Merchandise Inventory Recorded in a Lower-of-Cost-or-Market Rule? 341

Computing the Lower-of-Cost-or-Market 341
Perpetual Inventory System? 253

Recording the Adjusting Journal Entry to Adjust Merchandise

Purchase of Merchandise Inventory 254
Inventory 341

Purchase Discounts 255

Purchase Returns and Allowances 256 What Are The Effects of Merchandise Inventory Errors on

Transportation Costs 258 the Financial Statements? 343

Cost of Inventory Purchased 259 How Do We Use Inventory Turnover and Days’ Sales in

How Are Sales of Merchandise Inventory Recorded in a Inventory to Evaluate Business Performance? 345

Perpetual Inventory System? 260 Inventory Turnover 346

Cash and Credit Card Sales 260 Days’ Sales in Inventory 346

Sales on Account 261 A EN 6A: Merchandise Inventory Costs Under a

Sales Discounts 262
PP
DIX
Periodic Inventory System 347

Sales Returns and Allowances 263

Transportation Costs—Freight Out 264 How Are Merchandise Inventory Costs Determined Under a

What Are the Adjusting and Closing Entries For a Periodic Inventory System? 347

Merchandiser? 265 First-In, First Out (FIFO) Method 348

Last-In, First-Out (LIFO) Method 349

Adjusting Merchandise Inventory Based on a Physical Count 265

Weighted-Average Method 349

Closing the Accounts of a Merchandiser 266

How Are a Merchandiser’s Financial Statements Prepared? 269 ■ Review 350
■

Income Statement 269 ■ Assess Your Progress 357

■

Statement of Retained Earnings and the Balance Sheet 271

■

How Do We Use the Gross Profit Percentage to Evaluate ■ Comprehensive Problem for Chapters 5 and 6 375
Business Performance? 272
■

7

A EN 5A: Accounting for Multiple Peformance
Ch e
PP
DIX
Obligations 273
apt
r
nternal Control and Cash 380

How Are Multiple Performance Obligations Recorded in a
I

Perpetual Inventory System? 273 What Is Internal Control, and How Can It Be Used to Protect

a Company’s Assets? 381
A EN 5B: Accounting for Merchandise Inventory in a

Internal Control and the Sarbanes-Oxley Act 381
PP
DIX
Periodic Inventory System 275

The Components of Internal Control 382

How Are Merchandise Inventory Transactions Recorded in a Internal Control Procedures 383

Periodic Inventory System? 275 The Limitations of Internal Control—Costs and Benefits 385

Purchases of Merchandise Inventory 275 What Are the Internal Control Procedures With Respect to

Sales of Merchandise Inventory 276 Cash Receipts? 386

Preparing Financial Statements 277 Cash Receipts Over the Counter 386

Adjusting and Closing Entries 277 Cash Receipts by Mail 386

vi Contents

What Are the Internal Control Procedures With Respect to ■ Review 458
■

Cash Payments? 388 ■ Assess Your Progress 465

■

Controls Over Payment by Check 388

■

How Can a Petty Cash Fund Be Used for Internal Control
9
Purposes? 390

Setting Up the Petty Cash Fund 390 Ch e

Replenishing the Petty Cash Fund 391
apt
r
lant Assets, Natural Resources, and

Changing the Amount of the Petty Cash Fund 393
P

How Are Credit Card Sales Recorded? 393 ntangibles 488
I

How Can the Bank Account Be Used as a Control Device? 395 How Does a Business Measure the Cost of Property, Plant,
and Equipment? 489

Signature Card 396

Deposit Ticket 396 Land and Land Improvements 490

Check 396 Buildings 491

Bank Statement 397 Machinery and Equipment 491

Electronic Funds Transfers 397 Furniture and Fixtures 492

Bank Reconciliation 398 Lump-Sum Purchase 492

Examining a Bank Reconciliation 401 Capital and Revenue Expenditures 493

Journalizing Transactions from the Bank Reconciliation 402 What Is Depreciation, and How Is It Computed? 494

How Can the Cash Ratio Be Used to Evaluate Business Factors in Computing Depreciation 495

Performance? 403 Depreciation Methods 495

Partial-Year Depreciation 501

■ Review 404

Changing Estimates of a Depreciable Asset 501
■

■ Assess Your Progress 411 Reporting Property, Plant, and Equipment 502
■

■ Critical Thinking 426 How Are Disposals of Plant Assets Recorded? 503
■

Discarding Plant Assets 504

Selling Plant Assets 506
Ch e

How Are Natural Resources Accounted For? 511
apt
r
Receivables 432

How Are Intangible Assets Accounted For? 512

What Are Common Types of Receivables, and How Are Accounting for Intangibles 512

Credit Sales Recorded? 433 Specific Intangibles 512

Types of Receivables 433 Reporting of Intangible Assets 515

Exercising Internal Control Over Receivables 434 How Do We Use the Asset Turnover Ratio to Evaluate

Recording Sales on Credit 434 Business Performance? 516

Decreasing Collection Time and Credit Risk 435

A EN 9A: Exchanging Plant Assets 517

How Are Uncollectibles Accounted for When Using the
PP
DIX

Direct Write-Off Method? 437 How Are Exchanges of Plant Assets Accounted For? 517

Recording and Writing Off Uncollectible Accounts—Direct Write-off Exchange of Plant Assets–Gain Situation 517

Method 437 Exchange of Plant Assets–Loss Situation 518

Recovery of Accounts Previously Written Off—Direct Write-off
■ Review 519
Method 437
■

Limitations of the Direct Write-off Method 438 ■ Assess Your Progress 525
■

How Are Uncollectibles Accounted For When Using the ■ Critical Thinking 537
■

Allowance Method? 439 ■ Comprehensive Problem for Chapters 7, 8, and 9 538
■

Recording Bad Debts Expense—Allowance Method 439
10

Writing Off Uncollectible Accounts—Allowance Method 440

Recovery of Accounts Previously Written Off—Allowance Method 441 Ch e

apt
r
Estimating and Recording Bad Debts Expense—Allowance Method 442
nvestments 545

Comparison of Accounting for Uncollectibles 447
I

How Are Notes Receivable Accounted For? 449 Why Do Companies Invest? 546

Identifying Maturity Date 450 Debt Securities Versus Equity Securities 546

Computing Interest on a Note 451 Reasons to Invest 546

Accruing Interest Revenue and Recording Honored Notes Classification and Reporting of Investments 547

Receivable 452 How Are Investments in Debt Securities Accounted For? 549

Recording Dishonored Notes Receivable 454 Purchase of Debt Securities 549

How Do We Use the Acid-Test Ratio, Accounts Receivable Interest Revenue 550

Turnover Ratio, and Days’ Sales in Receivables to Disposition at Maturity 550

Evaluate Business Performance? 455 How Are Investments in Equity Securities Accounted For? 551

Acid-Test (or Quick) Ratio 456 Equity Securities with No Significant Influence 551

Accounts Receivable Turnover Ratio 457 Equity Securities with Significant Influence (Equity Method) 552

Days’ Sales in Receivables 457 Equity Securities with Control (Consolidations) 554

Contents vii

How Are Debt and Equity Securities Reported? 554 How Are Bonds Payable Accounted For Using the Straight-

Trading Debt Investments 554 Line Amortization Method? 629

Available-for-Sale Debt Investments 556 Issuing Bonds Payable at Face Value 629

Held-to-Maturity Debt Investments 558 Issuing Bonds Payable at a Discount 629

Equity Investments with No Significant Influence 558 Issuing Bonds Payable at a Premium 632

How Do We Use the Rate of Return on Total Assets to How Is the Retirement of Bonds Payable Accounted For? 634

Evaluate Business Performance? 560 Retirement of Bonds at Maturity 634

■ Review 561 Retirement of Bonds Before Maturity 635

■

■ Assess Your Progress 566 How Are Liabilities Reported On the Balance Sheet? 636

■

■ Critical Thinking 574 How Do We Use the Debt to Equity Ratio to Evaluate
■

Business Performance? 638
11

Ch e A EN 12A: The Time Value of Money 639
PP
DIX

apt
r
What Is the Time Value of Money, and How Is Present Value
Current Liabilities and ayroll 578 and Future Value Calculated? 639
P

How Are Current Liabilities of Known Amounts Accounted Time Value of Money Concepts 640

For? 579 Present Value of a Lump Sum 642

Accounts Payable 579 Present Value of an Annuity 642

Sales Tax Payable 580 Present Value of Bonds Payable 643

Income Tax Payable 580 Future Value of a Lump Sum 644

Unearned Revenues 581 Future Value of an Annuity 645

Short-term Notes Payable 581
A EN 12B: Effective-Interest Method of

Current Portion of Long-term Notes Payable 583 PP
DIX
Amortization 646

How Do Companies Account For and Record Payroll? 583

Gross Pay and Net (Take-Home) Pay 584 How Are Bonds Payable Accounted For Using the Effective-

Employee Payroll Withholding Deductions 584 Interest Amortization Method? 646

Payroll Register 587 Effective-Interest Amortization for a Bond Discount 646

Journalizing Employee Payroll 588 Effective-Interest Amortization of a Bond Premium 647

Employer Payroll Taxes 588 ■ Review 649

■

Payment of Employer Payroll Taxes and Employees’ Withholdings 590

Internal Control Over Payroll 590
■

How Are Current Liabilities That Must Be Estimated
■

Accounted For? 591
13

Bonus Plans 591
Ch e

Vacation, Health, and Pension Benefits 592
apt
r

Warranties 592 Stockholders’ Equity 671

How Are Contingent Liabilities Accounted For? 594 What Is A Corporation? 672

Remote Contingent Liability 595 Characteristics of Corporations 672

Reasonably Possible Contingent Liability 595 Stockholders’ Equity Basics 673

Probable Contingent Liability 595 How Is the Issuance of Stock Accounted For? 676

How Do We Use the Times-Interest-Earned Ratio to Issuing Common Stock at Par Value 677

Evaluate Business Performance? 596 Issuing Common Stock at a Premium 677

■ Review 597 Issuing No-Par Common Stock 678

Issuing Stated Value Common Stock 679
■


Issuing Common Stock for Assets Other Than Cash 679
■

■ Critical Thinking 616 Issuing Preferred Stock 680
■

12
How Is Treasury Stock Accounted For? 681

Treasury Stock Basics 681
Ch e

Purchase of Treasury Stock 681
apt
r
Long-Term Liabilities 619

Sale of Treasury Stock 681

How Are Long-Term Notes Payable and Mortgages Payable Retirement of Stock 685

Accounted For? 620 How Are Dividends and Stock Splits Accounted For? 685

Long-term Notes Payable 620 Cash Dividends 685

Mortgages Payable 621 Stock Dividends 688

What Are Bonds? 623 Cash Dividends, Stock Dividends, and Stock Splits Compared 692

Types of Bonds 625 How Is the Complete Corporate Income Statement

Bond Prices 625 Prepared? 693

Present Value and Future Value 626 Continuing Operations 693

Bond Interest Rates 626 Discontinued Operations 694

Issuing Bonds Versus Issuing Stock 627 Earnings per Share 694

viii Contents

How Is Equity Reported For a Corporation? 695 How Do We Use Vertical Analysis to Analyze a

Statement of Retained Earnings 695 Business? 807

Statement of Stockholders’ Equity 696 Vertical Analysis of the Income Statement 808

How Do We Use Stockholders’ Equity Ratios to Evaluate Vertical Analysis of the Balance Sheet 809

Business Performance? 697 Common-Size Statements 810

Benchmarking 811

Earnings per Share 697

Price/Earnings Ratio 698 How Do We Use Ratios to Analyze a

Rate of Return on Common Stockholders’ Equity 698 Business? 812

■ Review 699 Evaluating the Ability to Pay Current Liabilities 813

■

Evaluating the Ability to Sell Merchandise Inventory and Collect
Receivables 816
■

■ Critical Thinking 725 Evaluating the Ability to Pay Long-term Debt 818
■

■ Comprehensive Problem for Chapters 11, 12, and 13 726 Evaluating Profitability 820

■

Evaluating Stock as an Investment 823

14
Red Flags in Financial Statement Analyses 825

Ch e ■ Review 827
■

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The Statement of Cash Flows 732 ■ Assess Your Progress 835
■

What Is the Statement of Cash Flows? 733 ■ Critical Thinking 854
■

Purpose of the Statement of Cash Flows 733

Classification of Cash Flows 734
16

Two Formats for Operating Activities 736
Ch e

How Is the Statement of Cash Flows Prepared Using the
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Indirect Method? 736 ntroduction to Managerial Accounting 859
I

Cash Flows from Operating Activities 739 Why Is Managerial Accounting

Cash Flows from Investing Activities 743 Important? 860

Cash Flows from Financing Activities 745 Managers' Role in the Organization 861

Net Change in Cash and Cash Balances 749 Managerial Accounting Functions 862

Non-cash Investing and Financing Activities 749 Ethical Standards of Managers 863

How Do We Use Free Cash Flow to Evaluate Business How Are Costs Classified? 865

Performance? 751 Manufacturing Companies 865

Direct and Indirect Costs 866
A EN 14A: Preparing the Statement of Cash Flows by

Manufacturing Costs 866
PP
DIX
the Direct Method 752 Prime and Conversion Costs 867

How Is the Statement of Cash Flows Prepared Using the Product and Period Costs 868

Direct Method? 752 How Do Manufacturing Companies Prepare Financial

Cash Flows from Operating Activities 752 Statements? 870

Balance Sheet 870
A EN 14B: Preparing the Indirect Statement of Cash

Income Statement 870
PP
DIX
Flows Using a Spreadsheet 758

Product Costs Flow Through a Manufacturing

How Is the Statement of Cash Flows Prepared Using the Company 871

Indirect Method and a Spreadsheet? 758 Calculating Cost of Goods Manufactured 872

■ Review 762
Calculating Cost of Goods Sold 874

Flow of Costs Through the Inventory Accounts 875
■


Using the Schedule of Cost of Goods Manufactured to Calculate Unit
■

■ Critical Thinking 795 Product Cost 875
■

What Are Business Trends That Are Affecting Managerial
Ch e 15 Accounting? 877

Shift Toward a Service Economy 877
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Global Competition 877
Financial Statement Analysis 800

Time-Based Competition 877

How Are Financial Statements Used to Analyze a

Total Quality Management 877

Business? 801 The Triple Bottom Line 878

Purpose of Analysis 801
How Is Managerial Accounting Used In Service and

Tools of Analysis 801
Merchandising Companies? 879

Corporate Financial Reports 801

Calculating Cost per Service 879

How Do We Use Horizontal Analysis to Analyze a

Calculating Cost per Item 879

Business? 803 ■ Review 880

Horizontal Analysis of the Income Statement 804
■


Horizontal Analysis of the Balance Sheet 805
■

Trend Analysis 806 ■ Critical Thinking 903

■

Contents ix

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Ch e 17 How Can the Production Cost Report Be Used to Make
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Decisions? 986
Job Order Costing 907

A EN 18A: Process Costing: First-In, First-Out

How Do Manufacturing Companies Use Job Order and
PP
DIX
Process Costing Systems? 908 Method 987

Job Order Costing 908 How Is a Production Cost Report Prepared Using the FIFO

Process Costing 909 Method? 988

How Do Materials and Labor Costs Flow Through the Job Comparison of Weighted-Average and FIFO Methods 996

Order Costing System? 909 ■ Review 997
■

Materials 911 ■ Assess Your Progress 1005

■

Labor 914

How Do Overhead Costs Flow Through the Job Order
■

Costing System? 917
19

Before the Period—Calculating the Predetermined Overhead
Allocation Rate 918 Ch e
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During the Period—Allocating Overhead 919 Cost Management Systems: Activity-Based, Just-in-

What Happens When Products Are Completed and Sold? 921 Time, and Quality Management Systems 1028

Transferring Costs to Finished Goods Inventory 922 How Do Companies Assign and Allocate Costs? 1029

Transferring Costs to Cost of Goods Sold 922

Single Plantwide Rate 1030

How Is The Manufacturing Overhead Account Adjusted? 923 Multiple Department Rates 1032

At the End of the Period—Adjusting for Overallocated and How Is an Activity-Based Costing System Developed? 1036
Underallocated Overhead 923

Step 1: Identify Activities and Estimate Their Total Indirect Costs 1037

Summary of Journal Entries 925

Step 2: Identify the Allocation Base for Each Activity and Estimate the

Cost of Goods Manufactured and Cost of Goods Sold 927 Total Quantity of Each Allocation Base 1038

How Do Service Companies Use a Job Order Costing Step 3: Compute the Predetermined Overhead Allocation Rate for
System? 929 Each Activity 1039

■ Review 931 Step 4: Allocate Indirect Costs to the Cost Object 1040

■

Traditional Costing Systems Compared with ABC Systems 1041

How Can Companies Use Activity-Based Management to
■

Make Decisions? 1042
■

Pricing and Product Mix Decisions 1042

Cost Management Decisions 1043
Ch e 18 How Can Activity-Based Management Be Used in Service
Companies? 1045

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rocess Costing 961

How Do Just-in-Time Management Systems Work? 1048
P

How Do Costs Flow Through a Process Costing System? 962 Just-in-Time Costing 1050

Job Order Costing Versus Process Costing 962 Recording Transactions in JIT 1050

Flow of Costs Through a Process Costing System 963 How Do Companies Manage Quality Using a Quality

What Are Equivalent Units Of Production, and How Are Management System? 1053

They Calculated? 966 Quality Management Systems 1054

Equivalent Units of Production 967 The Four Types of Quality Costs 1054

How Is a Production Cost Report Prepared For the First Quality Improvement Programs 1055

Department? 968 ■ Review 1057

Production Cost Report—First Process—Assembly Department 969
■


How Is a Production Cost Report Prepared for Subsequent
■

Departments? 975
■

Production Cost Report—Second Process—Cutting Department 975
20

What Journal Entries Are Required in a Process Costing
System? 982 Ch e
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Transaction 1—Raw Materials Purchased 982 Cost-Volume- rofit Analysis 1087

Transaction 2—Raw Materials Used in Production 983
P

How Do Costs Behave When There Is a Change in

Transaction 3—Labor Costs Incurred 983
Volume? 1088

Transaction 4—Additional Manufacturing Costs Incurred 983

Variable Costs 1088

Transaction 5—Allocation of Manufacturing Overhead 984

Fixed Costs 1089

Transaction 6—Transfer from the Assembly Department to the

Cutting Department 984 Mixed Costs 1091

Transaction 7—Transfer from Cutting Department to Finished Goods What Is Contribution Margin, and How Is It Used to
Inventory 984 Compute Operating Income? 1095

Transaction 8—Puzzles Sold 984 Contribution Margin 1095

Transaction 9—Adjust Manufacturing Overhead 985 Unit Contribution Margin 1095

x Contents

Contribution Margin Ratio 1096 Budgeting Benefits 1185

Contribution Margin Income Statement 1096 Budgeting Procedures 1186

How Is Cost-Volume-Profit (C ) Analysis Used? 1097 Budgeting and Human Behavior 1186

vp

Assumptions 1097 What Are the Different Types of Budgets? 1187

Breakeven Point—Three Approaches 1097 Strategic and Operational Budgets 1187

Target Profit 1099 Static and Flexible Budgets 1188

CVP Graph—A Graphic Portrayal 1101 Master Budgets 1188

How Is C Analysis Used for Sensitivity Analysis? 1102 How Are Operating Budgets Prepared for a Manufacturing
vp

Changes in the Sales Price 1102 Company? 1190

Changes in Variable Costs 1103
Sales Budget 1191

Changes in Fixed Costs 1103 Production Budget 1192

Using Sensitivity Analysis 1104 Direct Materials Budget 1193

Cost Behavior Versus Management Behavior 1105 Direct Labor Budget 1194

What Are Some Other Ways C Analysis Can Be Used? 1106 Manufacturing Overhead Budget 1195

Cost of Goods Sold Budget 1196
vp

Margin of Safety 1106

Selling and Administrative Expense Budget 1197

Operating Leverage 1107

Sales Mix 1109 How Are Financial Budgets Prepared for a Manufacturing

■ Review 1112 Company? 1198

■

Capital Expenditures Budget 1198

Cash Budget 1198
■


Budgeted Income Statement 1206
■

■ Comprehensive Problem For Chapters 16–20 1137 Budgeted Balance Sheet 1207

■

21
How Are Operating Budgets Prepared for a Merchandising
Ch e Company? 1209

Sales Budget 1209
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Variable Costing 1142

Inventory, Purchases, and Cost of Goods Sold Budget 1211

How Does Variable Costing Differ from Absorption Selling and Administrative Expense Budget 1211

Costing? 1143 How Are Financial Budgets Prepared for a Merchandising

Absorption Costing 1143 Company? 1212

Variable Costing 1143 Capital Expenditures Budget 1212

Comparison of Unit Product Costs 1144 Cash Budget 1213

How Does Operating Income Differ Between Variable Budgeted Income Statement 1217

Costing and Absorption Costing? 1145 Budgeted Balance Sheet 1218

Units Produced Equal Units Sold 1146 How Can Information Technology Be Used in the Budgeting

Units Produced Are More Than Units Sold 1147 Process? 1220

Units Produced Are Less Than Units Sold 1149 Sensitivity Analysis 1220

Summary 1150 Budgeting Software 1220

How Can Variable Costing Be Used for Decision Making in a ■ Review 1221
■

Manufacturing Company? 1152 ■ Assess Your Progress 1228

■

Setting Sales Prices 1153

Controlling Costs 1153
■

Planning Production 1153
23

Analyzing Profitability 1153
Ch e

Analyzing Contribution Margin 1156
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Summary 1157
Flexible Budgets and Standard Cost

How Can Variable Costing Be Used for Decision Making in a Systems 1265
Service Company? 1158

How Do Managers Use Budgets to Control Business

Operating Income 1158
Activities? 1267

Profitability Analysis 1159

Performance Reports Using Static Budgets 1267

Contribution Margin Analysis 1160

Performance Reports Using Flexible Budgets 1268

■ Review 1162

Why Do Managers Use a Standard Cost System to Control
■

Business Activities? 1272
■


Setting Standards 1273
■

22
Standard Cost System Benefits 1275

Variance Analysis for Product Costs 1275
Ch e

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How Are Standard Costs Used to Determine Direct Materials
Master Budgets 1183 and Direct Labor Variances? 1277

Why Do Managers Use Budgets? 1184 Direct Materials Variances 1278

Budgeting Objectives 1184 Direct Labor Variances 1280

Contents xi

How Are Standard Costs Used to Determine Manufacturing Relevant Nonfinancial Information 1375

Overhead Variances? 1282 Differential Analysis 1375

Allocating Overhead in a Standard Cost System 1283 How Does Pricing Affect Short-Term Decisions? 1377

Variable Overhead Variances 1283 Setting Regular Prices 1377

Fixed Overhead Variances 1285 Special Pricing 1381

What Is the Relationship Among the Product Cost How Do Managers Decide Which Products to
Variances, and Who Is Responsible for Them? 1288 Produce and Sell? 1384

Variance Relationships 1289 Dropping Unprofitable Products and Segments 1384

Variance Responsibilities 1290 Product Mix 1388

How Do Journal Entries Differ in a Standard Cost System? 1291 Sales Mix 1391

Journal Entries 1291 How Do Managers Make Outsourcing and Processing

Standard Cost Income Statement 1295 Further Decisions? 1392

■ Review 1297 Outsourcing 1392

■

Sell or Process Further 1396

■

■ Critical Thinking 1320 ■ Review 1399
■

■

■

24
■

Ch e
26
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Responsibility Accounting and erformance
Ch e
P
Evaluation 1324
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Capital nvestment ecisions 1426

Why Do Decentralized Companies Need Responsibility
I
D

Accounting? 1325 What Is Capital Budgeting? 1427

Advantages of Decentralization 1325 The Capital Budgeting Process 14427

Disadvantages of Decentralization 1326 Focus on Cash Flows 1429

Responsibility Accounting 1327 How Do The Payback and Accounting Rate of Return

What Is A Performance Evaluation System, and How Is It Methods Work? 1431

Used? 1330 Payback 1431

Goals of Performance Evaluation Systems 1330 Accounting Rate of Return (ARR) 1434

Limitations of Financial Performance Measurement 1331 What Is the Time Value of Money? 1437

The Balanced Scorecard 1331 Time Value of Money Concepts 1438

How Do Companies Use Responsibility Accounting to Evaluate Present Value of a Lump Sum 1440
Performance in Cost, Revenue, and Profit Centers? 1334 Present Value of an Annuity 1441

Controllable Versus Noncontrollable Costs 1334 Present Value Examples 1441

Responsibility Reports 1335 Future Value of a Lump Sum 1443

Future Value of an Annuity 1443
How Does Performance Evaluation in Investment Centers

Differ from Other Centers? 1339 How Do Discounted Cash Flow Methods Work? 1444

Return on Investment (ROI) 1340 Net Present Value (NPV) 1444

Residual Income (RI) 1343 Internal Rate of Return (IRR) 1449

Limitations of Financial Performance Measures 1344 Comparing Capital Investment Analysis Methods 1452

Sensitivity Analysis 1453
How Do Transfer Prices Affect Decentralized

Capital Rationing 1456
Companies? 1346

Objectives in Setting Transfer Prices 1346 ■ Review 1457
■

Setting Transfer Prices 1347 ■ Assess Your Progress 1463

■

■ Review 1349 ■ Critical Thinking 1476
■

■

■ Assess Your Progress 1355 ■ Comprehensive Problem for Chapters 25 and 26 1477
■

■

■

■ Comprehensive Problem for Chapters 22–24 1367
App dix A— Present Value Tables and Future Value Tables
■

A-1
en

25
App dix B— Accounting Information Systems B-1
en

Ch e GLOSSARY G-1

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Short-Term Business ecisions 1373 N E I-1
I
D
X

D

How Is Relevant Information Used to Make Short-Term HOTO CRE TS P-1
P
DI

Decisions? 1374

Relevant Information 1374

xii Contents

Changes to This Edition
General
Revised end-of-chapter short exercises, exercises, problems, continuing problems, comprehensive problems, and critical
thinking cases.
NEW! Using Excel. This end-of-chapter problem introduces students to Excel to solve common accounting problems as they would
in the business environment.
NEW! Tying It All Together feature ties together key concepts from the chapter using the company highlighted in the chapter opener.
The in-chapter box feature presents scenarios and questions that the company could face and focuses on the decision-making
process. The end-of-chapter business case helps students synthesize the concepts of the chapter and reinforce critical thinking.
NEW! A Continuing Problem starts in Chapter 1 and runs through the financial chapters, exposing students to recording entries for
a service company and then moving into recording transactions for a merchandiser later in the text. The managerial chapters’
continuing problem has been revised for this edition and emphasizes the relevant topics for that chapter using a continuous
company.
Chapter 1
NEW! Added discussion about why accounting is important to non-accounting majors.
Chapter 3
Updated discussion of the revenue recognition principle for the newly released standard.
Added a discussion on how to calculate interest for notes receivable and notes payable.
Changed interest calculations to use a 365-day year rather than a 360-day year to better reflect how actual lenders calculate interest.
Chapter 4
Increased the usage of the classified balance sheet as a requirement for end-of-chapter problems.
Changed the balance sheet presentation to reflect Property, Plant, and Equipment rather than Plant Assets.
Chapter 5
REVISED! Discussion on sales of merchandise revised to reflect the newly released revenue recognition standard, including
reporting sales on account at the net amount and introduction of the Sales Discounts Forfeited account.

Changed income statement presentation to reflect Other Income and (Expenses) instead of Other Revenue and (Expenses) to better
reflect how actual income statements are presented.
NEW! Added Appendix 5A that discusses multiple performance obligations.
Chapter 6
NEW! Added a comprehensive problem for Chapters 5 and 6 which includes the complete accounting cycle for a merchandising
company with ratio analysis.
Chapter 7
NEW! Added coverage of credit card sales. In previous editions, this topic was covered in Chapter 8.
Chapter 8
Expanded coverage of estimating bad debts to help students understand why the Allowance for Bad Debts account may have either a
debit or credit unadjusted balance due to previously overestimated or underestimated adjustments.
Chapter 9
NEW! Added comprehensive problem for Chapters 7–9 which includes transactions and analysis for cash, receivables, and
long-term assets.
Chapter 10
REVISED! Discussion on debt and equity securities revised to reflect newly released financial instrument standard including the
elimination of trading investments (equity) and available-for-sale investments (equity).
xiii

Chapter 11
Updated the payroll section for consistency with current payroll laws at the time of printing.
Added a section to illustrate how companies record the payment of payroll liabilities.
Chapter 12
NEW! Added discussion on future value, including determining the future value of a lump sum and of an annuity.
Chapter 13
NEW! Moved the corporate income statement, including calculating earnings per share, from the Chapter 15 Appendix to
Chapter 13. The discussion on the Extraordinary Items section has been removed to align with current standards.

NEW! Added comprehensive problem for Chapters 11–13 which includes payroll, other current liabilities, long-term liabilities, and
stockholders’ equity transactions and analysis.
Chapter 14
Modified the wording in Changes to Current Assets and Current Liabilities section of preparing the statement of cash flows, indirect
method, to emphasize adjustments are made to net income to convert from accrual basis to cash basis.
Chapter 15
Rearranged the liquidity ratios from most stringent to least stringent (cash ratio, acid-test ratio, current ratio).
NEW! Added problem (both A and B series) that has students complete a trend analysis and ratios to analyze a company for its
investment potential.
Chapter 16
Expanded the discussion of managerial accounting to include manager’s role in the organization and managerial accounting
functions.

Clarified and expanded the discussion of how companies classify costs used in managerial accounting.
Revised the discussion on manufacturing cost flows, including better explanation of how cost of goods manufactured and cost of
goods sold are calculated.
Expanded discussion on business trends that are affecting managerial accounting.
Chapter 17
Expanded the discussion on cost accounting systems, including why companies choose either process or job-order costing.
Clarified the discussion on the allocation and adjustment of manufacturing overhead.
Chapter 18
REVISED! For consistency throughout the chapter, all company examples now use the same company, Puzzle Me, to better
understand how costs flow through a process costing system and are reflected on the production cost report.

Expanded and clarified discussion on equivalent units of production.
REVISED! The discussion on preparing a production cost report was split into two learning objectives (first department and
subsequent departments) allowing faculty to omit the discussion on subsequent departments.

REVISED! Discussion on preparing a production cost report for the first department now realistically reflects beginning inventory.
Updated the discussion on how the weighted-average method is different than the FIFO method when preparing the production
cost report.
Chapter 19
Clarified the differences between the use of a single plantwide rate versus a multiple department rate when allocating overhead.
Expanded the discussion of how service companies can use activity-based management.
xiv

Chapter 20
Moved discussion of breakeven point before coverage of target profit for better student understanding.
Clarified the high-low method when determining a company’s variable and fixed costs.
NEW! Discussion on how sensitivity analysis could be used and the differences between predicted cost behavior versus actual man-
agement behavior.
Chapter 21
Expanded discussion on the differences between absorption and variable costing and the impact on operating income.
Chapter 22
Expanded discussion benefits of budgets, including benchmarking.
NEW! Added discussion on types of budgets, including participative, zero-based, and continuous budgets.
Moved the coverage of merchandising budgets from the appendix into the chapter. This allows faculty to choose to cover both
manufacturing and merchandising budgets or either. Each section is developed on a stand-alone basis.
Clarified the steps involved in the different budgets for better student understanding.
Chapter 23
Expanded the discussion on performance reports using static budgets, including advantages and disadvantages.
Chapter 26
NEW! Added discussion on future value, including determining the future value of a lump sum and of an annuity.
http://www.pearsonhighered.com/Horngren
xv

Financial & Managerial Accounting . . .
Expanding on Proven Success
Accounting Cycle Tutorial
MyAccountingLab’s interactive tutorial helps students
master the Accounting Cycle for early and continued

success in the Introduction to Accounting course. The
tutorial, accessed by computer, smartphone, or tablet,
provides students with brief explanations of each con-

cept of the Accounting Cycle through engaging, inter-
active activities. Students are immediately assessed on

their understanding and their performance is recorded
in the MyAccountingLab Gradebook. Whether the
Accounting Cycle Tutorial is used as a remediation

self-study tool or course assignment, students have
yet another resource within MyAccountingLab to help

them be successful with the accounting cycle.
NEW!
ACT Comprehensive roblem
P
The Accounting Cycle Tutorial now includes a comprehensive problem that allows students to work with the same

set of transactions throughout the accounting cycle. The comprehensive problem, which can be assigned at the beginning or
the end of the full cycle, reinforces the lessons learned in the accounting cycle tutorial activities by emphasizing the connec-

tions between the accounting cycle concepts.
Study lan
P
The Study Plan acts as a tutor, providing personalized recommendations for each of your students based on his or her abil-
ity to master the learning objectives in your course. This allows students to focus their study time by pinpointing the precise
areas they need to review, and allowing them to use customized practice and learning aids–such as videos, eText, tutorials, and
more–to get them back on track. Using the report available in the Gradebook, you can then tailor course lectures to prioritize
the content where students need the most support–offering you better insight into classroom and individual performance.

ynamic Study Modules
D
Help students study effectively on their
own by continuously assessing their activity
and performance in real time. Here’s how
it works: students complete a set of ques-
tions with a unique answer format that also
asks them to indicate their confidence level.
Questions repeat until the student can an-
swer them all correctly and confidently.
Once completed, Dynamic Study Modules
explain the concept using materials from
the text. These are available as graded as-
signments prior to class, and accessible on
smartphones, tablets, and computers. NEW!
Instructors can now remove questions from
Dynamic Study Modules to better fit their
course. Available for select titles.
xvi

Learning Catalytics
Learning Catalytics helps you generate class discussion,
customize your lecture, and promote peer-to-peer learning
with real-time analytics. As a student response tool, Learn-
ing Catalytics uses students’ smartphones, tablets, or lap-
tops to engage them in more interactive tasks and thinking.
• NEW! Upload a full PowerPoint® deck for easy cre-
ation of slide questions.
• Help your students develop critical thinking skills.
• Monitor responses to find out where your students are

struggling.
• Rely on real-time data to adjust your teaching strategy.
• Automatically group students for discussion, team-
work, and peer-to-peer learning.
Animated Lectures
These pre-class learning aids are available for every
learning objective and are professor-narrated Pow-
erPoint summaries that will help students prepare
for class. These can be used in an online or flipped
classroom experience or simply to get students ready
for lecture.
Chapter Openers
246 chapter 4
Chapter openers set up the concepts to be covered in the chapter using stories students can relate to. The implications
Adjustment data:
of those concepts on a company’s reporting and decision making processes are then discussed.a. Office Supplies on hand, $600.
b. Accrued Service Revenue, $1,800.
c. Accrued Salaries Expense, $500.
Tying t All Together

d. Prepaid Insurance for the month has expired.
e. Depreciation was recorded on the truck for the month.
NEW! 6. Prepare an adjusted trial balance as of January 31, 2019.
I
This feature ties together key concepts from the chapter using the company highlighted in the chapter opener.
7. Prepare Murphy Delivery Service’s income statement and statement of
retained earnings for the month ended January 31, 2019, and the classified

The in-chapter box feature presents scenarios and questions that the company could face and focuses decreasing orderthe
on decision-making
balance sheet on that date. On the income statement, list expenses in
by amount—that is, the largest expense first, the smallest

expense last.
process. The end of chapter business case helps students synthesize the concepts of the chapter and reinforce
8. Calculate critical
the following ratios as of Januarythinking.
31, 2019, for Murphy Delivery Ser-
vice: return on assets, debt ratio, and current ratio.
Completing the Accounting Cycle 199
TYING IT ALL TOGETHER > Tying It All Together 4-1

Before you begin this assignment, review the Tying It All Together feature in the chapter. It will also be helpful if you review
Hyatt Hotels Corporation was founded in 1957 when Jay Pritz- closed at the end of the period. Revenues, expenses, and dividends Hyatt Hotels Corporation’s 2015 annual report ( https://www.sec.gov/Archives/edgar/data/1468174/000146817416000152/
ker purchased the first Hyatt hotel next to the Los Angeles Inter- are all temporary accounts. Some examples of temporary accounts h10-k123115.htm ).
CHAPTER 4
national Airport. Today, Hyatt Hotels owns and operates hotels in that Hyatt Hotels might have include Owned and Leased Hotels Hyatt Hotels Corporation is headquartered in Chicago and is a leading global hospitality company. The company develops,
owns, and operates hotels, resorts, and vacation ownership properties in 52 different countries. For the year ended December 31,
52 countries around the world. For the year ended December 31, Revenue; Selling, General, and Administrative Expense; Interest
2015, Hyatt Hotels reported the following select account information (in millions):
2015, the company reported revenues totaling $4.3 billion with Expense; and Dividends.
net income of $124 million. (You can find Hyatt Hotels Corpo- Revenue $ 4,328
ration’s annual report at https://www.sec.gov/Archives/edgar/ When would Hyatt Hotels Corporation prepare its post-
data/1468174/000146817416000152/h10-k123115.htm) closing trial balance? What type of accounts would be Selling, general, and administrative expense 4,005
reported on this trial balance? Other Expenses 61
Would Hyatt Hotels Corporation record closing entries A post-closing trial balance is a list of all permanent accounts
and why? Interest Expense 68
and their balances at the end of the accounting period and is
Hyatt Hotels would record closing entries in order to get the prepared after the closing process. Hyatt Hotels would report Income Tax Expense 70
accounts ready for next year. All companies record closing entries only permanent accounts on its post-closing trial balance. Some Dividends 0
in order to zero out all revenue and expense accounts. In addition, examples of permanent accounts that Hyatt Hotels might have
the closing process updates the Retained Earnings account bal- include assets, such as Cash and Property; liabilities, such as Retained Earnings, December 31, 2014 2,165
ance for net income or loss during the period and any dividends Accounts Payable; and equity, such as Common Stock and
paid to stockholders. Retained Earnings. Requirements
1. Journalize Hyatt Hotels Corporation’s closing entries at December 31, 2015.
Why are temporary accounts important in the closing
2. Determine Hyatt Hotels Corporation’s ending Retained Earnings balance at December 31, 2015.
process? What type of temporary accounts would Hyatt
Hotels Corporation have? 3. Review the Hyatt Hotels Corporation’s balance sheet included in the 2015 annual report and find ending Retained Earnings,
December 31, 2015. Does your ending Retained Earnings calculated in Requirement 2 match?
Temporary accounts are important in the closing process because
these accounts relate to a particular accounting period and are
xvii

Try It!
Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.
Cash $ 4,000 Common Stock $ 20,000

Accounts Receivable 3,200 Retained Earnings, January 1 15,700
M04_HORN6833_06_SE_C04.indd 246 12/20/16 11:41 PM
Prepaid Rent 1,900 Dividends 2,100

Office Supplies 3,000 Service Revenue 1,600
Equipment 34,800 Depreciation Expense—Equipment 300
the business earned by providing e-learning services for clients.
The asset Cash increased, so we debit Cash. Revenue increased, so we credit Service
Revenue.
Date Accounts and Explanation Debit Credit

Ac L + Ec
Nov. 8 Cash slide.ne
lide.n
5,500 t Cashc = Service
Service Revenue 5,500 Revenuec
Performed services and received cash.
EffectCashon the Accounting Equation

Service Revenue
Nov.Next to every
1 30,000 20,000journal
Nov. 2entry
in both financial
5,500 and managerial
Nov. 8 chapters, these illustrations help
Nov.reinforce
8 5,500
the connections between recording transactions and the effect those transactions have
130 chapter 3
on the accounting equation.
Transaction 5—Earning of ServiceBook Revenue
ValueonTheAccount
balance sheet reports both Furniture and Accumulated Depreciation—
On November 10, Smart Touch Learning performed
Furniture. services
Because it is for clients, for
a contra whichAccumulated
account, the Depreciation—Furniture is
clients will pay the company later. The business earned
subtracted $3,000
from of service
Furniture. Therevenue onnet
resulting account.
amount (cost minus accumulated depreciation)
This transaction Book increased
Value Accounts Receivable,
of a plant so weitsdebit
asset is called bookthis asset.
value. TheService
book value represents the cost invested in the
Revenue is increased
A depreciable with
asset’s costa minus
credit. assetPlant Assets,
that the Natural
business has Resources, and Intangibles
not yet expensed. For Smart Touch Learning’s 513furniture, the
accumulated depreciation. book value on December 31 is as follows:
Like any other asset, a patent may be purchased. Suppose Smart Touch Learning pays
Date on January 1.Accounts
$200,000 to acquire a patent and Explanation
The accounting Debit
clerk records the following Credit
entry Ac L + Ec
at acquisition: Nov. 10 Accounts Receivable 3,000
Book value of furniture: Accounts = Service
Service Revenue 3,000 Receivablec Revenuec
Furniture $ 18,000
Date Performed
Accounts and services on account.
Explanation Debit Less: Accumulated
Credit AcT
Depreciation—FurnitureL + (300)
E
Jan. 1 Patent Patentc
Book value of furniture
200,000 = $ 17,700
Cash 200,000 CashT
To record purchase nstructor Tips & Tricks

Accounts Receivable
of patent. Service Revenue
I
Nov. Found
10 3,000 throughout
the text, 5,500 notes
these handwritten Nov. 8mimic the experience of having an experi-
Depreciation on the3,000
buildingNov.
purchased on December 1 would be recorded in a simi-
enced teacher walk alarstudent
manner.through
Supposeconcepts on the10depreciation
that the monthly “board.” Many include
is $250. mnemonic
The following devices
adjusting entry
or examples
Smart Touch Learning believes to help
this patent’s would
useful liferecord
students depreciation
remember
is only thefor
five years December:
rules
because ofit isaccounting.
likely that a new, moreNotice the process
efficient differences
willand the similarities
be developed between
within Transactions
that time. 4 and 5. In both
Amortization
transactions, Service Revenue was increased
expense is calculated using the straight-line method as follows:(credited) because in both cases the company
had earned
AT revenue. However,
L + in Transaction
ET 4, the company wasAccounts
Date paid at the
and time of ser-
Explanation Debit Credit
vice. In Transaction 5, on theDepreciation
Accumulated other hand, the company
Dec. will receive
31 Depreciation cash later (Accounts
Expense—Building 250
Receivable). =
Thisexpense
difference isExpense—
key-because
Depreciation—
Amortization = (Cost Residualthe amount
value) of
/ Useful revenue is
life
Accumulated
not determined by
Depreciation—Building 250
when c
the company
Building receives cash. c are recorded when the company does the work or
Revenues
Building
= ($200,000 - $0) / 5 yearsTo record depreciation on building.
provides the service.
= $40,000 per year
Transaction 6—Payment of Expenses with Cash
Smart Touch Learning paid the following cash expenses on November 15: office rent,
$2,000, and employee salaries, $1,200. We need to debit each expense account to record its
For most
increase and creditintangibles, the residual
Cash, an asset, for the value will be zero.
total decrease. Remember, an increase in a contra asset, such as Accumulated
Depreciation, decreases total assets. This is because a contra asset
has a credit balance and credits decrease assets.
The company’s accounting clerk would record the following adjusting entry for
amortization:
Had Smart Touch Learning not recorded the adjusting entries for depreciation on
Date Common Questions,
Accounts and Explanation
the furniture andAnswered
Debit Creditplant assetsAT
building, would have been
L overstated
+ and
ET expenses would
Dec. 31 Amortization Our authors
Expense—Patenthave spent yearsunderstated.
have been in the classroom
40,000 answering
PatentT students’
After recording questions
the adjusting entries, and
property, have
plant,
Amortization
andfound
equip-
M02_HORN6833_06_SE_C02.indd 69
ment (plant assets) are reported at the correct = amount, as shown
net
12/17/16 2:25 PM
Patent patterns in the concepts or rules that consistently

40,000 confuse students. These commonly asked31
on
Expense—the December
partial balance sheet in Exhibit 3-2. Patent c
questions
To record amortization are located in the margin of the text next to where the answer or clarification
of patent. can be
found highlighted in purple text.
Notice that Smart Touch Learning credited the amortization directly to the intangible
asset, Patent, instead of using an Accumulated Amortization account. A company may
credit an intangible asset directly when recording amortization expense, or it may use the
account Accumulated Amortization. Companies frequently choose to credit the asset Why was the
account directly because the residual value is generally zero and there is no physical account Patent
asset to dispose of at the end of its useful life, so the asset essentially removes itself
credited instead
from the books through the process of amortization.
At the end of the first year, Smart Touch Learning will report this patent at $160,000 of Accumulated
($200,000 cost minus first-year amortization of $40,000), the next year at $120,000, and so Amortization—
forth. Each year for five years the value of the patent will be reduced until the end of its Patent?
five-year life, at which point its book value will be $0.
Copyrights and Trademarks 130
M03_HORN6833_06_SE_C03.indd 11/4/16 2:35 PM
A copyright is the exclusive right to reproduce and sell a book, musical composition, film, Copyright
Exclusive right to reproduce and sell
xviii other work of art, or intellectual property. Copyrights also protect computer software pro- a book, musical composition, film,
grams, such as Microsoft® Windows® and the Microsoft® Excel® spreadsheet software. Issued other work of art, or intellectual
by the federal government, a copyright is granted for the life of the creator plus 70 years. property.

Try it! Boxes
Found after each learning objective, Try Its! give students opportunities to apply the concept
they’ve just learned by completing an accounting problem. Links to these exercises appear
t122
hroughout the chapter
eText, allowing
3 students to practice in MyAccountingLab without interruption.
Try It!
Total Pool Services earned $130,000 of service revenue during 2018. Of the $130,000 earned, the business received $105,000 in
cash. The remaining amount, $25,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred
$85,000 of expenses during the year. As of December 31, $10,000 of the expenses still needed to be paid. In addition, Total Pool
Services prepaid $5,000 cash in December 2018 for expenses incurred during the next year.
1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system.
2. Determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.
Check your answers online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren.
For more practice, see Short Exercises S3-1 and S3-2. MyAccountingLab
WHAT CONCEPTS AND PRINCIPLES APPLY

TO ACCRUAL BASIS ACCOUNTING?
Try t! Solution Videos FRS
I
I
Learning Objective 2As we have seen, the timing and recognition of revenues and expenses are the key differ-
Information on IFRS provides guidance
Author-recorded and accompanying
Define and apply the time period
Try It! Exercises, these videos walk
ences between the cash basis and accrual basis methods of accounting. These differences
students through the problem
concept, revenue recognition, and can and by understanding the time period concept and the revenue recognitiondiffers from U.S. GAAP
the solution.
be explained on how IFRS
matching principles
and matching principles. throughout the financial chapters.
The Time Period Concept
Smart Touch Learning will know with 100% certainty how well it has operated only if the
company sells all of its assets, pays all of its liabilities, and gives any leftover cash to its
stockholders. For obvious reasons, it is not practical to measure income this way. Because
Time Period Concept businesses need periodic reports on their affairs, the time period concept assumes that a
Assumes that a business’s activities business’s activities can be sliced into small time segments and that financial statements can
can be sliced into small time be prepared for specific periods, such as a month, quarter, or year.
segments and that financial
statements can be prepared for The basic accounting period is one year, and most businesses prepare annual financial
specific periods, such as a month, statements. The 12-month accounting period used for the annual financial statements is
quarter, or year. called a fiscal year. For most companies, the annual accounting period is the calendar year,
Fiscal Year
from January 1 through December 31. Other companies use a fiscal year that ends on a date
An accounting year of any 12 other than December 31. The year-end date is usually the low point in business activity for
consecutive months that may the year. Retailers are a notable example. For instance, Wal-Mart Stores, Inc., and J. C. Penney
or may not coincide with the Company, Inc., use a fiscal year that ends around January 31 because the low point of their
calendar year. business activity comes about a month after the holidays.
Revenue Recognition Principle
Requires companies to record The Revenue Recognition Principle
ecision Boxes
revenue when (or as) the entity
The revenue recognition principle1 tells accountants when to record revenue and requires
satisfies each performance
D
companies
This feature provides common follow aand
questions
obligation. five step process:solutions business owners face. Students
potential
Step 1: Identify
are asked to determine the course the contract
of action with thetake
they would basedAon
customer. contract is an agreement
concepts coveredbetween
in the
two or more parties that creates enforceable rights and obligations.
chapter and are then given potential solutions. Process Costing 987
Step 2: Identify the performance obligations in the contract. A performance obli-
gation is a contractual promise with a customer to transfer a distinct good or service.
DECISIONS
Can we cut these costs?
1
On May 28, 2014, the FASB and IASB issued new guidance on accounting for revenue recognition, Revenue from Contracts with
The management team of Puzzle Me is looking Customersat(Topic
the 606).
production of $0.165
This new standard willper puzzle
become (+3.30for* public
effective 5%) and decrease
business total
entities withcosts from
annual reporting periods
cost reports for July, and discussing opportunities
beginning afterfor improve-
December $5.30 to $5.135 per puzzle. Based on the completed production
15, 2017.
ment. The production manager thinks the production process is of 38,000 puzzles in July, the total cost savings would be $6,270
very efficient, and there is little room for cost savings in conversion per month (+0.165 per puzzle * 38,000 puzzles). The purchasing
costs. The purchasing manager tells the team that he was recently manager recommends using the new supplier.
approached by a supplier with an excellent reputation for quality.
This supplier submitted a bid for cardboard that was a little thinner Alternate Solution
but would allow the company to decrease direct materials costs by
M03_HORN6833_06_SE_C03.indd 122 The marketing manager has a different perspective. He points 11/4/16 2:34 PM
5%. What should the team do?
out that most of the puzzles produced are for toddlers. Based
on market research, the adults who purchase these puzzles like
Solution the sturdy construction. If Puzzle Me changes materials and the
The production cost reports for the Assembly and Cutting Depart- puzzles do not stand up well to the treatment they receive by
ments show direct materials costs of $2.80 and $0.50 per puzzle, young children, the company could rapidly lose market share.
respectively, for total direct materials cost of $3.30 per puzzle. A The marketing manager does not recommend using a thinner
decrease of 5% in direct materials costs would result in a savings cardboard.
• Pricing products. Puzzle Me must set its sales price high enough to cover the manu-
facturing cost of each puzzle plus selling and administrative costs. The production cost xix

report for the Cutting Department, Exhibit 18-13, shows that the total production cost
of manufacturing a puzzle is $5.30 ($4.40 per EUP for transferred in, $0.50 per EUP for
direct materials, and $0.40 per EUP for conversion costs). Obviously, the puzzle must be
priced more than this for the company to be profitable.
• Identifying the most profitable products. Sales price and cost data help managers
figure out which products are most profitable. They can then promote these products to
help increase profits.
• Preparing the financial statements. Finally, the production cost report aids financial
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Winters Landscape Services accrued $4,000 of Salaries Expense at December 31. Winters paid the next payroll at January 10 of
$6,000. This payment included the accrued amount at December 31, plus $2,000 for the first few days of January.
23A. Record the adjusting entry to accrue Salaries Expense.
24A. Record the reversing entry.
25A. Journalize the cash payment.
Check your answers online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren.
CHApTeR 4
For more practice, see Short Exercise S4A-15. MyAccountingLab
REVIEW
> Things You Should Know Things You Should Know
1. How do we prepare financial statements? Provides students with a brief review of each
242 chapter 4
■ Financial statements are prepared from the adjusted trial balance in the following learning objective presented in a question
order:
1. Income statement—reports revenues and expenses and calculates net income or
and answer
e. Unearned Revenue format.
earned during December, $4,200.
net loss during the period f. Accrued Service Revenue, $1,000.
2. Statement of retained earnings—shows how retained earnings changed during 2019the
transactions:
period due to net income or net loss and dividends a. On January 4, Myla’s Motors paid wages of $1,900. Of this, $1,300 related to the
3. Balance sheet—reports assets, liabilities, and stockholders’ equity as of the lastaccrued
day wages recorded on December 31.
of the period b. On January 10, Myla’s Motors received $1,700 for Service Revenue. Of this, $1,000
■ A classified balance sheet classifies each asset and each liability into specific categories.
related to the accrued Service Revenue recorded on December 31.
2. How could a worksheet help in preparing financial statements? Requirements

■ The columns of a worksheet can be extended to help in preparing the financial1. Journalize adjusting entries.
statements. 2. Journalize reversing entries for the appropriate adjusting entries.
■ The income statement section will include only revenue and expense accounts.3. Refer to the 2019 data. Journalize the cash payment and the cash receipt that
■ The balance sheet section will include asset and liability accounts and all equity occurred in 2019.
accounts except revenues and expenses.
CHAPTER 1
CRITICAL THINKING
52 chapter 1
Using Excel > Using Excel

CRITICAL THINKING
NEW! M04_HORN6833_06_SE_C04.indd 208 11/4/16 2:40 PM
roblems
CHApTeR 4
P4-41 Using Excel to prepare financial statements, closing entires, and the post-closing trial balance
P
This end of chapter problem intro Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren.
> Using Excel

Cedar River Corporation started operations on July 1, 2018. On July 31, a trial balance was prepared, adjusting entries were
duces students to Excel to solve common journalized and posted, and an adjusted trial balance was completed. A worksheet is to be used to help prepare the financial
P1-54 Using Excel to prepare transaction analysis statements and the post-closing trial balance.
accounting problems as they would in Requirements
Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren.
theoperations
Echo Lake Corporation started businesson Novemberenvironment. Students
1, 2018. Nine transactions occur during November.
1. UseFinancial
Excel to statements
complete the Income Statement and Balance Sheet columns of the worksheet.
are prepared at the end of the month.
will work from a template that will aid a. Use formulas to total the columns.
Requirements b. Use a formula to determine the amount of the net income or net loss.
them in solving the problem related to
1. Use Excel to prepare a transaction analysis of the nine transactions. Use the blue shaded areas for inputs. c. Format the cells requiring dollar signs.
a. For each transaction, recordaccounting
the amount (eitherconcepts taughtunder
an increase or decrease) in the
thecorrect
chap-
account. Enter onlyd. Boldface
non-zerothe totals.
amounts.
If an account is not affected by the transaction, leave the amount blank. Be sure to use a minus sign (−)2.if the amount
Prepare the is a
income statement, the statement of retained earnings, and a classified balance sheet.
decrease. ter. Each chapter focuses on different a. Use the Increase Indent button on the Home tab to indent items.
Excel skills.
b. The row totals will be calculated automatically.
b. Use formulas to sum items.
c. The accounting equation (Assets = Liabilities + Equity) should remain in balance after each transaction. The accounting
equation is calculated automatically to the right of the transaction table. 3. Journalize the closing entries. The account titles are available when you click on the down-arrow.
2. Prepare the income statement, statement of retained earnings, balance sheet, and statement of cash flows 4. for the the closing
Postcompany. entries to the T-accounts.
Each
financial statement appears on a separate worksheet tab. Fill in the blue shaded areas using a formula that references
5. Completethe the
account
post-closing trial balance using formulas referencing the T-accounts. The account titles are available when you click
balances at the end of the month in the Transaction Analysis tab. the down-arrow.
End-of-Chapter Continuing and Comprehensive roblems a. Format the cells requiring dollar signs.
P
b. Boldface the totals.
> Continuing Problem NEW!

Continuing Problem—Starts in
Chapter 1 and runs through the financial
P1-55 is the first problem in a continuing problem that will be used throughout the
chapters to reinforce the concepts learned. chapters, exposing students to recording entries for a
P1-55 Using the accounting equation for transaction analysis, preparing service company and then moving into recording trans-
financial statements, and calculating return on assets (ROA) actions for a merchandiser later in the text. The manage-
Canyon Canoe Company is a service-based company that rents canoes for use
on local lakes and rivers. Amber and Zack Wilson graduated from college about rial chapters’ continuing problem has been revised for
10 years ago. They both worked for one of the “Big Four” accounting firms this edition and emphasizes the relevant topics for that
and became CPAs. Because they both love the outdoors, they decided to begin a
new business that will combine their love of outdoor activities with their busi-
M04_HORN6833_06_SE_C04.indd 242
chapter using a continuous company. 11/4/16 2:40 PM
ness knowledge. Amber and Zack decide that they will create a new corporation,
Canyon Canoe Company, or CCC for short. The business began operations on
November 1, 2018.
Practice Set—Starts in Chapter 2 and goes through
the financial chapters and provides another opportunity
Nov. 1 Received $16,000 cash to begin the company and issued common stock to
Amber and Zach. for students to practice the entire accounting cycle. The
2 Signed a lease for a building and paid $1,200 for the first month’s rent. practice set uses the same company in each chapter, but
3 Purchased canoes for $4,800 on account.
is often not as extensive as the continuing problem.
4 Purchased office supplies on account, $750.
7 Earned $1,400 cash for rental of canoes.
13 Paid $1,500 cash for wages.
15 Paid $50 dividends to stockholders.
16 Received a bill for $150 for utilities. (Use separate payable account.)
M01_HORN6833_06_SE_C01.indd 52
xx 11/2/16 7:16 PM

Comprehensive Problem 1 for Chapters 1–4—Covers the entire accounting cycle
for a service company.
Comprehensive Problem 2 for Chapters 1–4—A continuation of Comprehensive

Problem 1. It requires the student to record transactions for the month after the closing process.
Comprehensive Problem for Chapters 5 and 6—Covers the entire
NEW!
accounting cycle for a merchandise company, including analysis.

NEW!
Comprehensive Problem for Chapters 7–9—Covers cash, receivables,
and long-term assets transactions and anaylsis.
Comprehensive Problem for Chapters 11–13—Covers payroll, other

NEW!
current liabilities, long-term liabilities, and stockholders’ equity transactions and analysis.
Comprehensive Problem for Appendix B—Uses special journals and subsid-

iary ledgers and covers the entire accounting cycle for a merchandise company. Students can Cost-Volume-Profit Analysis 1137
complete this comprehensive problem using the MyAccountingLab General Ledger or Quick-
books™ software. COMPREHENSIVE PROBLEM
Comprehensive Problem for > Comprehensive Problem for Chapters 16–20
Chapters 16–20—Covers fundamental The Jacksonville Shirt Company makes two types of T-shirts: basic and custom. Basic
shirts are plain shirts without any screen printing on them. Custom shirts are created
managerial accounting concepts: job order using the basic shirts and then adding a custom screen printing design.
costing, process costing, cost management The company buys cloth in various colors and then makes the basic shirts in
two departments, Cutting and Sewing. The company uses a process costing system
systems, and cost-volume-profit analysis. (weighted-average method) to determine the production cost of the basic shirts. In the
Cutting Department, direct materials (cloth) are added at the beginning of the process
Comprehensive Problem for and conversion costs are added evenly through the process. In the Sewing Depart-
Chapters 22–24—Covers planning and ment, no direct materials are added. The only additional material, thread, is considered
an indirect material because it cannot be easily traced to the finished product. Conver-
control decisions for a manufacturing com- sion costs are added evenly throughout the process in the Sewing Department. The
finished basic shirts are sold to retail stores or are sent to the Custom Design Depart-
pany, including a master budget, flexible ment for custom screen printing.
budget, variance analysis, and performance The Custom Design Department creates custom shirts by adding screen print-
ing to the basic shirt. The department creates a design based on the customer’s request
evaluation. and then prints the design using up to four colors. Because these shirts have the cus-
tom printing added, which is unique for each order, the additional cost incurred is
Comprehensive Problem for determined using job order costing, with each custom order considered a separate job.
Chapters 25–26—Covers decision mak- For March 2018, the Jacksonville Shirt Company compiled the following data for
the Cutting and Sewing Departments:
ing, both short-term business decisions and
Department Item Amount Units
capital budgeting decisions.
Cutting Beginning balance $ 0 0 shirts
Started in March 1,200 shirts
Direct materials added in March 1,920
Enhanced eText Conversion costs

Completed and transferred to Sewing
1,320
??? 1,200 shirts
The Enhanced eText keeps students engaged in learning onEnding theirbalance
own time, while helping 0 0 shirts
them achieve greater conceptual understanding of course Sewing material. Thebalance,
Beginning worked examples,
transferred in, $1,350;ani-
conversion costs, $650
mations, and interactive tutorials bring learning to life, and algorithmic practice allows students $ 2,000 500 shirts
Transferred in from Cutting ??? ???
to apply the very concepts they are reading about. Combining resources that illuminate content
Conversion costs added in March 1,196
with accessible self-assessment, MyLab with Enhanced eText provides Completedstudents withto aFinished
complete
CHAPTER 20
and transferred Goods ??? 1,000 shirts
digital learning experience—all in one place. Ending balance, 60% complete ??? ???
And with the Pearson eText 2.0 mobile app (available For the samefor
time select titles)
period, the students
Jacksonville can compiled the following data
Shirt Company
for the Custom Design Department:
now access the Enhanced eText and all of its functionality from their computer, tablet, or
mobile phone. Because students’ progress is synced across all of Jobtheir devices,
Quantity they
Design Fee can stop Status
Printing
what they’re doing on one device and pick up again later on another 367 one—without
400 Yes breaking
3 colors Complete
368 150 No 2 colors Complete
their stride.
369 100 Yes 5 colors Complete
370 500 Yes 4 colors Complete
xxi

M20_HORN6833_06_SE_C20.indd 1137 11/24/16 2:16 PM

Dear Colleague,
Thank you for taking the time to review Horngren’s Financial and Managerial Accounting. We are
excited to share our innovations with you as we expand on the proven success of our revision to
the Horngren franchise. Using what we learned from focus groups, market feedback, and our col-
leagues, we’ve designed this edition to focus on several goals.
First, we again made certain that the textbook, student resources, and instructor supplements
are clear, consistent, and accurate. As authors, we reviewed each and every component to ensure a
student experience free of hurdles. Next, through our ongoing conversations with our colleagues
and our time engaged at professional conferences, we confirmed that our pedagogy and content
represents the leading methods used in teaching our students these critical foundational topics.
Lastly, we concentrated on student success and providing resources for professors to create an
active and engaging classroom.
We are excited to share with you some new features and changes in this latest edition. First,
we have added a new Tying It All Together feature that highlights an actual company and addresses
how the concepts of the chapter apply to the business environment. A Using Excel problem has
also been added to every chapter to introduce students to using Excel to solve common accounting
problems as they would in the business environment. Chapter 5 (Merchandising Operations) has
been updated for the newly released revenue recognition standard. The managerial chapters went
through a significant review with a focus of clarifying current coverage and expanding on content
areas that needed more explanation.
We trust you will find evidence of these goals throughout our text, MyAccountingLab, en-
hanced eText, and in our many new media enhanced resources such as the Accounting Cycle
Tutorial with a new comprehensive problem and animated lectures. We welcome your feedback
and comments. Please do not hesitate to contact us at [email protected] or
through our editor, Lacey Vitetta, [email protected].
Tracie L. Miller-Nobles, CPA Brenda Mattison, CMA Ella Mae Matsumura, PhD

xxii

Instructor and Student Resources
Each supplement, including the resources in MyAccountingLab, has been reviewed by the author team to ensure accuracy
and consistency with the text. Given their personal involvement, you can be assured of the high quality and accuracy of all
supplements.
For nstructors
I
MyAccountingLab
Online Homework and Assessment Manager: http://www.myaccountinglab.com

Instructor Resource Center: http://www.pearsonhighered.com/Horngren
For the instructor’s convenience, the instructor resources can be downloaded from the textbook’s catalog page
(http://www.pearsonhighered.com/Horngren) and MyAccountingLab. Available resources include the following:
Online Instructor’s Resource Manual:
Course Content:
■ Tips for Taking Your Course from Traditional to Hybrid, Blended, or Online
■ Standard Syllabi for Financial Accounting (10-week & 16-week)
■ Standard Syllabi for Managerial Accounting (10-week & 16-week)
■ Sample Syllabi for 10- and 16-week courses
■ “First Day of Class” student handouts include:
• Student Walk-Through to Set-up MyAccountingLab
• Tips on How to Get an A in This Class
Chapter Content:
■ Chapter Overview
• Contains a brief synopsis and overview of each chapter.
■ Learning Objectives
■ Teaching Outline with Lecture Notes
• Combines the Teaching Outline and the Lecture Outline Topics, so instructors only have one document to review.
• Walks instructors through what material to cover and what examples to use when addressing certain items within the chapter.
■ Handout for Student Notes
• An outline to assist students in taking notes on the chapter.
■ Student Chapter Summary
• Aids students in their comprehension of the chapter.
■ Assignment Grid
• Indicates the corresponding Learning Objective for each exercise and problem.
• Answer Key to Chapter Quiz
■ Ten-Minute Quiz
• To quickly assess students’ understanding of the chapter material.
■ Extra Critical Thinking Problems and Solutions
• Critical Thinking Problems previously found in the text were moved to the IRM so instructors can continue to use their
favorite problems.
■ Guide to Classroom Engagement Questions
• Author-created element will offer tips and tricks to instructors in order to help them use the Learning Catalytic questions in
class.
Online Instructor’s Solutions Manual:
■ Contains solutions to all end-of-chapter questions, short exercises, exercises, and problems.
■ The Try It! Solutions, previously found at the end of each chapter, are now available for download with the ISM.
■ Using Excel templates, solutions, and teaching tips.
■ All solutions were thoroughly reviewed by the author team and other professors.
xxiii

Online Test Bank:
■ Includes more than 3,900 questions, including NEW multi-level questions.
■ Both conceptual and computational problems are available in true/false, multiple choice, and open-ended formats.
■ Algorithmic test bank is available in MyAccountingLab.
PowerPoint Presentations:
Instructor PowerPoint Presentations:
■ Complete with lecture notes.
■ Mirrors the organization of the text and includes key exhibits.
Student PowerPoint Presentations:
■ Abridged versions of the Instructor PowerPoint Presentations.
■ Can be used as a study tool or note-taking tool for students.
Demonstration Problem PowerPoint Presentations:
■ Offers instructors the opportunity to review in class the exercises and problems from the chapter using different companies and
numbers.
Clicker Response System (CRS) PowerPoint Presentations:
■ 10 multiple-choice questions to use with a Clicker Response System.
Image Library:
■ All image files from the text to assist instructors in modifying our supplied PowerPoint presentations or in creating their own
PowerPoint presentations.
Working Papers and Solutions:
■ Available in Excel format.
■ Templates for students to use to complete exercises and problems in the text.
Data and Solutions Files:
■ Select end-of-chapter problems have been set up in different software applications, including QuickBooks and General Ledger.
■ Corresponding solution files are provided for QuickBooks.
For Students
MyAccountingLab
Online Homework and Assessment Manager: http://www.myaccountinglab.com

• Pearson eText • Working Papers
• Using Excel templates • Accounting Videos
• Animated Lectures • Student PowerPoint® Presentations
• Demo Docs • Accounting Cycle Tutorial
• Interactive Figures • Flash Cards
Student Resource Web site: http://www.pearsonhighered.com/Horngren

The book’s Web site contains the following:
• Data Files: Select end-of-chapter problems have been set up in QuickBooks software and the related files are available for
download.

• Working Papers
• Try It! Solutions: The solutions to all in-chapter Try Its! are available for download.
• Links to Target Corporation’s Annual Report and Kohl’s Corporation’s Annual Report
http://www.pearsonhighered.com/Horngren
xxiv

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content Scribd suggests to you:
601. Definitions (1827), p. 235.
602. I. e. to the object which measures that cost-value.
603. Ibid., p. 243.
604. See above, p. 254. Ricardo’s long correspondence with Malthus on the
subject is mentioned by Empson, Edin. Rev., l. c. p. 469. Empson’s extracts from it
are the most valuable part of his article.
605. R. Torrens, Production of Wealth, 1821, pp. iv, v.
606. Held, Sociale Geschichte Englands, p. 205.
607. Dialogues of Three Templars on Political Economy, 1824 (Works, Black,
1863, vol. iv.). All depends on the assumption in the middle of Dialogue I. p. 196,
(“it is Mr. Ricardo’s doctrine that,” &c.), and on the confinement of the discussion
to natural value (p. 198).
608. Measure of Value, p. 20 n.
609. London, 1832; Birmingham, 1833. The Constituent Assembly applied the
same measure, but in a different way, in 1791. See Roscher, National-ökon. (1879),
p. 298.
610. The words are, “enable the labourers to maintain a stationary or an
increasing population” (Pol. Econ., 1836, p. 218). The awkwardness of the sentence
may be due to bad editing; but we read elsewhere of the “price of wages.”
611. Pol. Econ., 1836, pp. 218, 223.
612. See Lassalle and Marx.
613. Cf. Malthus, Pol. Econ. (1836), pp. 224, 225, &c. Essay on Population, 7th
ed., III viii. 323, but especially IV. xiii. 473. See also Rogers, Six Centuries, ch. viii.,
‘The Famine and the Plague,’ especially pp. 233–242.
614. Malthus, Essay on Pop., IV. xiii. 473; cf. pp. 373 and 434.
615. Cf. especially Essay on Pop. (2nd ed.), III. ix. 444. “The price of labour
has been rising—not to fall again.”
616. Emigr. Comm. (1827), p. 326, qu. 3411; cf. 3408, 3409. Cf. above, p. 197.
617. The chief of them being the rate of profits which is at the given time
enough to induce the “undertaker” (or “enterpriser”) to continue business.
618. See Mill on Thornton’s ‘Labour,’ Fortnightly Review, May 1869. Cf.
Walker on The Wages Question, pp. 140 seq.
619. So in Quarterly Review, Jan. 1824, p. 315, Malthus says profits depend
rather on the demand for produce than on the demand for labour.
620. Discourse on Pol. Econ., by J. R. MacCulloch, pp. 61, 62 (1st and 2nd
edd.), 1825.
621. Conversations on Pol. Econ., 1817 (1st and 2nd edd.), p. 137. Mrs.
Marcet’s memory is preserved for latter-day readers by Macaulay’s reference to her
in the essay on Milton.
622. Discourse, l. c. Cf. MacC.’s Pol. Econ., Pt. III. ch. ii. p. 378 (ed. 1843);
Prof. Fawcett’s Manual of Pol. Econ., p. 131 (1876).
623. James Mill, Elem. (1821), p. 25; John Mill, Principles, II. xi. § 1. Cf. Fort.
Rev., 1869, May; Thornton, Labour, II. i. p. 83.
624. Wealth of Nations, I. viii. p. 31, 2.
625. Ibid., IV. ix. 306, 1.
626. Ibid., IV. ix. 310, 2.
627. Ibid., V. i. 327, 2.
628. Pol. Econ., ed. 1836, ch. iv. sect. ii. p. 224.
629. Ibid. ed. 1820, ch. iv. p. 248.
630. Quarterly Review, Jan. 1824. Cf. below, p. 288.
631. Supplement to Encyclopædia Britannica. Cf. above, p. 71.
632. Empson in Edin. Rev., Jan. 1837, p. 496.
633. Quart. Rev., Jan. 1824 (no. lx.), pp. 333–4.
634. Ricardo, Pol. Econ. and Tax., ch. i. sections iv., v.; Works, pp. 20, 25. Cf.
Malthus, Pol. Econ., 1820, p. 104, and the whole of section iii. pp. 72 seq.
635. Quart. Rev., l. c. p. 324; cf. p. 315. Cf. above.
636. Pol. Econ. and Tax., ch. i. sections iv. and v.
637. Any given value, it might be added, is influenced by custom as well as
competition.
638. 1821, p. 186, ch. iv. sect. iii. “That consumption is coextensive with
production.”
639. Pol. Econ., III. xiv. “Of excess of supply.” Cf. I. v. § 3, p. 42.
640. A cargo of skates was sent to Rio Janeiro in 1808.
641. The intention of the new Corn Law of 1815 was to keep out all foreign
grain till the home price should reach 80s. a quarter, or the loaf 1s. See above, p.
221.
642. The article on the Bullion question, in August of the same year, might be
his, if it was not Francis Horner’s. Cf. Horner’s Life, vol. i. ch. vi., dates April and
Sept. 1805, from which it appears that Horner was working hard at the question
and meant to write on it, as he might have done better in 1811, fresh from his
experience on the Bullion Committee. As to the February article, the authorship is
shown partly by internal evidence, partly by Horner’s Life, vol. ii. p. 68 (Jan. 1811):
“I received Malthus’ MS. from you [Jeffrey] and have since transmitted it to him
with such remarks as occurred to me in perusing it,” &c. MacCulloch did not begin
to write the economical articles for the Edin. Rev. till 1818. See Notes and Queries,
5th Oct., 1878.
643. For the history of the currency in the interval see Miss Martineau’s
Introd. to Hist. of Peace, Bk. II. ch. iii.; Hist. of the Peace, Bk. I. ch. iii. and ch. xv.;
Cobbett’s Paper v. Gold; Macleod’s Banking, vol. ii., end of ch. ix. pp. 174–221,
much the completest account.
644. Peel changed his views then on Currency, as he did later on Catholic
Emancipation and the Corn Laws.
645. p. 370. He speaks approvingly of the American free trade in banking in a
way that would have pleased Cobden.
646. p. 371.
647. E. g. Horner complains of this even in so clear a paper as that on
Newenham. See Horner’s Life, vol. i. pp. 436–7 (sub dato 1808).
648. Works (ed. MacC.), pp. 291–296.
649. Ricardo, Works (MacC.), p. xxi.
650. Cf. below, Bk. V.
651. Horner’s Life, vol. ii. p. 68 (Jan. 1811).
652. Thoughts and Details on High and Low Prices during the last Thirty
Years, 1793–1823. The later ed. of 1838 in three vols. is more valuable.
653. Political Register, 30th Nov., 1816.
654. Internal evidence, e. g. p. 237 of the Quarterly, compared with p. 65 of
Measure of Value, would show his authorship, and the article is ascribed to him by
Tooke, Prices, ed. 1838, vol. i. p. 21.
655. l. c. pp. 215–16.
656. Bosanquet, Practical Observations on the Report of the Bullion
Committee (1810); Ricardo, The High Price of Bullion a Proof of the Depreciation
of Bank-Notes (1809), and his Reply to Bosanquet (1811).
657. l. c. Pol. Econ., Introd. (1820), pp. 6 and 7 n., (1836) p. 5 n. Cf. Tooke,
Prices, Part I. p. 6 (ed. 1823).
658. Tooke, Prices, Part III. p. 91.
659. See Tract on Value, p. 18.
660. Quarterly, April 1823, p. 230.
661. Econ. Pol., Part III. ch. ii., 2nd ed., 1842; 1st ed., 1802.
662. “Products” is Say’s word, however.
663. Elements (1821), ch. iv. sect. iii. pp. 186 seq. “That consumption is
coextensive with production.” Mill taught this as early as 1808 in his tract (against
Spence) Commerce defended.
664. Lettres à M. Malthus sur différents sujets d’écon. pol., notamment sur
les causes de la stagnation générale du commerce (1820), pp. 26 seq.
665. Pol. Econ. (1820), p. 355, (1836) p. 316. Against Say’s general position see
Definitions, p. 56 n.
666. Wealth of Nations, I. iii.
667. See above, p. 232. A curious footnote in Essay on Pop., 3rd ed., vol. ii. p.
264, suggested that there might be over-production in the case of high farming
when its cost made the farmers charge more than the public could bear. But this
note disappeared afterwards.
668. Ricardo, Pol. Econ. and Taxation, ch. xxi. p. 176 (MacCull.’s ed.). Mill
(Elements, pp. 193 ft., 194) is more rigid.
669. Essay, 7th ed., IV. xiii. 473.
670. Pol. Econ. (1836), ch. iv. sect. iii. p. 239, slightly altered from 1st ed.,
1820, ch. iv. sect. iii. p. 266.
671. Sismondi, Nouveaux Principes de l’Écon. Pol., 1819. See Malthus, Pol.
Econ. (1820), p. 420, (1836) pp. 325 n., 366 n. Cf. on the other hand Essay, III.
xiii. 372–3 and n.
672. Wealth of Nations, V. i. art. ii. pp. 350–353 (ed. MacC.). He is outrivalled
by Ferguson, Civil Society, parts iv. and v. (ed. 1773).
673. 3rd ed. of Pol. Ec. and Tax. (1821), ch. xxxi. pp. 468–9, ed. MacCull., pp.
235–6. Cf. below (Critics). It is the position of Marx.
674. If we believe Bowring, Life of Bentham (ed. 1843), p. 176.
675. “Supposing that his opinions have not altered within the last twelve
months.”—De Quincey, vol. iv. p. 231.
676. James Mill, Elements, pp. 193, 194. MacCull., Pol. Ec., p. 207. Cf. the
tract Mordecai Mullion (1826).
677. Especially by Sunday Schools, according to the testimony of Samuel
Bamford.—Radical, vol. i. p. 7 (1844).
678. We have his counterpart in our own day.
679. See below, Bk. III., for disproof of the charge that he was reactionary in
his politics, like many economical optimists.
680. Pol. Econ., 1820, p. 236.
681. l. c. p. 472.
682. Emigr. Comm. (1827), p. 317, qu. 3281.
683. Some such view is suggested by Malthus himself, Essay, IV. xiii. p. 473
(cf. Pol. Ec., 1820, p. 475), a passage which it is hard to reconcile with the passages
in the Quarterly and in the Pol. Ec. that speak of the necessity of a special class of
unproductive consumers.
684. Pol. Econ. (1820), ch. vii. sect. ix. p. 473. Cf. Tract on Rent, p. 48 n.
685. Essay on Pop., III. iii. p. 282 (in relation to Robert Owen). Cf. the whole
ch. xiii. of Book III., where he treats of “Increasing Wealth as it affects the
Condition of the Poor.”
686. Pol. Econ., l. c. p. 474.
687. Ibid., l. c. pp. 474–5.
688. See above, pp. 245 seq. and 252.
689. See below, Bk. IV., and cf. above, p. 208.
690. See above, p. 142.
691. The passage is quoted in full because by recent critics it is much garbled;
e. g. in Progress and Poverty, VII. i. 304 n.
692. Essay, 2nd ed., IV. vi. 531.
693. Lucretius, iii. 951. Cicero’s simile of the theatre open to all comers, but
giving each man his own seat, had special application to Property (De Finibus, iii.
20).
694. Epitaph on Fenton.
695. James Grahame’s Population (1816), p. 34. Cf. Quarterly Rev., Dec. 1812,
p. 327; Hazlitt, Spirit of the Age, ‘Malthus,’ end.
696. Book III. Part I. ch. iv. (1785).
697. E. g. Godwin, Population (1820), I. iii. 17. The withdrawal was probably
due to Sumner. See Otter, Life of Malthus in Pol. Ec. (1836), p. lii.
698. Cf. Essay, 2nd ed., pp. 400, 401, and nn.; 7th ed., p. 298 n. Cf. pp. 295
and 297 n. Cf. also Tooke, above quoted, p. 291.
699. Cf. above, p. 220.
700. On Bounties and the Corn Trade. Cf. High Price of Provisions, p. 3.
701. l. c. p. 23. See above, p. 289. Also Corn Law Catechism, 1839, qu. 244.
702. l. c. pp. 9–11. Cf. the “make up” and “bread money” mentioned in Report
of Poor Law Commission, 1834, p. 27.
703. High Price, &c. pp. 19, 20.
704. l. c. p. 27. Cf. above, p. 43.
705. 1st ed., pp. 82, 83; 7th ed., pp. 302–3.
706. Essay, 7th ed., Appendix, p. 493.
707. He borrows, as he himself says, the language of Sir Frederick Eden on the
State of the Poor (1797). See Essay on Population, 2nd ed., p. 417 n.; 7th ed., p.
308 n.
708. Letter to Whitbread (1807), pp. 12, 13; cf. Essay, p. 445 ft.
709. Quoted, Essay, III. vi. 308 n.
710. 7th ed., III. vi. 303; 1st ed., p. 365.
711. III. vi. (7th ed.), p. 305.
712. See e. g. Emigration Committee, 1827, qu. 3369, p. 323.
713. Dr. John Moore’s View of Society and Manners in France, Switzerland,
and Germany (7th ed., 1789), vol. ii. pp. 144–157.
714. Essay, 7th ed., III. vi. p. 307; Emigration Committee (1827), qu. 3361, p.
323.
715. l. c. pp. 307–8. Cf. above, p. 134.
716. Reports to Local Gov. Bd. on Foreign Poor Laws, 1875, p. 7.
717. Macvey Napier’s Correspondence, pp. 29 seq. Date 30th Sept, 1821.
718. Report of Poor Law Comm., 1834; Remedial Measures, p. 227.
719. Essay on Population, Appendix, p. 492. It was probably this disclaimer of
public duty that led Coleridge to complain, “the entire tendency of the modern or
Malthusian political economy is to denationalize” (Table Talk, p. 327). Cf.
Toynbee, Industr. Revol., p. 24. But it may have been simply the idea that Malthus,
like Ricardo, advocated laissez faire; and in this case it is singular he should not
have said “Ricardian” instead of “Malthusian.”
720. Essay, 2nd ed., IV. vii. p. 538; 7th ed., IV. viii. p. 530.
721. Essay, 2nd ed., p. 539.
722. E. g. Report of Commissioners, p. 13.
723. Report, pp. 227–8.
724. Report, p. 228.
725. Even if he were a poor ratepayer, voting a sum of which his richer
neighbour would pay the larger share.
726. Essay, 2nd ed., p. 490; 7th ed., p. 394; cf. pp. 392 top and 396.
727. Essay, 7th ed., IV. x. pp. 442–3; cf. p. 161.
728. 7th ed., IV. i. p. 390. Cf. above, p. 37.
729. Not quite logical, if the test of a virtuous action is its tendency to produce
happiness.
730. Ibid., IV. i. p. 390.
731. 2nd ed., pp. 489, 490, 501; 7th ed., pp. 390, 401. Cf. Paley, M. and P.
Phil., I. vi., II. iv.; Tucker, Light of Nature (1st ed., 1768), vol. ii. ch. xxix., esp. § 12.
732. Essay, 7th ed., IV. i. 391. Kant’s test of a moral law, so far as it was not
purely dogmatic, was most easily illustrated, or he would have said parodied, by
this Utilitarian argument.
733. Essay, 2nd ed., p. 487; 7th ed., p. 392.
734. Ibid., 2nd ed., p. 488; 7th ed., pp. 392–3; cf. p. 398.
735. Ibid., 1st ed. (1798), p. 211.
736. The passage in A Tale of the Tyne, which left no trace on Miss
Martineau’s own memory, but so faithfully expounded Malthus that he called on
purpose to thank her for it (Autobiogr., i. 253), is easily identified in the light of
these extracts as ch. iii. p. 56 of ed. 1833.
737. 2nd ed., pp. 491–2; 7th ed., p. 395. See above, p. 36.
738. 2nd ed., p. 494; 7th ed., p. 397. Cf. above, p. 38.
739. The phrase in Essay, 7th ed., p. 401.
740. Not to be confused with his contemporary, Josiah Tucker, Dean of
Gloucester, the forerunner of Adam Smith.
741. 1727 to 1774, the year of his death. Betchworth, now absorbed in Mrs.
Hope’s estate of Deepdene, was on the farther side of Dorking from Albury and the
Rookery.
742. This lucid epithet is ascribed to George III.
743. A point of difference has been noted above (p. 39) and below (p. 330). He
differs from Bentham also, who would not gratify the passions but destroy them.
See Held, Soc. Geschichte, p. 213.
744. Essay, 7th ed., IV. x. 441.
745. Ibid., IV. i. 391.
746. See above, p. 35.
747. 7th ed., p. 441 ft.
748. Ibid., p. 442 top.
749. Essay, III. ii. 279, explains in this way the popular prejudice which, in
one case at least, visits the same sin more severely in a woman than in a man.
750. Essay, 7th ed., IV. x. 442.
751. Ibid., IV. ii. 401. Cf. Paley, Moral Philos., Vol. I. Book II. ch. iv. p. 65,
there quoted, and Tucker, L. of N. (1st ed.), vol. ii ch. xxix., especially §§ 5–7 and
12.
752. Essay, 7th ed., IV. x. 443, 444 ft.
753. Ibid., IV. viii. 432, 433, compared with p. 492.
754. Essay, 7th ed., App. pp. 492–3. Cf. 7th ed., p. 280: “Self-love is the
mainspring of the great machine.”
755. III. vii. 311.
756. Edin. Rev., 1810 (Aug.), an article on Ingram’s Disquisitions on
Population, and [Hazlitt’s] Letters in Reply to Malthus. As the relations of Malthus
to the Review were close at this time, and as the arguments and the style are
remarkably like our author’s, there is at least a strong probability that he wrote the
article, Jeffrey after his custom providing it with a head and tail to disguise the
authorship. Cf. Cockburn’s Life of Jeffrey, Vol. I. 301, 302, cf. 285.
757. Cf. Wealth of Nations, I. x. 48, 49.
758. Edin. Rev., 1810 (Aug.), p. 475.
759. Paley, Mor. and Pol. Phil., I. vii. 9; cf. Malthus, Essay, IV. ii. 397, &c. Cf.
above, p. 39.
760. Paley, ibid., I. iv. 14.
761. See above, p. 37. The passages there cited completely refute Held’s
assertion that “Malthus appealed to Utility in the teeth of his belief in the Bible”
(Sociale Geschichte Englands, Book I. ch. ii p. 234).
762. Mor. and Pol. Phil., vii. 10.
763. “Any condition may be denominated ‘happy’ in which the amount or
aggregate of pleasure exceeds that of pain.”—Paley, M. and P. Ph., I. vi.
764. Essay, 7th ed., III. vi. 305.
765. See Mr. Sidgwick’s Method of Ethics, p. 385 ft.
766. Quoted from The Crisis, by Empson, Edin. Rev., Jan. 1837, p. 482.
767. Report of the Crofters Commission, 1884, p. 9.
768. Essay, IV. iii. 407.
769. It would help the social reformer to learn, e. g. from clergymen,
guardians of the poor, and police magistrates, what exact proportion of the
destitution within their experience has been due, (a) to the fault of the victim, (b)
to the fault of his parents, (c) to the fraud or oppression of others, and (d) to the
mere accidents of trade.
770. 7th ed., p. 280.
771. III. ii. 434.
772. Scenes of Clerical Life, p. 250.
773. 7th ed., p. 404.
774. p. 464, 1817. As early as 1803 (Essay, 2nd ed., IV. xi 689) Malthus had
recommended Savings Banks.
775. 7th ed., p. 397. Cf. p. 407, &c.
776. 7th ed., p. 405. To make the whole picture complete we must add what is
said above (ch. i.) on the place of man on the earth, and also (Bk. III. chs. ii. and
iii.) on industrial society as it might be.
777. See above, p. 298.
778. Mackintosh changed but never recanted. See Macaulay’s Essays.
779. Essay, 7th ed., IV. vi 420–1.
780. W. of N., I. i.
781. More strictly, what grows of itself is natural; what makes it grow of itself
is Nature.
782. See e. g. Essay, p. 390.
783. Life of Godwin, ii. 266.
784. Southey wished some “Crusader” like Rickman to write economical
articles for the Quarterly and keep out Malthus (Life and Letters, vol. iii. p. 188).
785. Essay, III. vii. 318; written in 1817.
786. 2nd ed., IV. vi.; 7th ed., IV. vi. and vii. He must have remembered, when
he wrote these words, the imprisonment of his poor tutor Gilbert Wakefield for a
seditious pamphlet (1799–1800). See below, Bk. V.
787. 7th ed., p. 417.
788. 7th ed., p. 426: written in 1817. For the tendency of the French before the
Revolution to look to Government for everything, see e. g. Dyer’s Modern Europe,
vol. iv. ch. lii p. 304.
789. 7th ed., p. 418.
790. Essays Moral and Political, vol. i. p. 49; ‘The British Parliament.’
791. Malthus, Essay, 2nd ed., p. 502; 7th ed., p. 402. Cf. a striking passage in
the review of Newenham, Edin. Rev., July 1808, pp. 348–9.
792. E. g. 7th ed., pp. 438–9 and 478. Cf. above, p. 56. Horner’s letter to
Malthus in. Feb. 1812 (Mem. of Horner, vol. ii. pp. 109–10) shows it was an active
sympathy. Malthus agreed to act as a “steward” at one of Lancaster’s meetings in
London.
793. 2nd ed., pp. 556–7; opponents “may fairly be suspected of a wish to
encourage their ignorance as a pretext for tyranny.”
794. 7th ed., p. 439; 2nd ed., pp. 555–6.
795. Miss Martineau, Hist. of Peace, I. vii. 117–18.
796. Essay, 7th ed., IV. ix. 440, 441.
797. Held, Soc. Gesch., p. 215.
798. See above, pp. 95, 96, &c.
799. See above, p. 340.
800. Essay, 7th ed., IV. x. 446–7.
801. Emigr. Comm. (1827), qu. 3310.
802. IV. xiii. 474. Potatoes are a godsend to such, he says in another place
(Edin. Rev., July 1808, p. 344).
803. See above, Bk. II. ch. i.
804. See above, p. 301.
805. E. g. Essay, IV. ix. 433.
806. In Germany poor scholars from the country are often, when attending
the University, billeted for bread and butter on the well-to-do citizens; and
learning proves on the whole so inconsistent with laziness, that the practice does
not make them unwilling to earn their own living afterwards.
807. A protective duty is indirect relief of the protected industry, but as a rule
the protected are secured against indolence by their own domestic competition;
and the fault of protection lies elsewhere than in encouragement of indolence.
808. Rénan, Qu’est ce qu’une Nation?
809. Cf. above, p. 225.
810. Cf. p. 36.
811. The reaction against Rousseau and Godwin may partly account for the
absence of Cosmopolitanism.
812. See above, ch. i.
813. Some one has said, “Was man nicht definiren kann, zieht man als
Organismus an;” and we had been told, long before, that a simile is either “idem
per idem” or “idem per aliud,” either of them a logical fallacy.
814. Essay, Bk. IV. ch. x. p. 445. “Every man has a right to do what he will with
his own.” But the question is:—What is his own?
815. Professor T. H. Green, Liberal Legislation and Freedom of Contract,
Oxford, 1881.
816. τὴν φιλίαν ἀναγκαῖον ὑάρη γίνεσθαι. Ar. Pol., II. ii.
817. See above, p. 310.
818. Discourse on the Christian Union. See Essay on Population, 7th ed., p.
254 n.; Price, Observations, p. 206 n.
819. From Matth. vi. 10, and Psal. cxxii. 2 seq.
820. See esp. pp. 12–18, and 20 (4th ed., 1790).
821. Pt. II. Essay V. pp. 228 seq. Life, ii. 292. Cf. ii. 64.
822. Life, ii. 64.
823. Thoughts, p. 10 and n. Cf. pp. 43, 45. In Progress and Poverty (p. 93, ed.
1881) we are told that Godwin “until his old age disdained a reply” to Malthus.
824. Thoughts, p. 61.
825. Ibid., p. 67.
826. Ibid., pp. 72–3.
827. Life of Godwin, i. 324.
828. See above, p. 208 n. In the 5th edition he turns his back on Godwin and
addresses Owen.
829. So Coleridge (MS. note to p. vii. of his quarto copy of the essay): “And of
course you wholly confute your former pamphlet, and might have spared yourself
the trouble of making up the present quarto.”
830. Edin. Rev., 1802, on Dr. Rennel’s Discourses, Syd. Sm., Works, i. p. 8.
831. p. 18. Compare De Quincey’s answer to Hazlitt in London Magazine,
1823 (vol. viii. pp. 349, 459, 569, 586).
832. Senior, Lect. on Pop., p. 35.
833. Population, I. iv. p. 27 (1820).
834. Cf. also speech on 9th April, 1816. Hansard, sub dato, p. 1109.
835. See above, p. 75. Cf. also above, pp. 142 seq., on Emigration.
836. Godwin, Popn., I. xiii. 106. Cf. I. iv. 22, II. ii. 142, VI. vi. 585.
837. Hawick, 1807, especially p. 84.
838. Sadler, Popn., I. i. 15 (1830).
839. Append. to 3rd ed., 1806; 7th ed., p. 485; cf. pp. 395, 446, and al.
840. See Appendix to ed. 1826, 7th ed., p. 627.
841. Life, ii. 271.
842. l. c. p. 259.
843. Life, ii. 259, 260. Cf. what Godwin writes to Sir John Sinclair, July 1821
(Sinclair’s Correspondence, i. 393).
844. l. c. p. 271.
845. Morgan and Rosser, e. g. See Life, ii. 272–5; cf. p. 280.
846. Edin. Rev., July 1821, p. 364.
847. Life of Godwin, ii. 274
848. Ibid., pp. 274–5.
849. No. 1, Oct 1802, esp. p. 26.
850. Population, I. i.
851. Appendix to 3rd ed., p. 520 n.; 7th ed., p. 491 n.
852. See his Letter to Godwin, dated October 1818, and quoted in Godwin’s
Population, Bk. II. ch. i pp. 116–123, with comments.
854. Population, II. x. 244–7.
855. E. g. II. xi. 274, 282, but especially I. iv. 25, and for the third argument,
pp. 29, 30, cf. pp. 43–50, &c. Cf. also Godwin to Sinclair in Sinclair’s
Correspondence, i. 393.
856. Population tends to double in a bundled years, and there is no risk of
over-population except in occasional times of dull trade (Letter of Godwin to
Sinclair, Sinclair’s Correspondence, l. c.). A notable exception.
857. Population, II. xi. 251–2.
858. IV. i.
859. II. ii. 127, and cf. above.
860. II. xi. 287, &c., &c.
861. III. iii. 327 seq.
862. Coups d’état in nature. Paul Bert, L’Enseignement Primaire, 1880, p.
xxviii.
863. Edinburgh Review, July 1821. Cf. Letter to the Rev. T. R. Malthus by
David Booth (1823), who absurdly assumes Malthus to be the reviewer. Though
internal evidence dispels this fancy, it shows that Malthus was still believed to
write for the Edinburgh Review.
864. Others, in Table Talk and Biogr. Literaria, are chiefly declamation.
865. In these quotations the capitals are in the original, and the italics
correspond to underlinings.
866. Arthur Aikin’s Annual Review, vol. ii. (for 1803) pp. 292 seq. Cf.
Southey’s Life and Correspondence (ed. 1850), vol. ii. p. 251, 20th Jan. 1804:
“Yesterday Malthus received, I trust, a mortal wound from my hand;” cf. vol. vi. p.
399, and vol. ii. p. 294. There is no hint of obligation to Coleridge.
867. Cf. above, ch. iii. pp. 81 seq., and Bk. III.
868. Sic, though it explains a thing by itself.
869. He probably meant 353rd, but his numbers are careless.
870. On margin of p. 364, 2nd paragr.: “Quote and apply to himself.”
871. E. g. on p. 65 opposite to lines 5, 6, “Ass!” a monosyllabic refinement
omitted in Southey’s review.
872. First in 1817, 7th ed., pp. 509 seq.
873. One of the charges (p. 18: that Malthus recommends the same remedies
as Condorcet) is sufficient to stamp the character of the book—An Inquiry into the
Principle of Population, &c., by James Grahame. Its Introduction gives a useful list
of writers on both sides; see p. 71. (Edin., 1816.) Simonin repeats Grahame’s
charges, with more mistakes of his own. See his Hist. de la Psychologie (1879), pp.
397–9.
874. 7th ed., p. 511. Cf. above, p. 52, and the reply to Godwin’s Reply, Essay,
2nd ed., III. iii. 384.
875. Edinburgh Review, Jan. 1837.
876. Life and Correspondence of Southey, vol. iii. pp. 21–2, and p. 188.
877. Bishop of Gloucester and later of Hereford. Theolog. Works (1832).
878. “The prolificness of human things, otherwise similarly circumstanced,
varies inversely as their numbers.”—Sadler, Popn., vol. iii. p. 352 (1830). Reviewed
somewhat caustically by Macaulay in Edin. Rev., July 1830. See Trevelyan’s Life of
Macaulay, vol. i. p. 126. Cf. Sadler’s ‘Reply’ to Edin. Rev. His weakest point was his
use of “inversely.”
879. Malthus, Essay, II. v. (7th ed.), pp. 164, 166; cf. p. 485.
880. G. P. Scrope, M.P., Pol. Econ., 1833, &c. Malthus, Essay, III. iii. (7th ed.),
282–6 (Owen), IV. xii. 457 (Owen), III. xiv. 380 n. (Anderson).
881. John Weyland, junr., F.R.S. The Principles of Population and Production
as they are affected by the Progress of Society with a view to Moral and Political
Consequences, 1816.
882. So Arnold Toynbee, Industrial Revolution, p. 107.
883. Ch. iii. p. 21. He adds, as his second: “This tendency can never be
destroyed.”
884. Essay, Appendix, p. 517.
885. Propos. iii and iv.
886. Essay, l. c. p. 521, a very strong passage.
887. Append. p. 526.
888. Pop. and Prod., pp. 82 seq.
889. 7th ed., I. ii. 12 n.; 2nd ed., p. 16.
890. Tour in Southern Counties of England, 1767, p. 342.
891. Between 1767 and 1820. Cf. above (England).
892. Travels in France, pp. 408–9 (ed. 1792) and al.
893. Essay on Pop., 7th ed., pp. 449, 451 seq.; Annals of Agriculture, no. 239,
pp. 219 seq. (quoted in Essay, App. pp. 496–7). Young had reproached Malthus for
denying the right to relief.
894. Travels in France, ed. 1792, pp. 438–9.
895. App. to Essay, pp. 499, 500. It is not true that “Owen was right as
against Malthus when he regarded a certain amount of comfort as the
indispensable condition of a moral life, and thought that a considerable increase of
man’s powers of production was possible” (Held, Soc. Gesch. Englands, pp. 351–
2). Malthus himself did both.
896. The Plan is quoted by Cobbett, Pol. Reg., Dec. 14, 1816. Malthus (Pol. Ec.
(1820), pp. 434, 435, (1836) p. 378) thinks that “co-proprietorship” of Government
with the landlords, after the scheme of the Economists and on the analogy of
Oriental “sole proprietorship,” might become too ready an engine of taxation for a
military despotism.
897. See above, pp. 87, 112, &c.
898. Essay, 7th ed., p. 284.
899. E. g. by Bagehot, Econ. Stud. (1880), pp. 135 seq., and by Southey in
Aikin’s Annual Review above quoted.
900. III. iii. 286. This and the rest of his argument (even its application to
Civil Liberty) is to be found in Aristotle, Politics, ii. 3 and 4, but esp. 5. δεὶ δὲ
μηδὲ τοῦτο λανθάνειν, &c.
901. Essay on Pop., 7th ed., p. 282.
903. Genesis of Species, 2nd ed., 1871, p. 5.
904. The puzzling effect of counting up one’s great-grandfathers and great-
grandmothers up to the twentieth degree or so is described by Blackstone as
quoted by Godwin (Popn.) and re-quoted by Hazlitt (Spirit of the Age, 1825, p. 273,
‘Godwin’). The puzzle is less if we remember that our remote ancestors must have
married into each other’s families, or rather were scions in the end of the same
families. We cannot go back to a single pair except through the “prohibited
degrees.”
905. We are to understand, therefore, that Malthus and the author agree that
population needs a check, and are simply not agreed what the checks are to be.
906. See below, p. 392.
907. See above, p. 370. The sixteen positions not touched in their own place
will be met by a reference to the following places in this book: i. to p. 20, add
Essay, 2nd ed. Bk. III. ch. iii. p. 383, ii. to p. 37, iii. to p. 338, iv. to pp. 51, 78, v. to
p. 80, vi. to p. 83, viii. to p. 113, ix. to p. 376, x. to p. 67, xi. to pp. 231, 297, see
Essay, 7th ed. p. 381, xii. to pp. 70, 75, 91, xiii. to p. 393, xiv. to pp. 91, 270, xv. to
p. 294, xvi. to p. 69, and xvii. to p. 75.
908. Das Kapital, 7ter Abschn. 23tes Kap. pp. 653 seq. (ed. 1872); cf. 646 seq.
909. The language of Ricardo, ch. xxxi. p. 236 (quoted by Marx, p. 656 n.). Cf.
above, p. 297. Cf. also Marx, pp. 427 foll.
910. Cf. what Prof. Rogers says in Six Centuries, p. 229, of the attempt made
in the fifteenth century to increase the “residuum” of agricultural labour for the
benefit of the farmers and landlords. Also above, p. 164 n.
911. Marx, ibid., p. 659.
912. Misprinted in Marx as 254.
913. See above, pp. 137, 188, &c.
914. See above, p. 335.
915. See above, pp. 299, 335, &c.
916. Das Kap., p. 549 n.
917. Das Kap., p. 641 n.
918. The passage omitted is neither true nor decent.
919. G. M. Ortes Reflessioni sulla popolazione (1790).
920. Das Kap., p. 549 n.
921. Cf. above, p. 382, and Malthus, Essay, 2nd ed. III. iii. 386, where he says
that Duty and Interest must work together.
922. ‘Theory of Population,’ in Westminster Rev., April 1852, pirated by the
German Professor Trall in 1877 (Eine neue Bevölkerungstheorie), and
substantially maintained by its author (Mr. Herbert Spencer) in Principles of
Biology, Vol. II. Part vi., ‘Laws of Multiplication.’
923. Essay, 7th ed., p. 269.
924. Above, p. 377.
925. E. g. Hazlitt, Reply to Essay on Population, p. 20.
926. W. R. Greg, Enigmas of Life, 8th ed., 1874, pp. 58 seq. This was nearly
Godwin’s position in his first reply.
927. Sadler on Population, and Reply to Edinburgh Review. Godwin,
Population, Bk. VI. ch. ii., &c.
928. Carey (H. C.), Princ. of Social Science (1858), vol. i. ch. xiv.; cf. above, p.
74 seq. H. George, Progress and Poverty, pp. 115, 116. Sadler, p. 70, &c.
929. Godwin, Sadler, &c.
930. Sadler, pp. 354–5, &c. Cf. Adam Smith, W. of N., I. viii. 36. See above, pp.
82, 83.
931. Godwin, see above, p. 361. Southey, Life and Corresp., III. 188. Bagehot,
Econ. Studies, pp. 133 seq. Cf. George, II. ii. 94. Above, pp. 362, 381.
932. Besant, Law of Population, ch. iii. Cf. Malthus, pp. 407 seq. (IV. iv.);
Cobbett, Taking Leave of his Countrymen (1817), p. 6; Political Register, 4th Jan.
1817, p. 26, &c., &c. Above, p. 329.
933. Godwin, Population, passim. George, II. ii. 102, 109. Above, pp. 111, 112.
934. Godwin, ibid.; George, pp. 138, 259, &c., &c.; Coleridge, MS. note to p.
358 (of Essay, 2nd ed.), where for “physical constitution of our nature” he would
read, “in the existing system of society.” So verbatim Southey in Aikin’s Ann. Rev. l.
c.
935. Doubleday, True Law of Population (1841). Above, p. 65. See Herbert
Spencer, Biology, Vol. II. pt. vi. ch. xii. pp. 455, 480, &c. The physiologists have
amply refuted Doubleday.
936. Herbert Spencer. See above, p. 393. W. R. Greg, Enigmas. Above, p. 394.
937. New Malthusians. See above, p. 24.
938. See above, pp. 365 seq. The orthodoxy of Malthus is proved not by a few
orthodox sentences which can be gleaned from him (as from Bacon), or even by the
discovery of flaws in the received doctrine, but by the whole logic of the essay.
939. See above, pp. 365 seq.
940. See above, p. 336.
941. See above, p. 328.
943. The authorship of the article is shown by Macvey Napier’s Letters sub
dato, and that of the biogr. preface by Empson’s art., p. 472.
944. “Daniel Malthus, 17, Sydenham de parochia Sti Giles Londini Armigeri
filius” (Matriculation entry, Easter term, 1747).
945. See Gibbon’s Memoirs, p. 46 (ed. Hunt and Clarke), and Jeffrey’s Life, i.
40.
946. Cf. Wealth of Nations, V. i. art., pp. 341 foll.
947. Biogr. pref. to Pol. Econ. (1836), p. xxvi.
948. The name Malthus itself is probably Malt-hus, or Malthouse (cf.
Shorthouse, Maltby), which still occurs as a surname in England. Francis (or, some
say, Thomas) Malthus wrote on ‘Fireworks, fortification, and arithmetic,’ in French
and in English, 1629.
949. Except perhaps in a letter quoted by Otter, biogr. pref. p. xxvii. (date
1788).
950. l. c. p. xxv.
951. l. c. pp. xxv and xxvi, which show, however, that at fifty-seven the
strength had failed a little.
952. “He was not born to copy the works of others.”—Letter in Gentl. Mag.,
Feb. 1800. See above, p. 7, and Otter, p. xxii.
953. Otter, pp. xxi, xxii.
954. So he urges Robert continually to “apply his tools.” “I hate to see a girl
working curious stitches upon a piece of rag.”—Otter, p. xxvi.
955. Gentl. Mag., Jan. 1800, p. 86; cf. Feb. 1800, p. 177; Otter, p. xxvi.
956. Monthly Mag., March 1800, Otter, p. xxii. What and where were the
pieces we are not told.
957. Written in 1772, and republished in Mrs. Barbauld’s series of British
Novelists, 1820. Graves lived at Claverton from 1750 till his death in 1804, in his
ninetieth year. He became Fellow of All Souls in 1730, and may have known Daniel
Malthus at Oxford.
958. Whom he names and quotes freely. Tucker, in Light of Nature, shows the
same open dislike of them, but with much more good-humour and taste.
959. In 1780 or thereabouts.
960. Wakefield’s Life (1804), vol. i. p. 214. It is curious to remember that
Marat is said to have been an usher at a Warrington School a short time before
this.
961. Wakefield’s Life, i. p. 344.
962. Elected in 1776. See Life, i. p. 111 ft.
963. Otter, l. c. p. xxvii. ft.
964. Letter in App. II. to Wakefield, Life, ii. pp. 454–463. A comparison of this
letter with Wakefield, Life, ii. p. 334, and Otter, l. c. p. xxiv. ft. (“by his own
acknowledgment”), makes it almost certain that the letter is by Malthus.
965. E. g. with such very different men as Watson, Bishop of Llandaff, and
Thomas Paine.
966. Though at college he took several prizes for Latin and Greek and English
Declamations. We may hope that his defect of utterance had not become
pronounced at that date, or that the declamations were not always declaimed.
967. Wakefield, Life, ii. p. 9.
968. Otter, l. c. p. xxv.
969. Otter himself was fourth wrangler in 1790, and E. D. Clarke junior optime
in the same year.
970. Otter, l. c. p. xxviii.
971. l. c. p. xxvii.
972. l. c. p. xxviii.
973. On the road leading out of Albury towards Guildford, a snug little low-
roofed house clinging to a hill slope, less ambitious than the Rookery, but not
without its pleasant garden walks, trees, and shrubberies.
975. Of which the genesis has been sufficiently described above, Bk. I. ch. i.
976. One of his sources is shown by Essay, IV. ix. 438: “In some conversations
with labouring men during the late scarcities.” Cf. the tract on The High Price of
Provisions, p. 10, &c.
977. See above, pp. 48, 49 (abroad), and p. 195 (in Ireland).
978. Clarke (E. D.) (Life by Otter, vol. ii. p. 15) refers to a letter from Malthus,
asking about the Foundling Hospital at St. Petersburg (date March 1800). Cf. ibid.,
p. 39: “As for Malthus, tell him he is not worth writing to. He is wrapped up in
other matters and obliterating all traces of his pilgrimage.... He is a great deal trop
de plomb pour un tourist” [sic]. So he draws on Mackintosh when the latter is in
India, in 1804. See Mackintosh’s Life (1836), p. 215.
979. E. g. Ricardo, Senior, and Dr. Thos. Chalmers (who paid him a flying visit
in October 1822: Life by Hanna, vol. ii. p. 358), and Francis Horner (Memoirs and
Corresp., e. g. vol. i. p. 406). In i. 436 of his Memoirs Horner speaks of having
gone with John Whishaw, the barrister, to visit Malthus at Haileybury in 1808, and
takes occasion to praise his mere love of truth above the eloquence and versatility
of others, though that, he says, may look like a decision in favour of dulness.
980. E. g. the reservoir, p. 106; but the most extravagant is perhaps the
botanical figure, on p. 273, where he says that “the forcing manure,” employed to
cause the French Revolution, has “burst the calyx of humanity.” Macaulay uses a
similar metaphor of precisely the same event, in the Essay on Burleigh.
981. His own command of metaphor made it the easier for him to turn the
edge of an opponent’s. See e. g. his handling of Weyland’s Giant, Musket-ball, and
Swaddling-clothes, in Essay, Append. pp. 514–521.
982. Engraved by Fournier for the Dictionnaire de l’Économie Politique, art.
‘Malthus.’
983. See below, p. 418 n.
984. Gentl. Mag., March 1835, p. 324.
985. Essay (7th ed.), II. iii. 148, where “winter of 1788” is perhaps for 1798,
though it is 1788 in the second and all subsequent editions; or else “preceding”
may be wrong. Cf. High Price of Prov., p. 2.
986. Cf. above, pp. 48, 127, which should be read in conjunction with this
Biography.
987. Life of Clarke, vol. ii. p. 183. We know from a footnote in the essay itself
(7th ed., p. 194) that part of it at least was written in 1802.
988. Stanhope, Life of Pitt, iii. p. 36; cf. p. 53. “Our election at Cambridge was
perfectly quiet.”
989. Life of Clarke, ii. 203–4 n.
990. Earl of Carlisle, the poet. See Engl. Bards and Scotch Reviewers.
991. Otter, l. c. p. xxvi. Cf. Essay, 1st ed., pp. 210–12. Gentl. Mag., April 1804,
p. 374. A compliment which Otter pays him (in an obituary in the Athenæum, 10th
Jan. 1835), that his servants stayed long with him, would fall more naturally to his
wife.
992. Mr. Sargant (Life of Owen, p. 85) says, on the authority of Mr. Holyoake,
that Malthus visited New Lanark in its palmy days. Owen’s work then was after
Malthus’ own heart; he was reforming the world by beginning with one individual
corner of it. Cf. Essay, III. iii. 282 ft.
993. See below, p. 423.
994. Memoirs of Horner, i. 436–7; cf. p. 406. Cf. Miss Martineau, Hist. of
Peace, Introduction, II. i. 257.
995. He was made a member of the French Institute, and, in 1833, one of the
five foreign Associates of the Acad. des Sciences Mor. and Pol., and a member of
the Royal Academy of Berlin (Otter, l. c. p. xli.). See Chas. Comte, Notice, and
Garnier, Dict. de l’Éc. Pol.
996. Bain, Life of James Mill (1882), p. 199.
997. All that is certainly known of the bulk of his contributions to the Edin.
Review is that, like those of James Mill and Mackintosh, they do not occur before
the twentieth number of it (in July 1807). See Bain, Life of James Mill, p. 75 n.
Horner mentions (Memoirs, Vol. I. p. 437) the article on Newenham’s Population
of Ireland, 1808, and another (of which he had seen the MS.) Feb. 1811 (Vol. II. p.
68). But see above, p. 285, note.
998. The apocryphal story of his eleven daughters is given and exposed by
Garnier, Dict. de l’Éc. Pol., art. ‘Malthus.’
999. Otter’s son-in-law. “Hal” in his childhood was asked what he would have
done if, like the Good Samaritan, he had found a man half dead by the roadside; he
answered (on the analogy of flies), “I should have killed him outright.” Contrast the
child’s answer with his father’s remarks on the same parable in Essay, IV. xi. 447.
1000. Clergy List, 1881.
1001. Moore’s Memoirs, Journals, &c. (ed. Russell, 1853), vol. iii. p. 148, date
Sept. 1820. Moore himself speaks of meeting Malthus and his wife when he was on
a visit to Mackintosh at Haileybury in May 1819. Ibid., ii. 315.
1002. Volksvermehrung, p. 9. Kautsky sometimes trips, but he is more
accurate than most of Malthus’ foreign biographers. Chas. Comte (in his Notice
historique sur la vie et les travaux de M. T. R. Malthus, read to Acad. of Mor. and
Pol. Sciences, 28th Dec., 1836) converts Haileybury into Aylesbury (p. 31).
1003. Pol. Econ. (1836), p. 380 n. Sydney Smith wrote to Grey about him
without success, in 1831 (Holland’s Life of Sydney Smith, vol, ii. p. 328).
1004. Richard, the brother of Wellington. See his Minute of 18th August,
1800, quoted by Malthus in his Statements.
1005. E. India Register and Directory (Hatchard), year 1807, pp. xxiv. seq.
“Preliminary view of the establishment of the E. India College.” These two
branches of the Haileybury programme correspond in their subjects to the
Competitive and the Further examinations of candidates for the Civil Service of
India as at present conducted. Malthus claims the credit of making the test in
Oriental languages a necessary condition of final appointment (Statements, p.
100).
1006. Accordingly Malthus gets many of his illustrations from India, e. g. Pol.
Ec. (2nd ed.), pp. 154–5.

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