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Brief Contents
Chapter 1 Business, Accounting, and You 1
Chapter 2 Analyzing and Recording Business Transactions 51
Chapter 3 Adjusting and Closing Entries 101
Chapter 4 Accounting for a Merchandising Business 159
Chapter 5 Inventory 212
Chapter 6 The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics 260
Chapter 7 Cash and Receivables 293
Chapter 8 Long-Term and Other Assets 355
Chapter 9 Current Liabilities and Long-Term Debt 406
Chapter 10 Corporations: Paid-In Capital and Retained Earnings 454
Chapter 11 The Statement of Cash Flows 504
Chapter 12 Financial Statement Analysis 564
Appendix A Columbia Sportswear Company Annual Report 2016 to Shareholders 621
Appendix B Time Value of Money—Future and Present Value Concepts 697
Appendix C FASB Update—Revenue Recognition 705
Company Index 707
Glindex 715
Credits 731
vii
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Contents
Chapter 1 Accounting, Business, and You—Putting It All Together 24

Business, Accounting, and You 1 SUMMARY 24
ACCOUNTING PRACTICE 27
Business, Accounting, and You 1
APPLY YOUR KNOWLEDGE 47
What Is a Business, and Why Study Accounting? 2
KNOW YOUR BUSINESS 47
The Definition of a Business 2
The General Concept of Value 3
Chapter 2
Business Owners and Other Stakeholders 4
The Goal of a Business 4 Analyzing and Recording Business
How Does a Business Operate? 5 Transactions 51
Resources Needed to Start and Operate a Business 5 Business, Accounting, and You 51
Operating a Business 5 How Are Accounts Used to Keep Business
The Cost of Money 6 Transactions Organized? 52
How Are Businesses Organized? 6 Organizing Accounts 52
Types of Businesses 6 Assets 52
Legal Forms of Businesses 7 Liabilities 53
What Is Accounting, and What Are the Key Accounting Stockholders’ Equity 53
Principles and Concepts? 9 What Is Double-Entry Accounting? 54
Generally Accepted Accounting Principles 9 Normal Balance 55
International Financial Reporting Standards 9
How Are the General Journal and General Ledger
The Business Entity Principle 10 Used to Keep Track of Business Transactions? 56
The Reliability (Objectivity) Principle 10 Transaction Analysis 57
The Cost Principle 10 Applying Transaction Analysis 57
Accounting Ethics: A Matter of Trust 10 Balancing the T-Accounts 65
What Is the Role of Accounting in a Business? 11
How Is a Trial Balance Prepared, and What Is It
How Do You Recognize a Business Transaction? 11 Used For? 67
Cash Accounting 11 Correcting Errors 67
Accrual Accounting 12 Preparation of Financial Statements 68
How Do You Measure a Business Transaction? 12
SUMMARY 72
How Do You Record Business Transactions Using the Accounting
Equation? 12
Transaction Analysis 13
Stockholders’ Equity 13
How Do You Report Business Transactions Using
Financial Statements? 18 Chapter 3
The Income Statement 19 Adjusting and Closing Entries 101
The Statement of Retained Earnings 19 Business, Accounting, and You 101
The Balance Sheet 19
How Does a Company Accurately Report Its Income? 102
The Statement of Cash Flows 21
Revenue Recognition and Matching Principles 102
Relationships Among the Financial Statements 21
ix
x Contents
What Is the Role of Adjusting Entries, and When Are They How Do You Prepare a Merchandiser’s Financial
Prepared? 104 Statements? 176
Accruing Revenues 105 The Income Statement 176
Accruing Expenses 106 Statement of Retained Earnings 179
Adjusting Deferred Revenues 107 Balance Sheet 179
Adjusting Deferred Expenses 108 SUMMARY 183
How Are Financial Statements Prepared from an Adjusted ACCOUNTING PRACTICE 186
Trial Balance? 113 APPLY YOUR KNOWLEDGE 209
The Adjusted Trial Balance 113 KNOW YOUR BUSINESS 209
Preparing the Financial Statements 115
How Does a Company Prepare for a New Accounting Chapter 5
Period? 117
Completing the Accounting Cycle 117
Inventory 212
Three Closing Entries: Revenues, Expenses, and Dividends 118 Business, Accounting, and You 212
Post-Closing Trial Balance 120 What Inventory Costing Methods Are Allowed? 213
Summary of the Adjusting and Closing Processes 120 Cost Flow versus Physical Flow of Inventory 214
SUMMARY 123 How Are the Four Inventory Costing Methods Applied? 216
ACCOUNTING PRACTICE 125 Inventory Cost Flows 216
APPLY YOUR KNOWLEDGE 154 Specific Identification Method 217
KNOW YOUR BUSINESS 154 First-In, First-Out (FIFO) Method 217
COMPREHENSIVE PROBLEM 157 Last-In, First-Out (LIFO) Method 219
Average Cost Method 220
Chapter 4 Journalizing Inventory Transactions 221
Accounting for a What Effect Do the Different Costing Methods Have on Net
Merchandising Business 159 Income? 222
Business, Accounting, and You 159 What Else Determines How Inventory Is Valued? 224
What Are the Relationships Among Manufacturers, How Is Inventory Reported on a Balance Sheet? 225
Wholesalers, Retailers, and Customers? 160 Inventory Shrinkage 226
How Do Periodic and Perpetual Inventory Systems How Do Inventory Errors Affect Financial Statements? 226
Differ? 160
Is It Possible to Estimate the Value of Inventory If the Inventory
How Do You Account for the Purchase of Inventory? 161 Is Accidentally Destroyed? 228
Cash and Credit Purchases 161
SUMMARY 231
Purchase Discounts 162 ACCOUNTING PRACTICE 233
Purchase Returns and Allowances 164 APPLY YOUR KNOWLEDGE 255
How Do You Account for the Sale of Inventory? 165 KNOW YOUR BUSINESS 256
Cash Sales 165 COMPREHENSIVE PROBLEM 258
Credit Sales 166
Sales Discounts 167
Chapter 6
Sales Returns and Allowances 168
Adjusting Entry to Record Estimated Returns and Allowances 169
The Challenges of Accounting:
Sales Returns 169
Standards, Internal Control, Audits,
Fraud, and Ethics 260
Sales Allowances 170
How Do You Account for Freight Charges and Other Selling Business, Accounting, and You 260
Expenses? 171 What Are the Rules That Govern Accounting? 261
Costs Related to the Receipt of Goods from Suppliers 172 Understandable 261
Costs Related to Delivering Goods to Customers 174 Relevant 261
Other Selling Costs 175 Reliable 261
Contents xi
Generally Accepted Accounting Principles (GAAP) in the How Are Accounts Receivable Reported on the Balance
United States 262 Sheet? 311
Generally Accepted Accounting Principles Around the How Do You Account for Notes Receivable? 311
World: IFRS 263
Identifying the Maturity Date 312
Differences Between FASB and IFRS 263
Origination of Notes Receivable 313
What Is Internal Control? 265 Computing Interest on a Note 313
Elements of an Internal Control System 265 Accruing Interest Revenue 314
What Is Fraud, and Who Commits It? 268 SUMMARY 318
Management Fraud 268
Employee Embezzlement 269
Factors Usually Present When Fraud Is Committed 269
What Is a Certified Public Accountant (CPA)? 271 Appendix 7A 349
Audits 271
What Is a Petty Cash Fund? 349
External Auditor Responsibilities 272
Setting Up a Petty Cash Fund 349
What Are the Legal and Ethical Responsibilities
of Accountants? 274 Replenishing the Petty Cash Fund 350
Legal Responsibilities of Accountants 274 Changing the Petty Cash Fund 351
Ethical Responsibilities of Accountants 275 ACCOUNTING PRACTICE 352
SUMMARY 278
Chapter 8
Long-Term and Other Assets 355
KNOW YOUR BUSINESS 290 Business, Accounting, and You 355
What Are the Different Types of Long-Term Assets? 356
Chapter 7 How Is the Cost of a Fixed Asset Calculated? 356
Cash and Receivables 293 Land and Land Improvements 357
Business, Accounting, and You 293 Buildings 358
What Internal Control Procedures Should Be Used Machinery and Equipment 358
for Cash? 294 Furniture and Fixtures 359
Internal Controls over Cash Receipts 294 Lump-Sum (Basket) Purchase of Assets 359
Internal Control over Cash Payments 295 How Are Fixed Assets Depreciated? 360
Purchase and Payment Processes 295 Measuring Depreciation 361
The Bank Reconciliation 296 Depreciation Methods 362
Preparing a Bank Reconciliation 297 Comparing Depreciation Methods 365
Online Banking 302 Partial-Year Depreciation 366
How Is Cash Reported on a Balance Sheet? 303 Changing the Useful Life of a Depreciable Asset 367
How Do You Account for Receivables? 303 Using Fully Depreciated Assets 368
Types of Receivables 303 How Are Costs of Repairing Fixed Assets Recorded? 369
Internal Control over Accounts Receivable 304 Ordinary Repairs 369
Accounting for Uncollectible Accounts Receivable 304 Extraordinary Repairs 369
How Do You Account for Uncollectible Accounts? 304 Betterments 369
The Direct Write-Off Method 304 What Happens When a Fixed Asset Is Disposed? 370
Direct Write-Off Method: Recovering Accounts Previously Written Off 305 How Do You Account for Intangible Assets? 373
The Allowance Method 305 Specific Intangibles 373
Estimating the Amount of Uncollectible Accounts 306 Accounting for Research and Development Costs 375
Writing Off Uncollectible Accounts Under the Allowance Method 309 How Are Natural Resources Accounted For? 375
Allowance Method: Recovering Accounts Previously Written Off 310 What Are Other Assets? 376
xii Contents
How Are Long-Term Assets Reported on the Balance Sheet? 377 How Are Cash Dividends Accounted For? 460
SUMMARY 380 Dividend Dates 460
ACCOUNTING PRACTICE 382 Declaring and Paying Dividends 461
APPLY YOUR KNOWLEDGE 402 Dividing Dividends between Preferred and Common Shareholders 462
KNOW YOUR BUSINESS 403 Dividends on Cumulative and Noncumulative Preferred Stock 463
How Are Stock Dividends and Stock Splits Accounted
Chapter 9 For? 464
Current Liabilities and Stock Dividends 464
Long-Term Debt 406 Recording Stock Dividends 465
Business, Accounting, and You 406 Stock Splits 467
Stock Dividends and Stock Splits Compared 469
What Are the Differences Among Known, Estimated, and
Contingent Liabilities? 407 How Is Treasury Stock Accounted For? 469
How Do You Account for Current Liabilities of a Treasury Stock Basics 469
Known Amount? 407 Purchase of Treasury Stock 470
Accounts Payable 407 Sale of Treasury Stock 470
Notes Payable 408 How Is Stockholders’ Equity Reported on the Balance
Sales Tax Payable 409 Sheet? 473
Accrued Expenses (Accrued Liabilities) 410 SUMMARY 475
Unearned Revenues 410 ACCOUNTING PRACTICE 477
Current Portion of Long-Term Debt 410 APPLY YOUR KNOWLEDGE 501
How Do You Account for Current Liabilities of an KNOW YOUR BUSINESS 502
Uncertain Amount? 411
Estimated Warranty Liability 411
Estimated Refund Liability 412 Chapter 11
How Do You Account for a Contingent Liability? 412 The Statement of Cash Flows 504
How Do You Account for Long-Term Debt? 413 Business, Accounting, and You 504
Notes Payable 413
What Is the Statement of Cash Flows? 505
Bonds Payable 415
How Does a Business Create a Statement of Cash Flows? 507
Lease Liabilities 422
The Logic of How the Statement of Cash Flows Is Prepared 507
How Are Liabilities Reported on the Balance Sheet? 423
Sources and Uses of Cash: Categorizing Changes as Operating, Investing,
SUMMARY 427 or Financing 508
ACCOUNTING PRACTICE 429 Statement of Cash Flows: Two Formats 510
APPLY YOUR KNOWLEDGE 450 How Is the Statement of Cash Flows Prepared Using the
KNOW YOUR BUSINESS 451 Indirect Method? 511
Cash Flows from Operating Activities 513
Chapter 10
Cash Flows from Investing Activities 515
Corporations: Paid-In Capital and Cash Flows from Financing Activities 517
Retained Earnings 454 Net Change in Cash and Cash Balances 519
Business, Accounting, and You 454 Noncash Investing and Financing Activities 519
How Are Corporations Organized? 455 How Is the Statement of Cash Flows Prepared Using the
What Makes Up the Stockholders’ Equity of a Corporation? 456 Direct Method? 522
Stockholders’ Rights 456 Cash Flows from Operating Activities 523
Classes of Stock 457 SUMMARY 529
Par Value, Stated Value, and No-Par Stock 457 ACCOUNTING PRACTICE 531
How Is the Issuance of Stock Recorded? 458 APPLY YOUR KNOWLEDGE 558
Issuing Common Stock 458 KNOW YOUR BUSINESS 559
Issuing Preferred Stock 460 COMPREHENSIVE PROBLEM 561
Contents xiii
Chapter 12 How Do You Put Everything Together to Make

Decisions? 585
Financial Statement Analysis 564
Seeing the Impact of Decisions 587
Business, Accounting, and You 564 What Are Red Flags in Financial Statement Analysis? 587
What Is Financial Analysis? 565
SUMMARY 590
Step One: Understand a Business’s Model and Strategy 565
Step Two: Understand the Environment in Which the Business
Operates 566
Step Three: Analyze the Content of the Financial Statements and Other
Information, Making Adjustments If Desired 567
Appendix A
Step Four: Analyze the Business’s Operations 567
Step Five: Use the Financial Analysis to Make Decisions 568
Columbia Sportswear Company Annual
Report 2016 to Shareholders 621
What Measures Does Someone Use to Analyze the
Performance of a Business? 568
Appendix B
Financial Analysis Techniques 569
Vertical Analysis 571
Time Value of Money—Future and
Horizontal Analysis 572
Present Value Concepts 697
Trend Percentages 574 Future Value 697
Question One: Is the Business a Going Concern? 574 Future-Value Tables 698
An Example: Bold City Brewery, Inc. 575 Future Value of an Annuity 699
Question Two: How Is the Business Earning a Net Income or Loss? 576 Present Value 700
An Example: Bold City Brewery, Inc. 578 Present-Value Tables 701
Question Three: Where Is the Business Getting Its Money? Can It Pay Its Present Value of an Annuity 701
Debt Obligations? 579 ACCOUNTING PRACTICE 703
An Example: Bold City Brewery, Inc. 579
Question Four: How Is the Business Investing Its Money? Is It Using Its Appendix C
Assets Efficiently? 580 FASB Update—Revenue Recognition 705
An Example: Bold City Brewery, Inc. 581
Question Five: Is the Business Generating Enough Net Income to Reward Company Index 707
the Stockholders for the Use of Their Money? 582 Glindex 715
An Example: Bold City Brewery, Inc. 583 Credits 731
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Preface
Changes to This Edition
Chapter 1 Business, Accounting, and You

• Expanded the use of Bold City Brewery, a real-life successful entrepreneurial venture,
to demonstrate the use and importance of accounting.
• Updated the “Try It!” problem.
• Updated the examples used in “How They Do It: A Look at Business.”
• Updated the Continuing Financial Statement Analysis Problem featuring Dick’s
Sporting Goods using the 2016 annual report.
• Updated end-of-chapter material related to Columbia Sportswear and Under
Armour using the 2016 annual reports.
Chapter 2 Analyzing and Recording Business Transactions

Chapter 3 Adjusting and Closing Entries

Chapter 4 Accounting for a Merchandising Business

• Fully integrated the new revenue recognition standard in text, exercises and
problems.
xv
xvi Preface

Chapter 5 Inventory
Chapter 6 The Challenges of Accounting: Standards, Internal

Control, Audits, Fraud, and Ethics
• Updated the auditor’s responsibilities with regard to auditing internal controls.
Chapter 7 Cash and Receivables

Chapter 8 Long-Term and Other Assets

Preface xvii
Chapter 9 Current Liabilities and Long-Term Debt

Chapter 10 Corporations: Paid-In Capital and Retained Earnings

Chapter 11 The Statement of Cash Flows

Chapter 12 Financial Statement Analysis

• Expanded the use of the Bold City Brewery, a real-life successful entrepreneurial ven-
ture, to demonstrate the use and importance of accounting.
Solving Teaching and Learning Challenges
Dear Colleagues,
We are very excited about the newest edition of Kemp and Waybright’s Financial Accounting. After
you have had a chance to look at this edition’s changes, we think you will be as excited about our latest
edition as we are.
Practical Approach: Accounting from a Business Perspective
As has been our goal in past editions, the fifth edition of Financial Accounting is all about helping stu-
dents learn. We believe the text and supporting materials tackle challenging topics in a pragmatic, easily
understood manner so that students understand not only accounting but its critical role in the business
world. We want to help you help your students master the basic concepts of financial accounting and
apply them to everyday business decisions.
To help with this goal, we’ve focused the fifth edition on businesses to which students can better relate.
First, we use Bold City Brewery—a successful, entrepreneurial business—to introduce, develop, and
demonstrate the topic of each chapter. We conclude each chapter by showing the importance of the
chapter topic to Bold City Brewery and larger firms. Second, throughout the chapter and at the end
of the chapter, we use examples and problems that reflect typical businesses that students encounter in
their real lives. This means smaller and more manageable numbers.
Execution: Ensuring Student Success
Every feature in Financial Accounting is about helping you, the faculty, help your students achieve this
goal. Based on our years of teaching, we believe we have created a complete package of instructional
materials using traditional and digital methods. For example, examine how each topic is introduced,
explained, and demonstrated. Notice how students not only learn the topic, but also see how it is applied
in the real world. Moreover, the end-of-chapter exercises, problems, and cases, all prepared by us, create
a progressive and appropriately challenging learning experience. Included in this edition are more than
18 live examples so students can test their understanding of the relationship between the general journal,
journal entries, and the impact on the accounting equation. These materials were all crafted carefully to
help you ensure your students have more of those “I get it” moments.
Assessment: Ensuring Your Success
We are first and foremost teachers. It’s our passion. We understand the challenges you face as teach-
ers. For example, to assure continuity between the text and the assessments, we prepared the solutions
manual and contributed to the algorithmic test bank, which we also checked for accuracy. In addition
to these supplements, there are automatically graded homework assignments in MyLab Accounting.
We believe in this text. Every day, we see how this text and supporting materials help students learn in
and out of the classroom. We believe you too will love this text. We believe you will quickly see how
Financial Accounting, with all of its supporting materials, creates success in your students.
Thank you for looking at Financial Accounting. We believe that the fifth edition of Financial Account-
ing is unique. It’s special. We hope you’ll look at it, compare it to other books, and think about what is
best for your students and you. If you do, we think there is one obvious choice: Kemp and Waybright’s
Financial Accounting. It’s all about success for you and your students.
Best wishes,
Bob Kemp
Robert Kemp, DBA, CPA Jeffrey Waybright
Ramon W. Breeden Senior Research Professor Jeffrey Waybright, CPA, MBA
McIntire School of Commerce Accounting Instructor
The University of Virginia Spokane Community College
xviii
xix
Deliver trusted content

You deserve teaching materials that meet your own high standards for your course. That’s why we
partner with highly respected authors to develop interactive content and course-specific resources that
you can trust—and that keep your students engaged.
Chapter Openers
Bold City Brewery is discussed at the beginning of each chapter in the Business, Accounting, and You
feature. This feature motivates students by tying the business concept directly to the chapter’s accounting
topics and demonstrating the importance and usefulness of the chapter’s topics.
102 Chapter 3
financial statements. These are steps one, two, three, and six of the accounting cycle.
Once again, the accounting cycle looks like this:
CHaPTeR
3
Step One
Recognize,
Adjusting and Closing Entries

measure and
Step Eight journalize Step Two
transactions
Prepare a Post
post-closing transactions
trial balance to the general
ledger
Learning Objectives Business, Accounting, and You

It’s closing time on December 31, and Susan and Brian Miller, the owners of the Step Seven Step Three
1 Understand the revenue Bold City Brewery,1 are meeting to discuss the past year. Brian says to Susan, Journalize and Prepare an
recognition and matching post closing unadjusted
“Well, we made it through another year. I think we’ve done a terrific job. We’re entries trial balance
principles
growing, we have thousands of happy customers, and we’ve always paid our obli-
2 Understand the four types gations on time. We’ve really worked hard this year, but I wonder, are we better
of adjustments, and prepare off? I mean, it’s time to take a look at what we’ve done and see whether we really Step Six Step Four
adjusting entries made money for ourselves. We need to pull everything together and see what we Prepare Journalize and
look like. Did we make a profit? It’s like the sport teams we love to follow: it’s the ƂPCPEKCN post adjusting
statements Step Five entries
3 Prepare financial end of the game and time to find out whether we’ve won or lost.”
statements from an adjusted Prepare an
Susan smiled and said, “I agree. However, for us adjusted trial
trial balance balance
to know how we are really doing, we need to have our
4 Prepare closing entries and
accounting staff ensure that our accounting records are up
a post-closing trial balance to date by preparing adjusting entries. Only after they do
Here in Chapter 3, we learn how to perform steps four, five, seven, and eight. The
that can they prepare accurate financial statements for the
accounting cycle is repeated for every accounting period. The accounting period can be
year. If we don’t have accurate financial statements, we
defined as a month, a quarter, or a year. The annual acounting period for most large com-
can’t effectively manage Bold City Brewery now and into Fiscal year Any consecutive, panies runs the calendar year from January 1 through December 31, although some
the future. Our accountants will also need to conclude this 12-month period that a business
companies use a fiscal year that does not coincide with the calendar year. A fiscal year
year and prepare for next year by preparing closing entries adopts as its accounting year.
is any consecutive 12-month period that a business chooses. It may begin on any day of
so we are ready to start the new year. If they don’t do that,
the year and end 12 months later. Usually, the fiscal year-end date is the low point in busi-
we won’t be able to keep track of how we are doing from
ness activity for the year. Although we focus primarily on an annual time period, financial
one year to the next.”
statements are also prepared monthly, quarterly, or semiannually. A business’s managers
Whether you are an accountant or a manager who uses
and other stakeholders need to know how the business is doing before the year ends.
accounting information, you need to understand the pro-
cess used by accountants to adjust and conclude (close) a
business’s financial records. Why? Because these records
affect the reports used to manage the business. They
How Does a Company Accurately Report
1 Understand the revenue
affect the final score used to judge a business’s success. recognition and matching Its Income?
In Chapter 2, we learned about journalizing and post- principles
ing transactions and how to prepare a trial balance and Accrual accounting Account- Revenue Recognition and Matching Principles
ing method that records revenues
when earned and expenses when
In Chapter 1, we learned that financial statements are prepared to provide useful informa-
incurred without regard to when cash tion to various users. However, for financial statements to be useful, they must be accurate
is exchanged. and up to date. To ensure that financial statements are up to date, GAAP requires the use
of accrual accounting. To practice accrual accounting, a business must follow the next
Revenue recognition two accounting principles:
1
The Bold City Brewery is located in Jacksonville, Florida. For more principle Recording revenues
information about the Bold City Brewery, go to www.boldcitybrewery when they are earned by providing • The revenue recognition principle states that revenues should be recognized, or
.com/home.php. goods or services to customers. recorded, when they are earned, regardless of when cash is received.
101
The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics 261
happens if a business does not follow the rules? We’ll consider these questions and
issues in this chapter.
Question-and-Answer Format mirrors

What Are the Rules That Govern those valuable, teachable moments in the
Accounting?
classroom when a student asks a question
1 Understand the importance
of US GAAP and how it
In Chapter 1, we saw that accountants need rules. Generally Accepted Accounting
Principles (GAAP) are the set of rules used by accountants. GAAP is intended to make that gets straight to the heart of the topic.
differs from accounting accounting information useful and help decision makers make good decisions. For
standards in other accounting information to be useful, it must be:
countries (IFRS)
• Understandable
Generally Accepted
• Relevant
Accounting Principles
(GAAP) The rules, principles, and • Reliable
concepts established by the account-
ing profession that govern financial
accounting. Understandable
Accounting information should be understandable. Accountants do not want users to
make bad decisions. They work hard so a company’s financial information is clear and
comprehensible. They know business is complex and that understanding financial infor-
mation is challenging. For that reason, accountants try to explain what they have done
in notes to the financial statements. Look at Appendix A and the financial statements of
Columbia Sportswear. The balance sheet, income statement, and other statements are
shown. Now look at the pages immediately following these statements. You will find pages
of notes that explain the numbers found in the financial statements.
Relevant
Accounting information should be relevant. Think of the thousands of transactions a
business conducts. Now think about trying to give to a business’s stakeholders every detail
of every business transaction; those users would be overloaded with information. For that
reason, accountants must summarize the information and determine what is important
to the user. Accountants try to provide only the information that is important. Accoun-
tants often say the information they provide is material, which is another way of saying
the information they provide is important. In deciding what is relevant, GAAP focuses
on the information that is important to those who provide a company’s financing, both
lenders and stockholders.
A part of relevance is making sure information is computed and disclosed consistently.
How would you feel if you were participating in a sporting event and the other team
decided to change the rules of the game? Accountants would feel the same if different
accounting rules were used each time. Accountants try to provide information that is com-
parable over time and among companies. As we’ll see in Chapter 12, Financial Statement
Analysis, stakeholders need consistent information in order to understand how a company
performs over time and how it compares with competing companies. Accountants use
GAAP to provide consistency. If GAAP changes, accountants explain how the change
110 Chapter 3
xx
of supplies used during the month will become supplies expense. The March 31 adjusting
entry updates the Supplies account and records Supplies Expense for the month:
Live Examples Approach The authors Date Account

GENERAL JOURNAL
Debit Credit
introduce unique live examples to illus- Mar 31 Supplies Expense

Supplies
275
275 GENERAL LEDGER
trate the connection between the account- Balance Sheet

Stockholders’ Equity
Income Statement
ing equation and journalizing transactions.

Assets Liabilities Retained
Common Stock Dividends Revenues Expenses
Earnings
In Chapters 2 and 3 of the Pearson eText,

students can journalize transactions, create Accounts
Receivable
Bal 4,250
Salaries Payable
Bal 1,350
Bal 1,350
Service
Revenue
Bal 12,350
Salaries
Expense
1,350
T-Accounts, and test their understanding 625

Bal 4,875 Unearned
Service Revenue
625
Bal 12,975
200
Bal 1,350
Rent Expense
of the relationship between journal entries

Bal 13,175
Prepaid Rent
200 Bal 800 1,050
Bal 6,300 1,050 Bal 600 Bal 1,050
Bal 5,250
and the accounting equation. Eighteen live Supplies

Supplies
Expense
examples allow students to practice over Bal

Bal
625
350
275
Bal
275
275
and over again until they comprehend these

critical accounting concepts. After the entry is posted to the general ledger, the correct account balances for Supplies
and Supplies Expense will be reflected. If Bold City Consulting fails to make this adjusting
entry, its assets (Supplies) would be overstated by $275 and its expenses (Supplies Expense)
would be understated by $275.
The amount of supplies that some companies use is often insignificant, and therefore
290 Chapter 6 they will expense the Thesupplies when
Challenges of purchased
Accounting: Standards, instead of treating
Internal Control, them
Audits, Fraud, as an291asset. Com-
and Ethics
Kelly was responsible for all of the bookkeeping functions, plus opening the mail, counting
Materiality Accounting prin- panies will use the• concept of materiality to decide whether to expense supplies when
Management’s Report on Internal Control Over Financial Reporting (Item 9A)
the cash in the registers at the end of the day, and making the daily bank deposit. With theseciple stating that a company must purchased or treat• them
Report as an asset. Registered
of Independent The materiality concept
Public Accounting states
Firm on that
Internal a company
Control over must
combined duties, Kelly found it fairly simple to give himself a “loan.” He removed $3,500 in cashperform strictly proper accounting perform strictly proper accounting
Financial Reporting (Item 9A) for items that have a material effect on the com-
only
from the cash register and replaced it with a $3,500 check from the incoming mail that day. Theonly for items that are significant for
check was from a customer who was paying his or her account in full. Kelly made a jour nal entry
pany’s financial statements. An item is considered to have a material effect when it would
the business’s financial statements; cause someone toRequirements
change a decision; stated differently, a material amount is one large
crediting Accounts Receivable to clear the customer’s account, but rather than debiting Cash, he
debited Inventory. Kelly knew that inventory was not counted and reconciled until year’s end. Thisinformation is significant, or material, enough to make a 1. Who is responsible for the information in the annual report? Who is responsible
difference to a user of the financial statements. So, the materiality con-
would give Kelly plenty of time to repay the “loan” before anyone noticed. when its presentation in the financial for recommending the independent accountants to the board of directors?
statements would cause someone to
cept frees accountants from having to report every account in strict accordance with
2. Who were the independent auditors? Under what standards did they conduct
Requirements change a decision. GAAP, while still reporting
their audit?items
What wasproperly.
their opinion of the audited financial statements?
1. What are the ethical considerations in this case? 3. Who is responsible for establishing and maintaining adequate internal control over
financial reporting? Is the effectiveness of the internal controls ever reviewed? Do
2. Discuss the primary internal control weakness in this case that could have contrib- Depreciation of long-term assets
you think that internal control procedures are necessary? Why?
uted to Kelly’s actions.
Long-term assets Long-lived, Long-term assets 4. ,Doorthefixed assets,
auditors are
have any assets that
responsibility with last for
respect more
to the than
internal one year.
controls? What Examples
Case 8. You are the controller for Pro Clean Services, a company that provides janitorial services was the auditor’s opinion regarding the management assessment of internal con-
to large commercial customers. The company has been very successful during its first two years
tangible assets such as land, build- include land, buildings, equipment, and furniture. All of these assets, except land, are used
trol effectiveness?
of operations, but to expand its customer base, the company is in need of additional capital to beings, equipment, and furniture used in up over time. As a long-term asset is used up, part of the asset’s cost becomes an expense,
used for equipment purchases. The two brothers who started the business, Adam and Tim Olson,the operation of a business lasting for just as supplies become supplies expense when they are used up. The expensing of a long-
invested their life savings in the business, so they have contacted a local bank about securing amore than a year.
loan for $175,000.
term asset’sIndustry
cost overAnalysis
its useful life is called depreciation. No depreciation is recorded
The bank has asked for a set of financial statements, and Adam, being a businessperson,Depreciation Allocation of the for land because
Purpose: itToishelp
never really used
you understand up. the performance of two companies in the same
and compare
knows that the bank is going to be looking for a growth in earnings each year. Although thecost of a long-term asset to Expense We account
industry.for long-term assets in the same way as prepaid expenses and supplies
company’s earnings have increased, Adam would like the past year to look better than it does now. Find the Columbia Sportswear Company Annual Report located in Appendix A and go to
over its useful life. because they are all assets. The major difference is the amount of time it takes for the asset
Adam stops by your office late in the afternoon on December 31 to find out when the financial the section titled “Design and Evaluation of Internal Control Over Financial Reporting” in Item
statements will be ready. You explain that you still have to close out the end of the year but should to be used up. Prepaid
9A starting expenses
on page 000. Nowand supplies
access the onlineare
2016typically used
Annual Report for within a year,
Under Armour, Inc. whereas
For most
have them ready by the end of the week. Adam tells you he is aware of a major contract Tim is long-term assets remain
instructions on howfunctional for several
to access the report online, seeyears. Suppose
the Industry Analysisthat, on 1March
in Chapter 1, Bold City
. Go to the
working on that it will be signed on January 3 and asks you to delay the closing process a few days
so the new contract can be included in this year’s operating results. You attempt to explain to Adam
Consultingsection in Item 8 on page 55 of the annual report titled “Report of Management on Internal Control
disposes of the
over Financial Reporting.”
equipment that was purchased previously and purchases new
that you cannot do that, but you can tell he is not listening to you. Adam interrupts by saying, “I equipment for $15,600 cash. (The accounting treatment of asset disposals is covered in
don’t know why you accountants get so worked up over a few days. Let me just say that it would Requirement
be in your best interest to include this contract in the current year’s operating results.” Adam leaves
1. Compare the two annual reports as they relate to their disclosure of internal con-
your office in a hurry, and you hear him mutter under his breath as he turns the corner, “That
trol procedures and the system of internal control.
accountant—who does he think he is trying to tell me how to run my business?”
Requirements
1. What are the accounting issues related to Adam’s request? Small-Business Analysis
2. What is the ethical issue involved in this case? Purpose: To help you understand the importance of cash flows in the operation of a small
3. What would be the appropriate course of action for you to take? business.
You own a business, like the Millers of the Bold City Brewery. You’re having a tough time
figuring out why your actual cash is always coming up less than the amount the general ledger
Know Your Business says should be there. You would hate to think that any of your employees would be stealing from
you, because they have all been with you since you opened the business five years ago. But maybe
Financial Analysis it’s time to do a little investigative work. After all, cash is the lifeblood of the business, and if it’s
being misappropriated, you need to find out fast!
Purpose: To help familiarize you with the financial reporting of a real company in order to fur-
You think back over some of your recent observations and some of the conversations you’ve
ther your understanding of the chapter material you are learning.
overheard. One startling conclusion is staring you in the face: Julie’s been a good employee, but
The annual report of Columbia Sportswear in Appendix A contains much more information
lately she’s been bragging about her wild weekends and some of the gambling casinos she’s
than what is reported in the financial statements and related footnotes. In this case, you will explore
been going to. Julie never used to be like that. You overheard one of her fellow employees ask
other information presented in the annual report in order to determine the responsibilities of both
her where she’s getting all this money, and she said that her husband just got a really good
management and the independent auditors as they relate to annual report content. In addition,
raise at his job and they’re celebrating. Then just last week, Julie drove to work in a new sports
you will investigate the respective roles of both management and the auditors in the company’s
car, and again you overheard her tell someone about the great deal her brother-in-law got for
internal control system.
her on this car.
Refer to the Columbia Sportswear Annual Report in Appendix A. You will need to find and
Julie is in charge of accounts payable, billing, and collections. Because your office is so small,
then read the following reports:
you always felt like these jobs could be done more efficiently by the same person. You also remem-
• Management’s Report on the Consolidated Financial Statements (Item 8) ber that Julie’s uncle is one of your vendors, and there was that situation last year where you dis-
• Report of Independent Registered Public Accounting Firm on Consolidated Financial covered a double billing from her uncle’s company. When you brought it to Julie’s attention, she
Statements (Item 8) immediately admitted her error and took care of it.
The Perfect Balance of Small Business Perspec-

tive and Corporate Coverage Not every student
will graduate and become part of a large corpora-
tion, which is why it’s important for students to
understand how financial accounting applies in
small business scenarios as well as corporate ones.
Closing entries are the end-of-period journal entries that zero out the temporary
accounts—revenues, expenses, and dividends—to get them ready for the next accounting
period. Closing entries also transfer the balances from the temporary accounts into the
Retained Earnings account. The post-closing trial balance is the final step in the account-
ing cycle. The post-closing trial balance is prepared to ensure that total debits still equal xxi
total credits before a new accounting period is started.
Focus on Decision Making shows stu-

Focus on Decision Making dents how to make financially sound busi-
ness decisions and to evaluate risk and the
“Who Owns Net Income and Where Does Net Income Go?”
What is net income? You can’t touch it. You can’t see it. You can’t spend it. There’s not impact of those decisions on a company.
even an account in the general ledger called Net Income. You can touch, see, and spend
cash. But using accrual accounting, net income is not cash. So, what is net income?
Net income is the net of revenues less expenses. But who gets the net income? Who
owns net income?
The answer is that owners own net income. Think of revenues as something that
benefits owners. Think of expenses as something that takes away some of that benefit
that revenues provide. The net—whether net income or loss—belongs to the owners.
At the end of each accounting period, we want to close out the old measures and
start new measures of revenues, expenses, and net income. We have closing entries
that zero out all the revenue and expense accounts so they start with a zero balance.
However, we do not zero out the impact that revenues and expenses had on balance
sheet accounts such as cash, accounts receivable, and accounts payable. To get this
to work, we must recognize that the net income belongs to the business’s owners.
It’s a part of the owners’ equity. If the business does not distribute it to the owners,
the net income is retained in the business. Earnings over time can be retained in the
business or distributed to owners.
How They Do It: A Look at Business

During a period of time, a business sells products and earns revenue. In doing so, it
incurs expenses. Revenue less expenses is net income (or net loss). Think about a
microbrewery such as the Bold City Brewery.2 Remember in Chapter 1 that our dream
brewery started with $1,500,000 in assets. It financed $1,500,000 in assets with
$750,000 in liabilities and $750,000 in stockholders’ equity. What did it do with its
assets? During the year, it used the assets to make and sell beer. Sales were $3,000,000.
It incurred expenses in making and selling the beer of $2,700,000. During the year, the
brewery made its owners $300,000 in net income. The owners started with $750,000
in stockholders’ equity. It increased its stockholders’ equity by adding $300,000 in net
income to retained earnings. Thus, at the end of the year, the $300,000 in additional
retained earnings increased stockholders’ equity from $750,000 to $1,050,000. If the
brewery does not pay a dividend to its owners, the brewery will have ending stockhold-
ers’ equity of $1,050,000. The brewery will start the next year with $1,050,000 in stock-
holders’ equity.
Now let’s look at the Walt Disney Company. Disney operates amusement parks,
makes movies, sells clothing, and does many other things related to the entertain-
ment business. On October 3, 2015, Disney started its 2016 year with retained earn-
ings of $59,028 million. During 2016, Disney earned net income of $9,391 million and
2
The numbers used to demonstrate how a microbrewery operates are representative of the microbrew-
ing industry. However, the numbers used do not reflect the actual operations of the Bold City Brewery. Adjusting and Closing Entries 117
Decision Guidelines focus students Decision Guidelines

on key business decisions that require
Decision Guideline Analyze
a firm understanding of the account- How can I tell how A company’s financial statements The income statement reflects how profitable a business has been
ing concepts in each chapter. well a business is
performing?
provide information regarding its
performance.
for a specified period of time. The statement of retained earnings
shows how much of a company’s earnings have been distributed
to the stockholders during the period. And the balance sheet
reflects the business’s financial position on a given date. In other
words, it shows what assets the business has and who has rights
to those assets.
Adjusting and Closing Entries 113

How Does a Company Prepare for a New
TRY IT!
Tr y I t ! Accounting Period?
Jane Richards is the accountant for Crazy Curls, Inc., a local salon. After Jane finished
preparing the financial statements for the year, she realized that she failed to make an Completing the Accounting Cycle
adjusting entry to record $975 of depreciation expense on equipment. What effect did this
error have on Crazy Curls’ financial statements?
4 Prepare closing entries
and a post-closing trial Try It! gives students the opportunity to
We have now reviewed steps one through six in the accounting cycle completed for Bold
City Consulting. The entire accounting cycle can be completed by finishing steps seven
Answer
balance
apply the concept they just learned to an
and eight. Step seven of the accounting cycle is the journalizing and posting of the closing
entries, and step eight is the preparation of a post-closing trial balance.
To determine the effect of omitting an adjusting entry, we must examine what the
adjusting entry should have been. Jane should have made the following adjusting Closing entries Journal entries
prepared at the end of the account-
accounting problem.
To complete the accounting cycle, closing entries must be journalized and posted.
Earlier in the chapter, we processed the transactions for Bold City Consulting and pre-
entry:
ing period to zero out the revenue, pared the financial statements at the end of March. If we continue recording information
expense, and dividend accounts so in the revenue, expense, and dividend accounts, we will lose track of what activity hap-
DATE ACCOUNTS POST REF. DR. CR. accounting can begin for the next pened before April compared with what happens in April and beyond, making it impos-
Depreciation Expense, Equipment 975 period.
sible to prepare accurate financial statements for the next accounting period.
Accumulated Depreciation, Equipment 975
So the transactions from the two different periods are not confused, the revenue,
expense, and dividend accounts must be reset to zero before we start recording transac-
tions for April. It is similar to resetting the scoreboard at the end of a game, before a new
As we can see from the journal entry, Depreciation Expense, Equipment should one starts. Because we must keep the accounting equation in balance, we cannot just erase
have been debited (increased), which would have increased total expenses for the balances in the revenue, expense, and dividend accounts because it would cause the
the year. An increase in total expenses causes a decrease in Net Income. So, the
equation to become unbalanced. To keep the accounting equation in balance and still be
omission of the adjusting entry for depreciation expense causes Net Income, and
able to zero out these accounts, accountants use closing entries; these entries accomplish
therefore Retained Earnings, to be overstated. We also see that the Accumulated
Depreciation, Equipment account should have been credited (increased), which two things:
would cause total assets to decrease because Accumulated Depreciation, Equip- • The revenue, expense, and dividend account balances from the current accounting
ment is a contra-asset account. So, the omission of the adjusting entry for depre- period are set back to zero so accounting for the next period can begin.
ciation expense also causes the total assets to be overstated.
• The revenue, expense, and dividend account balances from the current account-
ing period are transferred into Retained Earnings so the accounting equation stays
in balance. Transferring the revenue and expense account balances into Retained
Earnings actually transfers the Net Income, or Net Loss, for the current period into
If a company fails to make appropriate adjusting entries at the end of an accounting
Retained Earnings. Transferring the dividend account balance into Retained Earn-
period, its financial statements likely will not correctly report the results of operations
(Income Statement) or the financial position (Balance Sheet) of the company. Having ings decreases Retained Earnings by the amount of dividends for the period.
inaccurate financial information makes it hard for stakeholders to make good decisions. Temporary accounts Revenue, The revenue, expense, and dividend accounts are known as temporary accounts.
For example, managers can make poor management decisions, such as hiring additional
Accruals Revenues earned or or expenses are incurred before cash is paid, it is called an accrual. We have already
expenses incurred before cash has learned about accruals in Chapters 1 and 2 when we recorded transactions in Accounts
been exchanged. Receivable and Accounts Payable.
Businesses may also receive cash from customers before the delivery of goods or ser-
vices to the customer. In this case, cash is received before revenue is earned. In addition,
xxii businesses may pay for goods or services before receiving those goods or services from the
Deferrals Cash received or paid supplier. In this case, cash is paid before an expense is incurred. When cash is received for
before revenues have been earned or goods or services before the recognition of a revenue, or when cash is paid for goods or
expenses have been incurred. services before the recognition of the expense, it is called a deferral. We also reviewed
Stop and Think...

If cash is so important to the well-being of a business, why does US GAAP require the
Stop and Think includes a question-and- use of accrual accounting instead of cash accounting?
answer snapshot asking students to apply what Answer

they just learned. The goal of US GAAP is for financial statements to reflect accurate information regarding
the performance of a business. The fact that a business has received cash from custom-
ers does not necessarily mean that the business is performing well. For example, let’s
assume that during the year a business received $95,000 from customers for services it
had provided during the same year. The business also received another $15,000 from cus-
tomers for services that will not be provided until the following year. Under cash account-
ing, the business would report $110,000 of revenues in the first year. Now, suppose
during the second year the customers asked for (and received) a refund of the $15,000
before the services were provided. The $110,000 in revenues originally reported under
cash accounting during the first year now seem inaccurate because the business only
Inventory 255 ended up with revenues of $95,000. Under accrual accounting, the business would have
reported only $95,000 of revenues in the first year, which would have reflected a more
Requirements accurate picture of the business’s performance. This is because, under accrual account-
1. Assuming Fitness Equipment Doctor, Inc., uses the FIFO inventory cost-flow ing, revenues are recorded when they are earned instead of when cash is received.
assumption, what is the July 31 ending treadmill inventory balance and July cost of
goods sold for treadmills?
2. Assuming Fitness Equipment Doctor, Inc., uses the LIFO inventory cost-flow
goods sold for treadmills?
3. Assuming Fitness Equipment, Inc., uses the average cost inventory cost-flow
goods sold for treadmills? Round the average cost per unit to the nearest cent and
all other amounts to the nearest dollar.
Continuing Financial Statement Analysis Problem

Let’s look at Dick’s Sporting Goods (Dick’s) some more. Think about Dick’s. Think about accountants
Continuing Financial Statement
reporting what Dick’s has, where it got its money, and what it has been doing to create value. Is
Dick’s earning net income or loss? What resources did Dick’s need to operate? Think about the
Analysis Problem uses the Dick’s Sport-
business of Dick’s.
Return to Dick’s financial statements, which are contained in its Annual Report (see the
ing Goods 2016 annual report to familiar-
Continuing Financial Statement Analysis Problem in Chapter 2 for instructions on how to access
the Annual Report). Go to page 40, where you will find Dick’s income statement for the year
ize students with reading and interpreting
ending January 28, 2017 (called the Consolidated Statement of Income). On page 42, you’ll find
Dick’s balance sheet as of January 28, 2017. Now answer the following questions:
financial statements in each chapter. By
1. What makes up Dick’s inventory? See footnote 1 of the financial statements (page
45 in Dick’s 2016 annual report). What inventory method does Dick’s use, for
the end of the text, they have completely
example, FIFO or LIFO?
2. Look at Dick’s balance sheet. How much has Dick’s invested in inventory as of
analyzed the financial statements.
January 28, 2017, and January 30, 2016?
3. Look at Dick’s balance sheet. How much inventory does Dick’s have per store as of
January 28, 2017, and January 30, 2016? (Divide the total inventory by the num-
ber of stores Dick’s operated in each of these years: 797 in 2016 and 741 in 2015.)
Is inventory per store increasing or decreasing?
4. Look at Dick’s balance sheet and income statement. What is Dick’s inventory turn-
over rate for the year ending January 28, 2017? What does this tell you?
5. Look at Dick’s balance sheet and income statement. What is Dick’s days-sales-in-
inventory for the year ending January 28, 2017? What does this tell you?
6. Looking back over your answers to questions 1 through 5, how do you think Dick’s
is performing?
Apply Your Knowledge

Ethics in Action
Case 1. Susan Hopkins recently went to work for RJ Enterprises as the accounting manager. At
the end of the year, Bill Harrison, the CEO, called Susan into his office for a meeting. Mr. Harrison
explained to Susan that RJ Enterprises was in the midst of obtaining a substantial cash investment
from a major investor. Mr. Harrison said he was concerned that the investor would decide not
Reach every student with MyLab Accounting

to invest in RJ Enterprises when it saw the current year’s results of operations. Mr. Harrison then
asked Susan to revise the current year’s financial statements by increasing the value of the ending
inventory in order to decrease cost of goods sold and increase net income. Mr. Harrison tried to
MyLab is the teaching and learning platform that empowers you to reach every student. By combining trusted author content
reassure Susan by explaining that the company is undertaking a new advertising campaign that
will result in a significant improvement in the company’s income in the following year. Susan is
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concerned about the future of her job, as well as others within the company, if the company does
not receive the investment of cash.
Learn more about MyLab Accounting.
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MyLab gives you the flexibility to easily create your course to fit your needs.
xxiii
Accounting Cycle Tutorial (ACT)

with Comprehensive Problem
MyLab Accounting’s new interactive tutorial helps
students master the accounting cycle for early and
continued success in the Introduction to Account-
ing course. The tutorial—accessed by computer,
smartphone, or tablet—provides students with brief
explanations of each concept of the accounting cycle
through engaging videos and animations. Students
are immediately assessed on their understanding, and
their performance is recorded in the MyLab Account-
ing grade book. Whether the Accounting Cycle Tuto-
rial is used as a remediation self-study tool or course
assignment, students have yet another resource within
MyLab Accounting to help them be successful with the
accounting cycle. This updated version includes a new
comprehensive problem.
Learning Catalytics
Learning Catalytics, available through MyLab
Accounting, is a “bring your own device” assessment
and classroom activity system that expands the pos-
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xxiv Preface
Instructor Teaching Resources

This program comes with the following teaching resources:
Supplements available to
instructors at www
.pearsonhighered.com/kemp Features of the Supplement
Solutions Manual Contains solutions to all end-of-chapter questions, including short exercises, exercises, and problems.
Created by Jeffrey Waybright
Instructor’s Resource Course Content
Manual – Introduction to the Instructor’s Resource Manual with a list of resources and a roadmap to help navigate
Created by Stephanie Swaim, Dallas MyLab Accounting
County Community College District – Instructor tips for teaching courses in multiple formats: traditional, hybrid, or online
– “First Day of Class” student handout that includes tips for success in the course as well as an additional
document that shows students how to register and log on to MyLab Accounting
– Sample syllabi for 10- and 16-week courses
Chapter Content
– Chapter overview and teaching outline that includes a brief synopsis and overview of each chapter
– List of learning objectives from the text
– Key topics that walk instructors through what material to cover and what examples to use when addressing
certain items within the chapter
– Student chapter summary handout to assist students in taking notes on the chapter
– Assignment grid that outlines all end-of-chapter exercises, problems, and cases; the topic of a particular
exercise, problem, or case; estimated completion time; level of difficulty; and availability in General Ledger
or Excel templates
– Ten-minute quizzes that quickly assess students’ understanding of the chapter material
Test Bank Includes more than 1,500 questions; both objective-based questions and computational problems are avail-
able. Algorithmic test bank is available in MyLab Accounting.
Created by Lauren Psomostithis,
Algorithmic test bank is available in MyLab Accounting. Most computational questions are formulated
North Seattle College
with an algorithm so that the same question is available with unique values. This offers instructors a greater
pool of questions to pull from, and will help ensure each student has a different test.
All questions include the following annotations:
• Difficulty level (1 for straight recall, 2 for some analysis, 3 for complex analysis)
• Type (Multiple-choice, true/false, short-answer, essay)
• Learning objective
• AACSB learning standard (Ethical Understanding and Reasoning; Analytical Thinking Skills; Information
Technology; Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge)
Computerized TestGen TestGen allows instructors to:
• Customize, save, and generate classroom tests
• Edit, add, or delete questions from the Test Item Files
• Analyze test results
• Organize a database of tests and student results
Another random document with
no related content on Scribd:
and spade assigned to disinterment duty after some bombardment
did not dig deep enough here. But the captain does not wish to
understand and hurries us along to the next street.
A CRUMBLING CIVILISATION
In the ghastly stillness of this city that was once Rheims, at last
there is a sound of life. Down the Rue de la Paix, the street of peace,
an army supply-wagon clatters past us. And you have no idea how
pleasant can be the sound even of noise.
Then across the way appears a milk-woman, pushing her cart with
four tin cans and jingling a little bell. There are a few people, it
seems, still left, employés in the champagne industry, who cling to
their homes even though they must live in the cellar. Now the
devastation increases and the houses begin to be mere rubbish
heaps of brick and mortar as we approach the Place de la
Cathédrale.
At length we stand before the famous Cathedral of Rheims itself. I
know of no more impressive place to be in the closing days of the
year 1916 than here at the front of the terrible world war.
In this edifice is symbolised all that civilisation of ours that
culminated in the Twentieth Century, now to be razed to the ground.
For lo, these seven hundred years, even as the two great towers
above us have lifted the infinite beauty of their architectural lace-
work against the blue-domed sky, some thirty generations of the
human soul have sent their aspirations heavenward on the incense
of prayer. Over these very stones beneath our feet, king after king of
France has walked, to receive the crown of Charlemagne and to be
anointed before this altar from “le sainte ampouli.” And now here to-
day is history in no dead and musty pages but in the making, white-
hot from the anvil of the hour! Only a little over a mile away are the
German guns that from day to day shower the shell-fire of their
destruction on the city. This spot upon which we stand is their
particular objective point of attack. Hear! There is a rumbling
detonation. We wait hushed for an instant. But the sound is not
repeated. You see, already there have been some 30,000 shells
poured on Rheims. Twelve hundred fell in one day only. At any
moment there may be more.
“If the bombardment should begin,” we had been instructed at
Maison de la Presse, “you would rush for the nearest cellar.” I think
we all have listening ears. Every little while there is certainly
repeated that desultory firing on the front.
But nothing is dropping on us. And reassured, we turn to examine
the great shell hole in the pavement not five yards distant. The
Archbishop’s Palace, immediately adjoining the church, is flat on the
ground in ruins. The cathedral itself is slowly being wrecked. But in
the public square directly before it, look here! See Joan of Arc on her
horse triumphantly facing the future! In her hand she is waving the
bright flag of France. Amid the débris of the great war piling up about
her, the famous statue stands absolutely untouched. Here at the very
storm centre of the attack on civilisation, with the hell-fire of the
enemy falling in a rain of thousands of shells about her, she seems
as secure, as safe under God’s heaven as when the people passed
daily before her to prayer. Shall we not call it a miracle?
“See,” says the captain, his head reverently uncovered, his eyes
shining, “our Maid of Orleans. No German shall ever harm her!” And
since the war began, it is true, no German ever has. Not a statue of
the famous girl-warrior anywhere in France has been so much as
scratched by the enemy. Her name was the password on the day of
the Battle of the Marne and there are those who think it was the
shadowy figure of a girl on a horse that led the troops to that victory.
Oh, though cathedrals may crumble and cities be laid waste and
fields be devastated, some time again it shall be well with the world.
For the faith of the people of France in Joan of Arc shall never pass
away.
That we realize, as we look on the rapt face of the captain who
leads us now within the great church itself, where for three years all
prayers have ceased. The marvellous stained glass from the
thirteenth century, which made the religious light of the beautiful
windows, now hangs literally in tatters like torn bed-quilts blowing in
the wind. That great jagged hole in the roof was torn by a shell at the
last bombardment. There are fissures in the side walls. The rain
comes in, and the birds. Doves light there on the transept rail. Amid
the rubbish of broken saints with which the floor is littered, there yet
stands here and there a sorrowful statue hung with the garland of
faded flowers reminiscent of some far-off fête day. And Requiescat in
pace, you may read the legend cut in the stone of the eastern wall
above the tomb of some Christian Father.
In the nearby Rue du Cardinal de Lorraine, in a garden saying his
rosary, walks an old man in a red cap, one of the few remaining
residents who will not leave the city. He is the venerable Mgr. Lucon,
Cardinal of Rheims. Always he is praying, praying to God to spare
the cathedral. And God does not. “I do not understand. I suppose
that He in His wisdom must have some purpose in permitting the
church to be destroyed,” says the Cardinal of Rheims. “I do not
understand,” he always adds humbly.
“One may not understand,” repeats the captain. And he takes us to
luncheon at the Lion d’Or, the little inn where the wife of the
proprietor still stays to serve any “mission of the French
gouvernement.” Then he shows us the famous champagne cellars of
the Etablissement Pommery. Here one hundred feet below the
ground, in the chalk caves built a thousand years ago by the
Romans, are twelve miles of subterranean passageways with
thirteen million bottles of the most celebrated champagne in the
making.
The superintendent pours out his choicest brand: “Vive la France
and the Allies,” he says, lifting his glass. He talks more English than
the captain can. He is telling us of when the Germans entered
Rheims. “Four officers,” he says, “came riding ahead of the army.
And I met them by chance just as they arrived in the market place of
Rheims.”
“What did you do?” asks the New York correspondent of the
London Daily Mail. “I wept,” says the Frenchman, simply and
impressively. “Gentlemen,” he adds solemnly and sadly, “I hope you
may never meet some day four conquering Chinamen riding up
Broadway.”
I find myself catching my breath suddenly at that. And I am glad
when the captain hums a gay little French tune and holds out his
glass a second time: “Give us again ‘Vive la France.’”
The sun is dipping red in the west when we turn to leave Rheims
and Joan of Arc bravely flying the French flag before its crumbling
cathedral. There is the rumble of guns once more at the front. Then
the winter dusk rapidly envelops the road along which we are
speeding. It is the same road to Epernay. But now it is alive with
traffic. Under the protecting cover of the soft darkness, all sorts of
vehicles are passing. The headlights of our car flash on a continuous
procession of motor lorries, munition-wagons, army supply-wagons,
tractors, and peasants’ carts carrying produce to market. So we
arrive at Epernay for a lunch of red wine and war bread at the little
station. By ten o’clock we are safely within the walls of Paris. We
have escaped bombardment!
It is two days later before the French official communiqué in the
daily papers begins again recording: “At Rheims toward six o’clock
last night, after a violent attack with trench mortars, the Germans
twice stormed our advance posts. But these two attempts completely
failed under our machine-gun fire and grenade bombing.”
DIFFICULT DAYS IN THE WAR ZONE

It isn’t what happens necessarily. It’s what’s always-going-to-
happen that keeps one guessing between life and death in a war
zone. And there are special torments of the inquisition devised for
journalists. Ordinary civilians are occupied only with saving their
lives. Journalists must save their notes.
At half-past eleven o’clock that night of my return from Rheims,
there is dropped in the mail box on my hotel room door, a cablegram
from America: “Steamship St. Louis here. Your material from London
not on it.” The room in which I stand, the Hotel Regina, and the city
of Paris all reel unsteadily for an instant. Has the British Government
eaten up all my journalistic findings so preciously entrusted to
Wellington House? I grasp the brass foot rail of the bed and bring
myself upstanding. If they have, it is no time for me to lose my head.
Jacques with the empty coat sleeve and the Croix de Guerre on
his breast, who operates the elevator, I am sure thinks it a woman
demented who is going out in the streets of Paris alone at midnight.
But “an Americaine,” one can never tell what “an Americaine” will do.
“Pardon,” he says hesitatingly as I step out, “madame knows the
hour?” Yes, madame knows the hour. But an alien may not send a
telegram without presenting a passport, the document that never for
an instant goes out of one’s personal possession. No messenger
can do this errand for me.
Five minutes later I am in a taxicab tearing down the Rue Quatre
Septembre to the cable office in the Bourse. My appeal for help to
Sir Gilbert Parker in London is being counted on the blue telegraph
blank by the operator at the little window, when suddenly I remember
I have forgotten. My hand feels helplessly over my left hip where
there is concealed a letter of credit for three thousand dollars. But I
falter, “I haven’t any money, that is, where I can get at it.”
“I have,” speaks a voice over my shoulder. I look around into a
man’s cheerful countenance. “What’s the damage?” he says again in
pleasant Manhattan English. I hesitate only for an instant. “It’s
sixteen francs I need.”
He promptly pulls out his bank-roll. I ask for his card, of course, to
return the loan the next day with many thanks for his courtesy. He,
however, has no security that I will. As he puts me in my taxicab and
lifts his hat beneath the faint war-dimmed light of the street lamps in
the dark Rue Vivienne, he only knows that I am his country-woman.
And he is an American man. The Lord seems to send them when
you need them most.
Three days later the awful silence in which I am suffering all the
fears there are for a journalist in war-time, is broken by a reply from
London: “Material only delayed. Sailed steamship New York instead
of St. Louis.” After another two weeks of fitful nights in which I dream
of men in khaki who confiscate journalistic data, there comes the
message from New York that is like hearing from Heaven: “Your
consignment of material safely arrived.” Meanwhile, before I may be
permitted to take a line out of this country, Maison de la Presse must
pass on my French data. I am feverishly editing it for their approval
when there is a knock at my door. The maid is there with more letters
than the little brass mail box will hold. I eagerly open my American
mail to find it filled with holiday greetings. So, it can still be Christmas
somewhere in the world! I am standing at the window with a
Christmas card in my hand, thinking pleasant thoughts of the far-
away city called New York where there is still peace on earth, good-
will to men, when down the Rue de Rivoli passes a motor lorry piled
high with black crosses. There are fields in France that are planted
with black crosses, acres and acres of them. After each new push on
the front, more are required, black crosses by the cartload! I glanced
at my calendar. Why, to-day is Christmas! I had quite forgotten. You
see, over here all joy-making occasions seem to have been such a
long while ago, like the stories of once upon a time.
I turn once more to the task of making ready my data for Maison
de la Presse. Here a too colourful sentence must be rejected. There
is a too flagrantly feministic document that will be safest in the waste
basket. It is the martial mind that I must meet. A press bureau, you
see, is prepared to pass promptly propaganda on the battles of the
Somme. But dare one risk, say, a pamphlet on the breast feeding of
infants? Propaganda about the rising value of a baby! Dear, dear, it
might, for all a man could tell, be treason, seditious material
calculated to give aid and comfort to the enemy! Already to my
inquiries about maternity measures in Paris, have I not been
answered suspiciously: “But why do you ask? This matter it is not of
the war.”
My emasculated data at last are ready for review by le chef du
service de la presse. He stamps it all over with his signature in red
ink. It is done up in packages and officially sealed in red wax with the
seal of the state of France. At the Post Office in the Rue Etienne
Marcel, I register it and mail it, committing it with a sigh to the
mercies of the great Atlantic.
DEALING WITH GOVERNMENT

Having crossed the Channel once alive, it seems like tempting fate
to try it again. I draw in my breath as one about to plunge into a cold
bath in the morning, and go out to secure from three governments
the necessary permission that will allow me to return to England.
From the police alone it sometimes takes eight days to secure this
concession. But at the Prefecture of Police, they read my letter of
introduction from the French consul in New York. And I have only to
leave my photograph and sign on the dotted line. In five minutes they
have given my passport the necessary visé. The American consul
easily enough adds his. All my journey apparently is going as
pleasantly as a summer holiday planned by a Cook’s Agency, when
at length I come up with a bump against the British Control office in
the Rue Cheveaux Lagarde. And the going away from here requires
some negotiations. The British lieutenant in charge reads my nice
French letter and without comment tosses it aside. “You wish to go to
London?” he asks in great surprise. “Now, why should you wish to go
to London?” He gives me distinctly to understand this is not the open
season for tourists in England. “We don’t care to have people
travelling,” he says in a tone of voice as if that settles it. “Why have
you come over here in these difficult and dangerous times, anyhow?”
he asks querulously and a trifle suspiciously. “The best thing you can
do is to go home directly. And America is right across the water from
here.”
“But, Lieutenant,” I gasp, “my trunk is in England and I’ve got to
have a few clothes.”
“No,” he says, “personal reasons like that don’t interest the British
Government. Neither am I able to understand a journalistic mission
which should take a woman travelling in these days of war.” He looks
at me. “The New Position of Women! It is not of sufficient interest to
the British Government that I should let you go,” he says with finality.
“I know, Lieutenant,” I agree. “But surely you are interested in the
Allies’ war propaganda for the United States?” The light from the
window shines full on his face and I can see a faint relaxation about
the lines of his mouth. “Now I wish to go to England so that I may tell
the story of the British women’s war work. The readers of Pictorial
Review are four million women who vote.” The lieutenant stirs visibly.
His sword rattles against the rounds of his chair.
Well, my request hangs in the balance like this for a week. At
length one day he says, “I’m thinking about letting you go. I shall
have to consult with my superior officer. I don’t at all know that he will
consent.”
There is the day that I have almost given up hope. I am waiting
again before the lieutenant’s desk. He has gone for a last
consultation with the superior officer. Will he never come back? I
stare at his empty chair. The clock on the mantel ticks and ticks. The
fire in the grate snaps and snaps. Other people at the next desk who
get easier visés than mine, come and go—a Red Cross nurse, two
French sisters of charity, a little French boy returning to school. I
have counted the pens in the lieutenant’s glass tray. I know every
blot on his desk-pad. The clock has ticked thirty-five minutes of
suspense for me before the little French soldier in red trousers opens
the door and the lieutenant is here.
“Well,” he says, “we have decided. You are to be permitted to go,
but on one condition.” And he visés my passport, “No return to
France during the period of the war.”
It has taken nearly two weeks to win my case. Two days later at 6
a. m., when the gardens of the Tuileries are outlined dimly against
the faint rays of dawn, my taxicab is reeling through the streets of
Paris to the Gare St. Lazare. It is noon before the train reaches
Havre. The Red Cross nurse, the London newspaper correspondent
and the Belgian air-man all file out of our compartment and the Irish
major from Salonica is last. He turns to me with a frank Irish smile:
“Your bag can just as well go along with my military luggage. And
they’ll never even open it.”
At eight o’clock that night in Havre, my passport and the letter from
the French consul in New York are handed down the steel line of ten
men at a table. Each looks up with the same curious smile when his
glance arrives at the last visé: “Who put that on your passport?” asks
the officer at the head of the line. “The British Control Office?” he
says with heat. “It’s none of their business.” In an inner room, four
more men examine my documents. “Did the British officer see this
letter from the French consul?” I am asked. I nod assent. A laugh
goes round the room. “Pardon, madame,” says the man with the
most gold braid, “the British Control Office does not control France.
You are welcome to France, madame, welcome to France any time
you choose to come.”
That is the War Office that speaks. So, with the French
Government’s cordial invitation ringing pleasantly in my ears, I go on
board the Channel boat. But I have no intention of returning to
France right away, gentlemen. I lay out my life-preserver with a
feeling of great relief that if I survive this crossing, it will not have to
be done over again. And once more the boat in the darkness steals
safely and silently across the Channel.
In the morning, in Southampton, the major from Salonica hands
me his card: “Letters,” he says, a trifle wistfully, “will always reach me
at that address.” I look at the card here before me on my desk as I
write and I wonder. The major with his Irish smile may now be lying
dead on the field of battle somewhere on the front. In the midst of life
we are in death almost anywhere in the world to-day.
THE STAFF OF THE GREAT WOMEN’S WAR HOSPITAL IN

ENDELL STREET, LONDON
This is the shining citadel that marks the capitulation the world
over of the medical profession to the new woman movement.
IN COLDEST ENGLAND
I have again “established my residence” with the police in London.
I feel on terms of the most intimate acquaintance with the London
police. So many of them have my photograph and are conversant
with all the biographical and genealogical details of my life. You have
to do it, register at a police station, every time you change your hotel.
I have moved so often, I am nervous lest I seem like a German spy.
But at the Bow Street Station, the officer in charge just nods genially:
“Oh, that’s quite all right. Looking for more heat, aren’t you? I know.
You Americans are all alike.”
Have you ever shivered in London in January? Then you don’t
know what it is to be cold, not even when the thermometer drops to
zero and New York’s all snowed in but the subway, and the street
cleaning department has to spend a million dollars to dig you out of
the drifts. Yes, I know about the Gulf Stream. It does pleasantly
moderate the outdoor climate so that it is never really winter in
England. But the Gulf Stream does not get into their houses. I was a
luncheon guest the other day at a residence with a crest on its note-
paper. The hostess put on a wrap to pass down the staircase from
the drawing-room to the dining-room, and with my bronchitis—all
Americans get it in London—I was simply unable to remove my coat
at all. This mansion, English ivy-covered, and mildewed with ages of
aristocracy, has never had a real fire within its walls. There are only
the tiny grate fires which are, as it were, mere ornaments beneath
the mantelpiece. The drawing-room fire is lighted only just before the
guests arrive: the men with lifted coat-tails back up to it, their hands
crossed behind them spread to the blaze; the dog and the cat draw
near to the fender; conversation about the fire becomes general in
the tone of voice, well, in which one might admire a rare sunset. The
dining-room fire, likewise, is lighted only just before the butler
announces luncheon. And in all this grand mansion you discover
there isn’t any place to be warm, unless perchance the cook in the
kitchen may have it.
Well, English hotels strive to be as coldly correct as this English
high life. And I have suffered cold storage in Piccadilly at the rate of
ten dollars a day as long as my bronchitis will bear it. I ought to be ill
in bed at this moment. But I can’t be. There isn’t a hospital bed in
Europe without a wounded soldier in it. Schools, orphanages,
monasteries, country residences, castles and many hotels have
been turned into hospitals, all of them full of soldiers. A civilian who
may be ill literally has not where to lay his head. So I set out
desperately to find heat in London. I think I have searched every
hotel from Mayfair to Bloomsbury Square. As a special concession to
American patronage a few of them have put steam-heat on their
letter heads, “central heat,” they call it. But all European radiators,
when there are any, are as reluctant as their elevators. “Lifts” move
under groaning protest and if they go up, they let you know they do
not expect to come down. The radiators are equally as sullen about
radiating. They don’t want to at all. English radiators are such toy
affairs as to be incapable of any real action. They are so small they
get lost behind the furniture. At the Hyde Park Hotel, the clerk and I
hunted all over the place: “I’m sure we used to have them,” he said.
At last our search was rewarded. We found the one that was to keep
me warm. It was behind the dresser and such a miniature affair,
you’d surely have guessed Santa Claus must have left it for the
children at Christmas time.
Some one advised me that English hotels really didn’t do steam
heat well and the best way to be warm was to go to Brown’s, which
is famous for its grate fires. The Queen of Holland and the English
nobility always stop at Brown’s. So I tried Brown’s. I bought all the
“coals” the management would sell at one time and tipped the maid
liberally to start the fire in my room. To maintain the temperature
anything above fifty, I had to sit by the grate and keep putting on the
coals myself. In the bathroom there was no heat at all. “Oh, yes,
there was,” the management argued; “didn’t the hot-water pipe for
the bath come right up through the floor?” No, they insisted, there
couldn’t be any fire in the grate in the bathroom—because there
never had been since Brown’s began. Why, probably the hotel would
burn up with so much heat as that.
So I moved on and on. At last I came in the Strand to the Savoy,
where all Americans eventually arrive. It is the only hotel in England
with real steam-heat. Just pull out your dresser and your wash-
stand. Concealed behind each you will discover a radiator, warm,
real, life-size! Eureka! It is the only modern-comfort temperature in
London. I am able to remove sundry clothing accessories of
Shetland wool accumulated at Selfridge’s Department Store in
Oxford Street. And for the first time since my arrival on these shores
I am sitting in my hotel room unwrapped in either a rose satin down
bed-quilt or a steamer-rug. My soul once more uncurls itself for work.
It is wonderful to be warm to-day, even if one must be drowned by
the Germans to-morrow.
GREATEST DRAMA IN HISTORY

It begins to look gravely as if one may be. Out there in the yellow
fog beyond my window, more and more ominous are the posters that
come hourly drifting down the Strand from Fleet Street. Germany
has announced to the world that she is going to do her worst. And
she begins to tune her submarines for the sink-on-sight frightfulness
more terrible than any that has preceded. The Dutch boats stop. The
Scandinavian boats stop. The American boats stop. The entire
ocean is now blanketed in one danger zone.
All the world’s a stage of swift-moving events, the greatest and
most terrible spectacle that has ever been put on since civilisation
began. And we in London are spectators before a drop-curtain tight
buttoned down at the corners! It is lifted now and then by the hand of
the censor to reveal only what the Government decides is good for
the people to see. The plain citizen in London has no means of
knowing how much it is that he does not know. It was six months
after the Battle of Ypres had occurred before the English
newspapers got around to mention the event. So you see with what
a baffling sense of futility it is that one scans the newspapers here
now while history is making so fast that a new page is turned every
day. I am hungry for a real live paper, bright yellow from along Park
Row. And over my breakfast coffee at the Savoy I have only the
London Times, gravely discussing by the column, “What Is
Religion?” and “The Value of Tudor Music,” while the rest of the
world is breathless before a Russian revolution, later to be given out
in London exactly a week old.
But there is news that even the censor is playing up with a lavish
hand. The Strand streams with the posters: “The United States on
the Verge of War.” My official permit from Downing Street to go to
Holland has arrived in the morning’s mail. I cannot get there. I cannot
get to Scandinavia. Can I get home? It is the question that is
agitating a number of Americans abroad. We watchfully wait for a
warship to convoy us. But scan the Atlantic as we may from day to
day, there is none arriving. The folks back home have a way of
forgetting that we are here. Those that do remember are saying it
serves us right. We had no business to come in war-time. Sixteen
Americans at the Savoy every day rush to read the news bulletins
that hourly are tacked up in the lounge. But the wheels of
government at Washington move so slowly. The Senate only
debates and debates. And there is nothing said about us! Will it be
possible to flag the attention of Congress? The same idea occurs
simultaneously to Senator Hale in Paris and to several of us in
London. This is the answer to my cabled inquiry to Washington:
“Your request the fifth. Impracticable send warship convoy American
liner bringing Americans back from Europe. Signed, Robert Lansing,
Secretary of State.”
So, that’s settled. The only way for any of us to get away from
here will be just—to go. And I begin to. There is myself to get home,
and my data. Three consignments have already gone over under
special government auspices. But there have been anxious periods
of waiting before a cable, “Stuff safe,” has reached me. I am going to
sink or swim with the remainder of it. Wellington House arranges
with the censor at Strand House. There the material is read and
done up in packages, in each of which is enclosed a letter with the
War Office Stamp: “Senior Aliens Officer. Port of Embarkation.
Please allow the package in which this is enclosed to accompany
bearer Mrs. M. P. Daggett as personal luggage. This package has
been examined by the censorship.” All these data are now packed in
a suitcase that stands in my hotel room awaiting my departure.
When I was caught in the homeward rush of Americans from
London in 1914, the steamship offices in Cockspur Street were
jammed to the doors. To-day they are silent, empty, echoing places.
In 1917 it is such a life and death matter to travel, that most people
don’t. So grave is the danger that the Government refuses to permit
passports at all for English women. But for me, this that I am facing
is the risk of my trade in war-time.
To-day I had a letter from my New York office:
“The best thing for you to do is to get home as quick as you can.
Wouldn’t it be safest by way of Spain? Any way of course is taking a
chance and a big one. I wish to the Lord you were here, safe and
sound. But there isn’t a darn thing any of us can do about getting you
back. You have either got to take your life in your hands and take a
chance coming back, or stay in London. And God knows when this
war is going to end now!”
It is “safest by way of Spain.” Ambassador Gerard getting home
from Germany selected that route. But my passport, I remember, is
black-marked, “No return to France.” And I shall have the British
Foreign Office to explain to before I can reach my French friends
who so cordially invited my return. There will be altogether some four
steel lines to pass that way. I’d rather face the submarines. The
Spanish boats are small, only about 4,000 tons, which would be like
crossing the Atlantic in a bathtub. I’d rather be drowned than
seasick. I think I shall make sure of comfort by a British boat.
And then—the posters in the Strand begin to announce, “Seven
ships sunk to-day.” Four Dutch boats trying for their home port, are
submarined in English waters. The Laconia goes down. The Anchor
liner California meets her fate. It’s real, I tell you, on this side where
they’re daily bringing in the survivors. About nine hours in the open
boats is the usual experience for the rescued. Do you see the
deterring, dampening effect that this might have on one’s
enthusiasm for departure?
FACING LIFE OR DEATH?

This is the month of March. Oh, wouldn’t it be well to wait until the
water is warmer? It’s a disquieting sensation to wake up in the night
and meditate on whether, say, a week or ten days from now, you
may find yourself at the bottom of the Atlantic. In this state of low
depression, you decide to live a little longer. And so to-morrow you
select a little later date for your sailing. Then the arrival of American
mail proves that at least one more boat has run the blockade and
escaped the submarines. Yours might.
So I take my courage in both hands, and my passport, too, and
buy my ticket. When I have done this, a nice, quiet calm possesses
me. It is as if I had been a long time dying. Now it is over and
finished. I have nothing more to do about it. I pack my trunk just
curiously wondering, shall I ever wear this gown again? Or shall I
not? Oh, well, it is such a relief to be going away from all this Old
World grief. Are the war clouds gathering over New York, too? But I
still can see the city all golden in the sunlight beneath the clear blue
sky.
Last night I was awakened at twelve o’clock by the sounds of a
gay supper party’s revelry in some room down my corridor. Which of
the staid American gentlemen at this hotel is celebrating? Listen.
They are singing, evidently with lifted glasses: “Hail, hail, the gang’s
all here.” Not to the national anthem could my heart thrill more than
to Tammany’s own classic refrain. New York! New York! Not all the
Kaiser’s submarines can stop me from starting.
I may not send word of the steamship or the date of my departure.
But I cable my home office: “If I do not succeed in reporting to you
myself, apply for the latest information of my movements, to the
International Franchise Club, 9 Grafton Street, London.” You see, if I
should get the last Long Assignment....
There are only sixteen first class passengers for this trip on the
Carmania in her grim grey warpaint. Two of us are women, at whom
the rest stare with curious interest. Each of us as we step aboard is
handed a lifeboat ticket. Mine reads: “R. M. S. Carmania. Name,
Mrs. M. P. Daggett, Boat No. 5.”
I think I know now how a person feels who is going to his
execution. We who walk up this steamship gangway are under
sentence of death by the German Government. The old Latin
proverb flashes into my mind: “Morituri te salutamus.” It is we who
may be about to die who salute each other here on the Carmania
and then we are facing the steel line. Four British officers with
swords at their sides and pistols in their belts wait for us in the
drawing-room. All the other passengers go easily by but the New
York Jewish gentleman with the German name. At last he, too,
clears. But the British Government is not yet finished with a
journalist. The Tower of London and its damp dark dungeons is
again materialising clearly for me.
The lieutenant has been questioning me for half-an-hour. “I’m
sorry,” he says, “but I think I shall have to have you searched. This
suitcase of journalistic data, you say that there is inside each
package a note stating that the material has been passed by the
Government? Why isn’t that note on the outside of the package?”
“I don’t know,” I answer earnestly. “It’s the question I asked in vain
at Strand House. The censor said that it had to be this way. I assure
you the note is there. But if you break the outside seal to find out, my
government guarantee is gone. And if this boat by any chance goes
to Halifax, how are they to know there that I’m not a German spy?”
The lieutenant’s eyes are on my face. I think he believes I am
telling the truth. “Well,” he orders his corporal, “go to her stateroom
with her and have a look at her luggage.” The corporal is very nice.
He finds a blank note book in my trunk. “You aren’t supposed to
have this,” he says. And there is a package of business
correspondence. “Did you tell him out there about these letters?
Well, you needn’t. And I won’t.” At the suitcase with the magic seals
he gives only one glance. To his superior officer, when we return, the
corporal reports: “Everything’s quite all right. Stuff’s stamped all over
with the seal of the War Office.”
The lieutenant looks at his watch. “I had breakfast at seven. It’s
now one o’clock. That’s lunch time.”
“Don’t let me detain you,” I suggest pleasantly. He shakes his
head. “I’ve got to put this job through.”
I am this job. But the lieutenant has smiled. The conversation
eases up. “Pretty good suffrage data down at the Houses of
Parliament,” he himself suggests. “Do you know, I’m almost willing
now that women should vote. I didn’t used to be. But the war has
changed my mind.”
“By the way,” he asked suddenly, “you’re not mixed up with any of
those militants, are you?” I explain that I am not a suffragette, just a
plain suffragist. “Because I think those militants ought to be shot,” he
adds. I can only bite my tongue. Has the lieutenant no sense of
humour? No militant in Holloway Jail was ever more militant than he
is with his sword and pistol at this moment.
“There’s a question I’d like to ask,” he goes on. “In your country
where women have the franchise, do you find that they all vote
alike?” “No more than all the men,” I answer. “Then that’s all right,”
he says in a relieved tone. “I’ve been afraid that if we let women
vote, they might all vote against war.”
SHALL WE GO DOWN OR ACROSS?

“You really aren’t a militant, are you?” he says again, thoughtfully.
“Well, I’ll let you go.” So that’s my last steel line.
The boat begins to move in the Mersey. And the ship’s siren
sounds shrilly. It is the summons to shipwreck drill. We assemble
quickly in the lounge on the top deck, every one wearing a life-
preserver. At a second call of the siren, we file out following the
captain’s lead, to stand by our boats in which the crew are already
clambering to their oars.
So now we know how for the moment of disaster. The whole
steamship waits for it. This is a weird voyage that we begin. Mine-
sweepers out there ahead of us are cleaning up the seas. A
Scandinavian boat has just been sowing mines all over the water.
The Baltic, here beside us, poked her nose out yesterday, scented
danger and returned to the river. We wait now in the Mersey twenty-
four hours before the mysterious signal is given that it is the
propitious moment for our boat to get away. We steal softly to sea
under cover of a dense fog and a white snow-storm. The sea-gulls
are screaming shrilly above us like birds of prey. And we who look
into each other’s eyes are facing we know not whither, it may be
America or the Farthest Country of all.
Three men pace the wind-swept captain’s bridge, scanning the
horizon, and there are always two clinging in the crow’s nest in the
icy gale. This boat is manned by a pedigreed crew. From the captain
to the last cabin-boy, everybody has been torpedoed at least once.
The Marconi operator never smiles. He sits at his instrument with a
grey, drawn look about his young boyish mouth. He was on the
Lusitania when she went down. He was the last man off the Laconia
the other day. The wrinkled suit he’s wearing is the one they picked
him up in out of the sea.
For two days out, we have the little destroyers with us, and then
we are left to our luck and the gun in front and the watching men
aloft. The lifeboats are always swung out on their davits for the
siren’s sudden call. The doors of the upper deck stand open, waiting
beside each a preparedness exhibit, boxes of biscuit, flasks of
brandy, and a pile of blankets we are to seize as we run. We two
women have filled the pockets of our steamer-coats with safety-pins,
hairpins and a comb, first aid that no one remembers to bring when
they pick you up from the open boat. My fellow traveller is huddling
very close to her six-foot husband, to be tucked safely under his arm
at the emergency moment. It is good that we are having rough
weather. When the waves are tossing high, the periscopes may not
find us.
We are sixteen people who wander like disembodied spirits from
the gay days of old through these great empty rooms that once rang
with the joy of hundreds of tourists on their pleasure-jaunts over the
world. There are no games. There is no dancing. There is no band.
There are no steamerchairs on deck. At sundown we are closed in
tight behind iron shutters. No one may so much as light a cigaret
outside.
In the ghastly silence of the days that pass, there is only the strain
and quiver of the ship, and the solemn boom, boom of the sea.
Death is so near that it seems fitting the glad activities of life should
cease, as when a corpse is laid out in the front room of a house. For
a while there is a tendency to whisper, as if we were at a funeral, or
as if, perchance, the Germans in the sea could hear. But soon we
find ourselves functioning quite normally. Not until the sixth day out,
it is true, does any one venture to take a bath. You don’t want to be
rushed like that, you know, to your drowning. But we are sleeping
regularly at night. We eat bacon and eggs for breakfast as usual. We
are pleased when there is turkey and cranberry sauce for dinner.
One does not maintain an agony of suspense forever. For most of
us, I think it began to end when we had committed ourselves to the
decision of this voyage. After that, the issue rests with God or with
destiny, according to one’s religion.
There is no attempt at dressing for dinner on the Carmania.
Evening dress and all the time dress is life-preservers. We do not
take them off even at night for a while. We sleep in them. With the
new styles, of which there are many, you can. Mine is a garment that
buttons up exactly like a man’s vest. Next to the lining is a padded
filling, an Indian vegetable matter that will keep one afloat like cork.
To-day one desires the latest modern devices against death. A life-
preserver costs anywhere from five to fifteen dollars. You carry yours
with you as you do your toothbrush and your steamer-rug.
Time ticks off the minutes to life or to death to-morrow. We walk
the decks and scan a nearly deserted ocean. Only twice do we sight
a steamship on the horizon. At table we discuss as one does usually,
oh, immortality and Christian Science and woman suffrage. The
Englishman says, “Votes for women are really impossible, don’t you
know. Why, if the British women had voted twelve years ago, there
might not have been any battleships in 1914. And then where would
England have been to-day?”
“But if the German women too had voted twelve years ago, have
you thought how much happier the world might be to-day?” I ask.
The Englishman does not see the point but the American at my left
says, “Guess you handed him one that time.”
On April sixth the Cunard Bulletin, the wireless newspaper, is laid
beside our plates at breakfast with the announcement that’s thrilled
around a world, “The United States has declared for war.” The
Englishman next me says, “That must be a great relief for you.” And I
cannot answer for the choking in my throat. My country, oh, my
country, too, at the gates of hell to go in regiment by regiment!
On Sunday the English clergyman reads the service including the
phrases in brackets: “God save the King (and the President of the
United States). Vanquish their enemies and preserve them in felicity.”
Down beneath the sea the Germans in their submarines too are
praying like that to the same God. But one hopes, oh, one earnestly
hopes, that God will not hear them.
After the sixth day out, we have probably escaped the submarines.
The American men are no longer kindly asking me in anxious tone,
“You’re not nervous, are you?” On the eighth day they get out the
shuffleboard. Two mornings later when we awake, the sea is a
beautiful blue, all dimpling with sparkling points of golden light. It is
real New York sunlight again! The captain comes down from the pilot
house smiling: “Well, we got away this time,” he says.
The Statue of Liberty is rising on the horizon. The Manhattan sky-
line etches itself against the heavens. Do you know, I’d rather be a
door-keeper here at Ellis Island, than a lady-in-waiting anywhere in
Europe. The Carmania warps into dock in sight of the Metropolitan
Tower. Was Fourteenth Street ever cheap, common, sordid? As my
taxicab rolls across town, see how beautiful, oh, see how beautiful is
Fourteenth street, a little landscape cross-section right out of
Paradise! Nobody here is blinded, nobody maimed, nobody in crêpe,
nobody broken-hearted—yet. I have escaped from a nightmare of
the Middle Ages. I lift my face to the sunlight again.
I know I am tired, terribly tired of doing difficult things and saving
my life from day to day. But I have not realised how near collapse I
am until I drop in a chair before the Editor’s deck in the office of the
Pictorial Review. I, who have been so crazy to get to the country
where there is still free speech, that I had insanely hoped to stand in

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Chapter 1 Business, Accounting, and You 1

Chapter 2 Analyzing and Recording Business Transactions 51

Chapter 3 Adjusting and Closing Entries 101

Chapter 4 Accounting for a Merchandising Business 159

Chapter 5 Inventory 212

Chapter 7 Cash and Receivables 293

Chapter 8 Long-Term and Other Assets 355

Chapter 9 Current Liabilities and Long-Term Debt 406

Chapter 10 Corporations: Paid-In Capital and Retained Earnings 454

Chapter 11 The Statement of Cash Flows 504

Chapter 12 Financial Statement Analysis 564

Appendix A Columbia Sportswear Company Annual Report 2016 to Shareholders 621

Appendix B Time Value of Money—Future and Present Value Concepts 697

Appendix C FASB Update—Revenue Recognition 705

Company Index 707

Chapter 1 Accounting, Business, and You—Putting It All Together 24

How Do You Account for Uncollectible Accounts? 304 Betterments 369

ACCOUNTING PRACTICE 382 Declaring and Paying Dividends 461

Chapter 12 How Do You Put Everything Together to Make

Changes to This Edition

Chapter 1 Business, Accounting, and You

Chapter 2 Analyzing and Recording Business Transactions

Chapter 3 Adjusting and Closing Entries

Chapter 4 Accounting for a Merchandising Business

• Updated the examples used in “How They Do It: A Look at Business.”

Chapter 6 The Challenges of Accounting: Standards, Internal

Chapter 7 Cash and Receivables

Chapter 8 Long-Term and Other Assets

Chapter 9 Current Liabilities and Long-Term Debt

Chapter 10 Corporations: Paid-In Capital and Retained Earnings

Chapter 11 The Statement of Cash Flows

Chapter 12 Financial Statement Analysis

Deliver trusted content

Adjusting and Closing Entries

Learning Objectives Business, Accounting, and You

Question-and-Answer Format mirrors

Live Examples Approach The authors Date Account

introduce unique live examples to illus- Mar 31 Supplies Expense

trate the connection between the account- Balance Sheet

ing equation and journalizing transactions.

In Chapters 2 and 3 of the Pearson eText,

T-Accounts, and test their understanding 625

of the relationship between journal entries

and the accounting equation. Eighteen live Supplies

examples allow students to practice over Bal

and over again until they comprehend these

The Perfect Balance of Small Business Perspec-

Focus on Decision Making shows stu-

How They Do It: A Look at Business

Decision Guidelines focus students Decision Guidelines

Adjusting and Closing Entries 113

Stop and Think...

answer snapshot asking students to apply what Answer

Continuing Financial Statement Analysis Problem

Stop and Think...