Original PDF Financial Accounting 12th Edition by C William Thomas PDF

(Original PDF) Financial Accounting
12th Edition by C. William Thomas

Visit to download the full and correct content document:
https://ebooksecure.com/download/original-pdf-financial-accounting-12th-edition-by-c-
william-thomas/
HARRISON
TIETZ
T H O M AS
TWELFTH EDITION
MyLab ™
Improving Results
A proven way to help individual students achieve
the goals that educators set for their course.
ACCOUNTING
Engaging Experiences
Dynamic, engaging experiences that personalize
and activate learning for each student.
Financial
An Experienced Partner Financial
ACCOUNTING
From Pearson, a long-term partner
with a true grasp of the subject,
excellent content, and an eye on the
future of education.
www.pearson.com TWELFTH
EDITION
T H O M AS | T I E T Z | H A R R I S O N
For my wife, Mary Ann.
C. William (Bill) Thomas
To my husband, Russ, who steadfastly supports me in every endeavor.

Wendy M. Tietz
A01_HARR5987_12_SE_FM.indd 5 06/11/17 2:14 PM

This page intentionally left blank
About the Authors
C. William (Bill) Thomas is the J.E. Bush Professor of Accounting and a Master
Teacher at Baylor University. A Baylor University alumnus, he received both his BBA
and MBA there and went on to earn his PhD from The University of Texas at Austin.
With primary interests in the areas of financial accounting and auditing, Dr. Thomas
has served as the J.E. Bush Professor of Accounting since 1995. He has been a member
of the faculty of the Accounting and Business Law Department of the Hankamer School
of Business since 1971 and served as chair of the department for 12 years. He has been
recognized as an Outstanding Faculty Member of Baylor University as well as a Distin-
guished Professor for the Hankamer School of Business. Dr. Thomas has received many
awards for outstanding teaching, including the Outstanding Professor in the Executive
MBA Programs as well as the designation of Master Teacher.
Thomas is the author of textbooks in auditing and financial accounting, as well as
many articles in auditing, financial accounting and reporting, taxation, ethics, and
accounting education. His scholarly work focuses on the subject of fraud prevention and
detection, as well as ethical issues among accountants in public practice. He presently
serves as the accounting and auditing editor of Today’s CPA, the journal of the Texas
Society of Certified Public Accountants, with a circulation of approximately 28,000.
Thomas is a Certified Public Accountant in Texas. Prior to becoming a professor,
Thomas was a practicing accountant with the firms of KPMG, LLP, and BDO Seidman,
LLP. He is a member of the American Accounting Association, the American Institute
of CPAs and Association of International Certified Professional Accountants, and the
Texas Society of Certified Public Accountants.
Wendy M. Tietz is a professor in the Department of Accounting in the College of
Business Administration at Kent State University. She teaches introductory financial
and managerial accounting in a variety of formats, including large sections, small sec-
tions, and online sections.
Dr. Tietz is a Certified Public Accountant (Ohio), a Certified Management Accoun-
tant, and a Chartered Global Management Accountant. She is a member of the American
Accounting Association, the Institute of Management Accountants, the American Insti-
tute of CPAs and Association of International Certified Professional Accountants, and the
Sustainability Accounting Standards Board Alliance. She has published articles in such
journals as Issues in Accounting Education, Accounting Education: An International
Journal, IMA Educational Case Journal, and Journal of Accounting & Public Policy.
Dr. Tietz is also the coauthor of a managerial accounting textbook, Managerial Account-
ing, with Dr. Karen Braun. She received the 2017 Bea Sanders/AICPA Innovation in
Teaching Award for her web tool for financial accounting instructors, the Accounting
Case Template. In 2016, Dr. Tietz was awarded the Jim Bulloch Award for Innovations in
Management Accounting Education from the American Accounting Association/Institute
of Management Accountants for her accounting educator blog, Accounting in the Head-
lines. She also received the 2014 Bea Sanders/AICPA Innovation in Teaching Award for
her blog. She regularly presents at AAA regional and national meetings. She is intensely
interested in the power of storytelling, interactivity, and social media as educational prac-
tices to promote engagement and understanding.
Dr. Tietz earned her PhD from Kent State University. She received both her MBA
and BSA from the University of Akron. Prior to teaching, she worked in industry for
several years, both as a controller for a financial institution and as the operations man-
ager and controller for a recycled plastics manufacturer.
vii

viii About the Authors
Walter T. Harrison Jr. is professor emeritus of accounting at the Hankamer School of

Business, Baylor University. He received his BBA from Baylor University, his MS from
Oklahoma State University, and his PhD from Michigan State University.
Professor Harrison, recipient of numerous teaching awards from student groups as
well as from university administrators, has also taught at Cleveland State Community
College, Michigan State University, the University of Texas, and Stanford University.
A member of the American Accounting Association and the American Institute of
CPAs and Association of International Certified Professional Accountants, Professor
Harrison has served as chairman of the Financial Accounting Standards Committee of
the American Accounting Association, on the Teaching/Curriculum Development
Award Committee, on the Program Advisory Committee for Accounting Education and
Teaching, and on the Notable Contributions to Accounting Literature Committee.
Professor Harrison has lectured in several foreign countries and published articles in
numerous journals, including Journal of Accounting Research, Journal of Accountancy,
Journal of Accounting and Public Policy, Economic Consequences of Financial
Accounting Standards, Accounting Horizons, Issues in Accounting Education, and
Journal of Law and Commerce.
Professor Harrison has received scholarships, fellowships, and research grants or
awards from PricewaterhouseCoopers, Deloitte & Touche, the Ernst & Young Founda-
tion, and the KPMG Foundation.
Charles T. Horngren (1926–2011) was the Edmund W. Littlefield Professor of

Accounting, emeritus, at Stanford University. A graduate of Marquette University, he
received his MBA from Harvard University and his PhD from the University of Chicago.
He was also the recipient of honorary doctorates from Marquette University and DePaul
University.
A certified public accountant, Horngren served on the Accounting Principles Board
for six years, the Financial Accounting Standards Board Advisory Council for five
years, and the Council of the American Institute of Certified Public Accountants for
three years. For six years he served as a trustee of the Financial Accounting Foundation,
which oversees the Financial Accounting Standards Board and the Government
Accounting Standards Board.
Horngren is a member of the Accounting Hall of Fame. As a member of the Ameri-
can Accounting Association, Horngren was its president and its director of research. He
received its first annual Outstanding Accounting Educator Award. The California Certi-
fied Public Accountants Foundation gave Horngren its Faculty Excellence Award and
its Distinguished Professor Award. He was the first person to have received both awards.
The American Institute of Certified Public Accountants presented its first Outstanding
Educator Award to Horngren. Horngren was named Accountant of the Year, in
Education, by the national professional accounting fraternity, Beta Alpha Psi. Professor
Horngren was also a member of the Institute of Management Accountants, from whom
he received its Distinguished Service Award. He was a member of the institute’s Board
of Regents, which administers the Certified Management Accountant examinations.
Horngren is an author of these other accounting books published by Pearson: Cost
Accounting: A Managerial Emphasis, Fifteenth Edition, 2015 (with Srikant M. Datar
and Madhav V. Rajan); Introduction to Financial Accounting, Eleventh Edition, 2014
(with Gary L. Sundem, John A. Elliott, and Donna Philbrick); Introduction to Manage-
ment Accounting, Sixteenth Edition, 2014 (with Gary L. Sundem, Jeff Schatzberg, and
Dave Burgstahler); Horngren’s Financial & Managerial Accounting, Fifth Edition,
2016 (with Tracie L. Miller-Nobles, Brenda L. Mattison, and Ella Mae Matsumura);
and Horngren’s Accounting, Eleventh Edition, 2016 (with Tracie L. Miller-Nobles,
Brenda L. Mattison, and Ella Mae Matsumura). Horngren was the consulting editor for
Pearson’s Charles T. Horngren Series in Accounting.

Brief Contents
Preface xvi
1 The Financial Statements 1
2 Transaction Analysis 60
3 Accrual Accounting and Income 120
4 Internal Control and Cash 201
5 Receivables and Revenue 248
6 Inventory and Cost of Goods Sold 305
7 Plant Assets, Natural Resources, and Intangibles 367
8 Current and Contingent Liabilities 436
9 Long-Term Liabilities 468
10 Stockholders’ Equity 522
11 The Statement of Cash Flows 594
12 Financial Statement Analysis 668
APPENDIX A: Apple Inc. Annual Report 2016 745

APPENDIX B: Typical Charts of Accounts for Different Types of Businesses 766
APPENDIX C: Summary of Generally Accepted Accounting Principles (GAAP) 768
APPENDIX D: Summary of Differences Between U.S. GAAP and IFRS Cross
Referenced to Chapter 770
APPENDIX E: Investments 772
APPENDIX F: Time Value of Money 798
ix

Contents
Preface xvi
Chapter 2
Chapter 1 Transaction Analysis 60
The Financial Statements 1 SP OTLIGH T The Walt Disney Company Records
Millions of Transactions a Year! 60
SPOT L I GHT The Walt Disney Company 1
Recognize a Business Transaction and the Various Types
Explain Why Accounting Is Critical to Businesses 3 of Accounts in Which It Can Be Recorded 61
Describe the Decision Makers Who Use Accounting 3 Assets 61
Describe the Two Types of Accounting and Who Uses Liabilities 62
Each Type 4
Stockholders’ Equity 62
Explain How Businesses Are Organized 4
Analyze the Impact of Business Transactions on the
Explain and Apply Underlying Accounting Concepts, Accounting Equation 63
Assumptions, and Principles 5 Example: Alladin Travel, Inc. 63
The Entity Assumption 7
Transactions and Financial Statements 69
The Continuity (Going-Concern) Assumption 7
Mid-Chapter Summary Problem 71
The Historical Cost Principle 7
Analyze the Impact of Business Transactions on
The Stable-Monetary-Unit Assumption 8 Accounts 72
Apply the Accounting Equation to Business The T-Account 73
Organizations 9
Increases and Decreases in the Accounts: The Rules of
Assets and Liabilities 9 Debit and Credit 73
Equity 10 Additional Stockholders’ Equity Accounts: Revenues and
Construct Financial Statements and Analyze the Expenses 74
Relationships Among Them 12 Journalize Transactions and Post Journal Entries to
The Income Statement 13 the Ledger 76
The Statement of Retained Earnings 16 Posting from the Journal to the Ledger 76
The Balance Sheet 16 The Flow of Accounting Data 78
The Statement of Cash Flows 20 Accounts After Posting to the Ledger 83
Evaluate Business Decisions Ethically 23 Construct a Trial Balance 83
American Institute of Certified Public Accountants Code Analyzing Accounts 84
of Professional Conduct 25 Correcting Accounting Errors 85
End-of-Chapter Summary Problem 27 Chart of Accounts 86
The Normal Balance of an Account 86
End-of-Chapter Summary Problem 88

Contents xi
Chapter 3 Chapter 4
Accrual Accounting and Income 120 Internal Control and Cash 201
SPOTLIG HT September Is Busy at Walt Disney SP OTLIGH T Cooking the Books at Green
World Headquarters 120 Valley Coffee Company: $10 Million Is a Lot of
Explain How Accrual Accounting Differs from Beans! 201
Cash-Basis Accounting 121 Describe Fraud and Its Impact 203
Accrual Accounting and Cash Flows 122 Fraud and Ethics 204
The Time-Period Concept 122 Explain the Objectives and Components of Internal
Apply the Revenue and Expense Recognition Control 205
Principles 123 The Components of Internal Control 206
The Revenue Principle 123 Internal Control Procedures 207
The Expense Recognition Principle 124 Information Technology 209
Adjust the Accounts 125 Safeguard Controls 210
Which Accounts Need to Be Updated (Adjusted)? 125 Internal Controls for E-Commerce 210
Categories of Adjusting Entries 126 Security Measures 210
Prepaid Expenses 126 Evaluate Internal Controls over Cash Receipts and
Depreciation of Plant Assets 129 Cash Payments 211
Accrued Expenses 131 Cash Receipts over the Counter 211
Accrued Revenues 133 Cash Receipts by Mail 212
Unearned Revenues 134 Controls over Payments Made by Check or EFT 213
Summary of the Adjusting Process 135 The Limitations of Internal Control—Costs and
Benefits 214
The Adjusted Trial Balance 138
Construct the Financial Statements 139
Prepare a Bank Reconciliation 216
Signature Card 216
Close the Books 146
Deposit Ticket 217
Classifying Assets and Liabilities 148
Check 217
Reporting Assets and Liabilities: The Walt Disney
Bank Statement 217
Company 148
Bank Reconciliation 218
Formats for the Financial Statements 148
Preparing the Bank Reconciliation 221
Analyze and Evaluate a Company’s Debt-Paying
Ability 150 Online Banking 222
Net Working Capital 151 Report Cash on the Balance Sheet 224
Current Ratio 151 End-of-Chapter Summary Problem 224
Debt Ratio 152
How Do Transactions Affect the Ratios? 152

xii Contents
Chapter 5 Apply the Various Inventory Costing Methods 313

Compare the Effects of FIFO, LIFO, and Average-Cost
Receivables and Revenue 248 Methods on Gross Profit and Ending Inventory 316
SPOT L I GHT Apple’s Accounts Receivable Are The Tax Advantage of LIFO 317
Small Compared to the Company’s Net Sales Mid-Chapter Summary Problem 318
Revenue and Are Mostly Collectible 248
Explain and Apply Underlying U.S. GAAP for
Apply Generally Accepted Accounting Principles
Inventory 319
(GAAP) for Proper Revenue Recognition 250
Disclosure Principle 320
Shipping Terms 252
Lower-of-Cost-or-Market Rule 320
Collection 252
Speeding up the Cash Flow from Sales 252 Compute and Evaluate Gross Profit (Margin)
Percentage, Inventory Turnover, and Days’
Account for Sales Returns and Allowances 253 Inventory Outstanding (DIO) 322
Account for Sales Discounts 254 Gross Profit Percentage 322
Disclosure of Net Revenues on the Income Inventory Turnover and Days Inventory Outstanding
Statement 255 (DIO) 323
Account for Accounts Receivable 256 Use the Cost-of-Goods-Sold (COGS) Model to Make
Types of Receivables 256 Management Decisions 324
Managing and Accounting for Receivables 257 Computing Budgeted Purchases 325
Estimating Inventory Using the Gross Profit Method 325
Evaluate Collectibility Using the Allowance for
Uncollectible Accounts 258 Analyze Effects of Inventory Errors 326
Allowance Method 259 End-of-Chapter Summary Problem 328
Direct Write-Off Method 264
Computing Cash Collections from Customers 264 Chapter 7
Account for Notes Receivable and Interest Plant Assets, Natural Resources, and
Revenue 265 Intangibles 367
Accounting for Notes Receivable 266
SP OTLIGH T FedEx Corporation 367
Evaluate Liquidity Using Three New Ratios 268 Explain How to Account for the Cost of Plant
Quick (Acid-Test) Ratio 268 Assets 370
Accounts Receivable Turnover and Days’ Sales Land 370
Outstanding 269 Buildings, Machinery, and Equipment 370
End-of-Chapter Summary Problem 270 Land Improvements and Leasehold Improvements 371
Lump-Sum (or Basket) Purchases of Assets 371
Chapter 6 Distinguish a Capital Expenditure from an Immediate
Inventory and Cost of Goods Sold 305 Expense 372
SPOT L I GHT Under Armour, Inc.’s Performance Explain How to Account for Depreciation on Plant
Assets 374
Slips 305
How to Measure Depreciation 375
Show How to Account for Inventory 307
Depreciation Methods 375
Sale Price versus Cost of Inventory 308
Comparing Depreciation Methods 380
Periodic versus Perpetual Inventory Systems 310
Apply and Compare Various Inventory Cost
Methods 313 Other Issues in Accounting for Plant Assets 383

Contents xiii
Depreciation for Tax Purposes 383

Chapter 9
Depreciation for Partial Years 384
Long-Term Liabilities 468
Changing the Useful Life of a Depreciable Asset 385
Fully Depreciated Assets 386
SP OTLIGH T Southwest Airlines Is Flying
High 468
Analyze the Effect of a Plant Asset Disposal 386
Account for Bonds Payable and Interest Expense with
Disposing of a Fully Depreciated Asset for No Straight-Line Amortization 469
Proceeds 387
Issuing Bonds Payable at Par (Face Value) 471
Selling a Plant Asset 387
Issuing Bonds Payable at a Discount 473
Exchanging a Plant Asset 388
Issuing Bonds Payable at a Premium 475
T-Accounts for Analyzing Plant Asset
Transactions 389 Account for Bonds Payable and Interest Expense with
Effective-Interest Amortization 476
Apply GAAP for Natural Resources and Intangible
Issuing Bonds Payable at a Discount 476
Assets 391
Interest Expense on Bonds Issued at a Discount 478
Accounting for Natural Resources 391
Issuing Bonds Payable at a Premium 480
Accounting for Intangible Assets 392
Accounting for Specific Intangibles 393 Account for Other Features of Bonds Payable 484
Accounting for Research and Development Costs 395 Accounting for Partial-Period Interest Amounts 484
Retiring Bonds Payable Before Their Maturity 484
Explain the Effect of an Asset Impairment on the
Financial Statements 395 Accounting for Convertible Bonds and Notes 485
Analyze Rate of Return on Assets 396 Describe Other Long-Term Liabilities 486
DuPont Analysis: A More Detailed View of ROA 397 Deferred Income Taxes 486
Analyze the Cash Flow Impact of Long-Lived Asset Commitments 488

Transactions 398 Leases 488
End-of-Chapter Summary Problem 401 Analyze the Impact of Leverage on the Financial
Statements 490
The Leverage Ratio 490
Chapter 8 The Times-Interest-Earned Ratio 491
Current and Contingent Liabilities 436
Report Long-Term Liabilities on the Financial
SPOTLIG HT Amazon.com Moves a Lot of Statements 492
Merchandise and Incurs Many Liabilities 436 Reporting on the Balance Sheet 492
Distinguish Between Current and Long-Term Disclosing the Fair Value of Long-Term Debt 493
Liabilities 438
Reporting Financing Activities on the Statement of
Account for Accounts Payable and Analyze Accounts Cash Flows 493
Payable Turnover 438
Account for Notes Payable and Accrued
Interest 440
Chapter 10
Account for Accrued Liabilities and Unearned
Revenue 441 Stockholders’ Equity 522
Account for Contingent Liabilities 445 SP OTLIGH T The Home Depot: Building Toward
Success 522
Explain the Features of a Corporation 524

xiv Contents
Organizing a Corporation 525 Statement of Stockholders’ Equity 551

Stockholders’ Rights 526 A Detailed Stockholders’ Equity Section of the Balance
Stockholders’ Equity 526 Sheet 552
Classes of Stock 527 End-of-Chapter Summary Problems 553
Account for the Issuance of Stock 528

Common Stock 528 Chapter 11
How an “Other Than Cash” Stock Issuance Can Create The Statement of Cash Flows 594
an Ethical Challenge 532 SP OTLIGH T Google: The Ultimate Answer
Preferred Stock 532 (and Cash) Machine 594
Mid-Chapter Summary Problem 533 Identify the Purposes of the Statement of Cash
Authorized, Issued, and Outstanding Stock 535 Flows 596
How’s Your Cash Flow? Telltale Signs of Financial
Explain How Treasury Stock Affects a Company 535
Difficulty 597
How Is Treasury Stock Recorded? 535
Distinguish Among Operating, Investing, and
Retirement of Treasury Stock 537 Financing Activities 598
Resale of Treasury Stock 537 Two Formats for Operating Activities 599
Issuing Stock for Employee Compensation 537
Prepare a Statement of Cash Flows by the Indirect
Summary of Treasury-Stock Transactions 538 Method 600
Account for Retained Earnings, Dividends, and Cash Flows from Operating Activities 602
Stock Splits 539 Cash Flows from Investing Activities 604
Should the Company Declare and Pay Cash Cash Flows from Financing Activities 606
Dividends? 539
Noncash Investing and Financing Activities 608
Cash Dividends 539
Analyzing the Stockholders’ Equity Accounts 540
Dividends on Preferred Stock 541 Prepare a Statement of Cash Flows Using the Direct
Method 612
Stock Dividends 542
Cash Flows from Operating Activities 614
Stock Splits 543
Depreciation, Depletion, and Amortization
Summary of the Effects on Assets, Liabilities, and Expense 615
Stockholders’ Equity 544
Cash Flows from Investing Activities 615
Evaluate a Company’s Performance Using
Cash Flows from Financing Activities 615
New Ratios 544
Noncash Investing and Financing Activities 616
ROE: Relating Profitability to Stockholder
Investment 544 Computing Operating Cash Flows Using the Direct
Method 617
Earnings Per Share (EPS) 547
Computing Investing and Financing Cash Flows 621
Effect of Equity Financing on EPS 548
Measuring Cash Adequacy: Free Cash Flow 621
Market Capitalization and the Price-Earning Ratio 549
End-of-Chapter Summary Problems 624
Report Stockholders’ Equity Transactions in the
Financial Statements 550
Statement of Cash Flows 550

Contents xv
Chapter 12 APPENDIX D:
Summary of Differences Between U.S. GAAP and
Financial Statement Analysis 668
IFRS Cross Referenced to Chapter 770
SPOTLIG HT Evaluating Under Armour, Inc.,
APPENDIX E: INVESTMENTS
and Apple Inc., Using Different Financial Analysis
Explain Why Companies Invest in Other
Tools 668
Companies 772
Perform an Industry and Company Analysis 669
Investments in Equity Securities 773
Perform a Horizontal Analysis 671
Account for Investments in Equity Securities When
Trend Percentages 675 the Investor Has Insignificant Influence 773
Perform a Vertical Analysis 675 Recording the Purchase of Equity Securities 774
Prepare Common-Size Financial Statements 678 Recording Cash Dividends 775
Benchmarking 679 Adjusting Equity Investments to Their Fair Value 775
Benchmarking Against a Key Competitor 679 Recording the Sale of an Equity Investment 776
Mid-Chapter Summary Problem 680 Account for Investments in Equity Securities When
the Investor Has Significant Influence 777
Use Ratios to Make Business Decisions 681
Purchase of Equity-Method Investments 777
Remember to Start at the Beginning: Company and
Industry Information 683 Account for Investments in Equity Securities When
Now Let’s Do the Numbers 684 the Investor Has Controlling Influence 779
Measuring Ability to Pay Current Liabilities 684 Consolidation Accounting 779
Measuring Turnover and the Cash Conversion Account for Investments in Debt Securities 780
Cycle 687 APPENDIX F: TIME VALUE OF MONEY
Measuring Leverage: The Overall Ability Explain the Impact the Time Value of Money Has on
to Pay Debts 690 Certain Types of Investments 798
Measuring Profitability 690 Present Value 799
Analyzing Stock as an Investment 694 Present-Value Tables 800
The Limitations of Ratio Analysis 696 Present Value of an Ordinary Annuity 801
Evaluate the Quality of Earnings 696 Using Microsoft Excel to Calculate Present Value 802
An Audit Adds Credibility to Financial Statements 697 Using the PV Model to Compute Fair Value of Available-
Red Flags in Financial Statement Analysis 698 for-Sale Investments 804
Efficient Markets 698 Present Value of an Investment in Bonds 804
End-of-Chapter Summary Problems 701 COMPANY INDEX 811
APPENDIX A: GLINDEX 814

Apple Inc. Annual Report 2016 745
APPENDIX B:
Typical Charts of Accounts for Different Types of
Businesses 766
APPENDIX C:
Summary of U.S. Generally Accepted Accounting
Principles (GAAP) 768

Preface
Financial Accounting gives readers a solid foundation in the fundamentals of account-

ing and the basics of financial statements, and then builds upon that foundation to offer
more advanced and challenging concepts and problems. This scaffolded approach helps
students to better understand the meaning and relevance of financial information and
see its significance within a real-world context, as well as develop the skills needed to
analyze financial information in both their courses and career.
Financial Accounting has a long-standing reputation in the marketplace for being
readable and easy to understand. It drives home fundamental concepts using relevant
examples from real-world companies in a reader-friendly way without adding unneces-
sary complexity. While maintaining hallmark features of accuracy, readability, and ease
of understanding, the Twelfth Edition includes updated explanations, coverage, and
ratio analysis with decision-making guidelines. These time-tested methodologies with
the latest technology ensure that students learn basic concepts in accounting in a way
that is relevant, stimulating, and fun, while exercises and examples from real-world
companies help students gain a better grasp of the course material.
NEW TO THE TWELFTH EDITION

All Chapters
■■ New serial case on The Cheesecake Factory appears in every chapter in the end-
of-chapter material.
■■ Throughoutthe book, an emphasis has been placed on making content flexible
and modular to suit individual instructor preferences.
■■ Chaptercontent has been streamlined throughout the book to focus on the major
concepts. References to material beyond the scope of an introductory financial
accounting course have been eliminated to reduce “noise” in the learning process.
Chapter 1
■■ Updated and shortened the Disney case significantly, as well as the introduction,
so students can more easily understand the major points.
■■ Shortened and eliminated many references to upcoming chapters and material
(e.g., removed material on the board of directors and how corporate governance
works since this is covered later in the text; “carrying value” and “high-quality
earnings” were also removed since these concepts were too high level in the
introductory chapter).
■■ Significantly shortened the discourse on GAAP versus IRFS.
■■ Updated Ethisphere’s list of the World’s Most Ethical Companies.
Chapter 2
■■ Combined learning objectives 1 and 2.
■■ Updated the Disney case.
■■ Streamlined the coverage of the different types of accounts.
xvi

Preface xvii
■■ Deleted the “Account Formats” section.

■■ Deleted “Analyzing Transactions Using Only T-Accounts” section.
Chapter 3
■■ Significantly
shortened the Global View box on the rules for recognizing revenue
under U.S. GAAP versus IRFS.
Chapter 4
■■ Reversed Learning Objectives 3 and 4; “Evaluate Internal Controls” now comes
before “Preparing a Bank Reconciliation.”
■■ Eliminated Learning Objective 5, “Construct and Use a Cash Budget” and the
associated materials in the chapter.
■■ Significantly shortened the Green Valley introductory case.
■■ Streamlined the coverage on the details of SOX.
■■ Streamlined the sections related to internal controls.
■■ Updatedthe section on computer controls to include malware, spyware, and
ransomware.
■■ Streamlined the bank reconciliation and journal transactions sections.
Chapter 5
■■ This chapter underwent a major revision, so the Learning Objectives are
significantly different.
■■ Short-term investments were moved from Chapter 5 to Appendix E.
■■ Updated the Apple introductory case.
■■ Sales Returns and Allowances and Sales Discounts are now separate learning
objectives to allow for flexibility in coverage.
■■ Sales Returns and Allowances and Sales Discounts sections have been updated to
reflect changes in revenue recognition standards.
■■ Sales Returns and Allowances section has been significantly pared down.
■■ New “Cooking the Books” on OCZ Technology Groups discusses misleading
revenue recognition techniques.
■■ Severaltopics were eliminated, including internal controls over cash collections
on account, credit card and debit card sales, and factoring.
Chapter 6
■■ Under Armour, Inc. case is updated and significantly streamlined.
■■ Discussion on consignment inventory has been pared down and focused.
■■ Updated and streamlined the section on periodic versus perpetual inventory
systems.
■■ Section on keeping track of perpetual inventories under the LIFO and the
weighted-average cost methods was eliminated.

xviii Preface
■■ Streamlined the material on the disclosure principle.

■■ New “Cooking the Books” on LogiTech International’s write down of inventory
of parts related to its unsuccessful streaming device.
Chapter 7
■■ Updated the FedEx introductory case.
■■ Pared down the “Cooking the Books” feature on Waste Management.
■■ Significantly
pared down the conditions and details related to asset impairment
rules under U.S. GAAP versus IFRS.
Chapter 8
■■ Currentand Contingent Liabilities, which were previously covered in Chapter 9,
are now covered in this chapter.
■■ Long Term Investments is now covered in Appendix E.
■■ Time Value of Money is now covered in Appendix F.
■■ Updated the Amazon introductory case.
■■ New “Cooking the Engines” feature on the Volkswagen scandal as an example of
disclosure principles for contingent liabilities.
Chapter 9
■■ Current and contingent liabilities are now in Chapter 8.
■■ LearningObjective 4, “Analyze and Differentiate Financing with Debt vs. Equity,”
has been moved to Chapter 10, which covers stockholders’ equity.
■■ Shortened and updated Southwest Airlines introductory case.
■■ Clarified and streamlined the lease section to correspond with the FASB’s revised
standard.
■■ Added new Learning Objective on the impact of leverage on financial statements.
Chapter 10
■■ LearningObjective 5 has been changed from “Use Stock Values in Decision
Making” to “Evaluate a Company’s Performance Using New Ratios.”
■■ Moved discussion of EPS calculations and PE ratio previously covered in
Chapter 11 (Income Statement) to this chapter.
■■ Emphasized the coverage of EPS and removed coverage of the book value per
share.
■■ Coverage of debt versus equity financing has been moved to this chapter (it was
previously covered in Chapter 9, Liabilities).
■■ Updated and shortened the Home Depot introductory case.
■■ Tightened up the coverage of corporations and corporate governance.
■■ Eliminated several topics, including: redeemable preferred stock, redemption
value, and liquidation value.

Preface xix
Chapter 11
■■ Some material previously found in Chapter 11 moved to Chapter 12, including
earnings quality, footnotes, and differentiating between management and auditor
responsibilities; revenue recognition moved to Chapter 5; earnings per share
moved to Chapter 10.
■■ Coverage of Statement of Cash Flows moved from Chapter 12 in previous edition
to Chapter 11.
■■ Updated and shortened the Google introductory case.
■■ Condensed the material on noncash activities.
Chapter 12
■■ Coverage of material previously found in Chapter 11 can now be found in this
chapter, including: earnings quality, discussion on footnotes, and differentiating
between management and auditor responsibilities.
■■ Under Armour’s competitive position extensively updated.
■■ Several topics were eliminated, including: discussion of classes of stock (A, B,
etc.), book value per share, Economic Value Added (EVA), and weighted average
cost of capital.
Appendix E
■■ This new appendix combines and greatly condenses the coverage of all the
investments in marketable securities, both short- and long-term (formerly in
Chapters 5 and 8). All related problem materials were correspondingly shortened.
Appendix F
■■ Thisnew appendix covers the time value of money, which was formerly located in
Chapter 8. All related problem materials were correspondingly shortened.

SOLVING TEACHING AND LEARNING
CHALLENGES
Dear Valued Colleagues,
Welcome to the Twelfth Edition of Financial Accounting. We are grateful for your
support as an adopter of our text as we celebrate over 30 years of success in the market.
The Twelfth Edition of Financial Accounting has been improved in many respects, as
explained below.
Twelve chapters now rather than thirteen. We streamlined the content and the
writing in this edition. We focused on students when working on this edition—we made
the content more relevant to today’s students with new stories and eliminated topics that
are not relevant to introductory financial accounting. The first section of the book
continues to be focused on the accounting cycle and basic financial statement preparation.
The middle section of the book covers assets, liabilities, and stockholders’ equity. The
final two chapters cover the statement of cash flows and financial statement analysis. In
this edition, the topics of investments and the time value of money are now appendices
rather than a chapter. Chapter 9, Liabilities, from the 11th edition has been split into two
chapters in this 12th edition: Chapter 8, Current Liabilities and Chapter 9, Long-Term
Liabilities. We also integrated or eliminated the topics that were formerly in Chapter 11,
Evaluating Performance: Earnings Quality, the Income Statement, and the Statement of
Comprehensive Income, into other chapters. The book now has 12 chapters, making the
content fit into a 15- or 16-week semester easily. We also focused on making the writing
in the book more clear and understandable.
Author-created instructor resources. This book has a variety of instructor

resources created by one of the authors, Wendy Tietz, to help instructors be both more
efficient and more effective in their teaching. She has created 2–4 multiple-choice
questions for each Accounting in the Headlines blog post. Those questions are in MyLab
Accounting. She has also created a Learning Catalytics polling question for each blog
post that is designed to start the conversation about that particular blog post. Dr. Tietz
has created approximately 4–10 short videos about the major concepts in each chapter.
In addition, she has created step-by-step videos for 3–6 of the homework exercises in
each chapter. All of these videos are assignable through MyLab Accounting.
Try It in Excel®. As educators, we often have conversations with those who recruit our
students. Based on these conversations, we found that students often complete their
study of financial accounting without sufficient knowledge of how to use Excel® to
perform accounting tasks. To respond to this concern, we have adapted most of the
illustrations of key accounting tasks in the book to Excel® format and have added new
sections in key chapters entitled “Try It in Excel®,” which describe line-by-line how to
retrieve and prepare accounting information (such as adjusted trial balance worksheets,
ratio computations, depreciation schedules, bond discount and premium amortization
schedules, and financial statement analysis) in Excel® format.
xx

Preface xxi
Student success. We feel we have the most advanced student learning materials in the
market with MyLab Accounting. These include automatically graded homework,
DemoDocs, and learning aid videos. We believe that the use of MyLab Accounting
homework will greatly enhance student understanding of accounting with its
instantaneous feedback. MyLab Accounting makes the study of financial accounting a
more interactive and fun experience for students. In addition, we have adopted a
scaffolding approach in the book and its resources. Chapter content and the end-of-
chapter material build from the basic short exercise featuring a single concept to more
advanced problems featuring multiple learning objectives. The student can practice at
the basic level and then build upon that success to advance to more challenging problems.
Professor expectations. As professors, we know that you want a book that contains
the most relevant and technically correct content available. We also know that you want
excellent end-of-chapter material that is as up-to-date and error-free as possible. We
reviewed and created the end-of-chapter questions, exercises, problems, and cases taking
into account the types of assignments we ourselves use in class and assign as homework.
Based on comments from adopters, we have thoroughly reviewed every end-of-chapter
exercise and problem, with the goal of eliminating redundancy and adding relevance.
The textbook and solutions manual have been put through a rigorous accuracy check to
ensure that they are as complete and error-free as possible.
We welcome your comments and suggestions. Please don’t hesitate to send feedback
about this book to [email protected]. You are also welcome to reach
out directly to author Bill Thomas at [email protected] or author Wendy Tietz at
[email protected].
Bill Thomas
Wendy Tietz

xxii Preface
REACH EVERY STUDENT WITH MYLAB ACCOUNTING.

MyLab is the teaching and learning platform that empowers you to reach every student.
By combining trusted author content with digital tools and a flexible platform, MyLab
personalizes the learning experience and improves results for each student. Learn more
about MyLab Accounting.
EMPOWER EACH LEARNER

Each student learns at a different pace. Personalized learning pinpoints the precise areas
where each student needs practice, giving all students the support they need—when and
where they need it—to be successful.
IMPROVE STUDENT RESULTS

When you teach with MyLab, student performance improves. That’s why instructors
have chosen MyLab for over 20 years, touching the lives of over 50 million students.
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 Accounting course. The tutorial,
accessed by computer, Smartphone, or tablet, provides stu-
dents with brief explanations of each concept of the account-
ing cycle through engaging videos and animations. Students
are immediately assessed on their understanding, and their
performance is recorded in the MyLab Accounting grade
book. Whether the Accounting Cycle Tutorial 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.
NEW—Time Value of Money Tutorial NEW!
The Time Value of Money Tutorial in MyLab ensures

that students understand the basic theory and formulas of
the TVM, while also helping test their ability to apply the
TVM in the measurement of financial statement items.
Students work through two sections. The first is to help
them understand the theory—using whichever method the
instructors choose (manually, through Excel®, with tables,
or via a calculator), and the second is to give students the
opportunity to apply the theory by giving them a number of
scenarios regarding each financial statement.
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.

Another random document with
no related content on Scribd:
"H—m," chuckled Hora, glancing at a print hung upon the wall
opposite him, "that Morland would have been a cheap investment,
even if it had been a fake. As it is——"
"As it is," laughed Guy, "your capital has returned to you more
than a thousandfold. Still I can't help marvelling at your wonderful
eye for detail. You could not have been in Flurscheim's house more
than an hour, and yet I found every wire, every lock, every catch,
exactly where you told me I should find them. Some of the doors and
windows you could never have seen? How could you know?"
"It was not through any capacity for seeing through brick walls,"
said Hora drily. "But merely a deduction from what Flurscheim
himself did not tell me. He was very proud of a system of alarm
designed by himself for the protection of his treasures. He told me
that it was impossible for a window sash to be lifted or an outer door
to be unlatched without setting off the alarm—I observed from
outside that the attics were fitted with swing casements and I drew
my own conclusions."
"You omitted to inform me that the servants slept in those attics,"
remarked Guy. "I nearly stepped on the bed of one of them when I
entered the window."
"So that is why you left by the front door, was it?" enquired Hora.
"It was a little bit risky, wasn't it?"
"No," said the young man. "I calculated that I should get a
minute's start, and thirty seconds was quite enough. As a matter of
fact, I had a clear minute. I looked out into the street from a window
and saw that the coast was clear and the brougham was waiting.
There were two or three parties just leaving Lady Greyston's and I
calculated upon being able to join them without exciting observation.
The street was very much in shadow, and just between lights, after a
dance, you know, no one observes very clearly."
"Still it was a risk," observed Hora. "I should have returned by
the way I had gone."
"I still think I took the lesser evil," replied Guy. "Besides the
chance of finding Flurscheim's servants awake, there was the
possibility of being seen from the street as I passed along the
parapet back to the window of the Greyston's house. Then suppose I
had met someone on the stairs at the Greyston's. The function was
practically over. There was every likelihood that some of the servants
would be going to their quarters—it would have been deuced
unpleasant to have had to explain what I was doing there."
"At all events," remarked Hora, "you ought to have cut off the
alarm. Did you forget how to do it?"
A smile flickered across the young man's face.
"No," he said, "I left it in position on purpose. I thought I should
like to give Flurscheim a sporting chance of getting his own back.
There were just two flights of stairs and a bedroom door between us.
I thought that if that were not sufficient to enable me to get away I
should deserve to be captured."
Myra, who had been listening to the conversation in silence, half
uttered an exclamation. But she checked it so that only Hora's keen
ears heard. He smiled, but said nothing. Guy continued lazily: "You
see that I did not misjudge the conditions. I am here." Then he
repeated the words he had used a few hours previously. "You must
set me a more difficult task next time, Commandatore."
"What an enthusiast you are," remarked Hora. "If you go on at
this rate, there will be nothing left for you to do."
"I hate being idle," remarked the young man.
"Never fear, never fear," said Hora, "I have no doubt you will
manage to amuse yourself. You did so last night, did you not?"
Although the question was asked carelessly, the young man
flushed slightly as he answered: "Tolerably well."
"Only tolerably well?" asked Hora, "and yet you postponed your
enterprise until almost too late, for only 'tolerable' amusement."
"Admitted, Commandatore," answered Guy gaily, "the adverb is
not sufficient. To tell the truth, I met some very pleasant people, and
the time passed swiftly."
Myra sprung the next question.
"Who were they, Guy? Anyone I have met?"
"No," he answered. "A Captain and Mrs. Marven and——"
He did not get to the end of his sentence. Lynton Hora had risen
from his chair and interrupted him: "Who did you say? Say the name
again," he cried hoarsely.
Both Myra and Guy looked at him in amazement. Hora was not
given to showing emotion, and there could be no doubt but that he
was deeply moved. His lips were drawn closely together, beads of
perspiration broke out on his forehead, every line in his face
deepened.
"What's the matter, Commandatore—father?" cried Guy in
alarm, as he sprung to Hora's side and laid his hand on the elder
man's arm.
Hora shook off the touch roughly.
"Say the name again," he repeated.
"Marven," repeated Guy, "Captain Marven."
Gradually Hora regained control of himself. His features
resumed their normal air of petulant acquiescence with the world, but
there was a gleam in his eyes which revealed a very different spirit
within him. Presently he spoke.
"You are surprised to see me so much moved by the mention of
a name. You would not be if you knew what reason I have to hate
the possessor of it. So you found Captain Marven very good
company, eh, Guy?" He laughed sardonically.
"Why, yes," replied the young man.
"I wonder," he mused, "if you would have thought him as
entertaining if you knew the part he has played in my life."
"In your life?" queried Myra and Guy in the same breath.
"In my life," repeated Hora with deliberation. Then he continued
in accents which showed how deeply memories of the past rankled:
"That is the man, Guy, to whose actions my quarrel with the world is
due. Owing to him I found every man's hand raised against me.
Owing to him I was compelled in self-defence to raise my hand
against every man. Owing to him I became another Ishmael—thrust
out into the world, branded, a mark for every man's scorn and every
woman's jeers. Oh, I have taken my revenge upon the scorners," he
laughed harshly, "but not upon him—not upon him—yet."
He paused, and once more, it was only with an effort that he
regained control of himself. He did not again trust himself to speech.
He turned on his heel abruptly. At the door he paused.
"You have given me much to think about, Guy," he said. "At
present I am unable to think calmly. Some other time I will discuss
the matter with you."
He left the room swiftly and the firm step of his sound leg and
the following shuffle as he dragged the other foot along after it was
the only sound to be heard until the closing of another door told Myra
and Guy that he had shut himself in his own apartment.
CHAPTER III
THE MAKING OF A CRIMINAL
The philosophy of Lynton Hora had for once given way under
the stress of a deep emotion. There could be no doubt about that,
and no doubt either that the emotion which had strained the
philosophy to breaking point was the emotion of hate.
Never before had Guy seen him so wrought upon. Often he had
regretted that the man he called father should have been of so calm
a temperament—regretted even while he admired. Himself of an
impulsive, even ardent nature, he had longed to express his feelings
to the one being who had been his sole companion from infancy,
who had treated him with unfailing and unvarying kindness, but who
chilled, with what appeared to be temperamental coldness, any
expression of affection.
Guy was thrilled with the discovery that a deep sea of passion
underlay Hora's cold exterior. If Hora hated, of necessity he must
love.
He must love him, Guy Hora, his son. Did not every action in his
life show it?
The thought awakened Guy's memory actively. His earliest
memories were of the Commandatore. He had no knowledge of a
mother, or but shadowy recollections, and those might merely be the
offspring of his own imagination. Lynton Hora had been father and
mother both. Guy could recall Hora's face bending over his bed in
the days of his babyhood. He had one vivid recollection of being
parted from his father when he himself was about seven years old.
He had been left in the charge of some dark-haired, swarthy-faced
people, and they had neglected him—had beaten him. How he had
cried for his father, and when his father had returned, he
remembered running to him and sobbing out his tale of misery. He
remembered how Hora had told him that men never cried when they
were hurt, and that he, stricken with shame, had answered that it
was not the beating but the loneliness which had brought the tears to
his eyes.
Hora had smiled and had left him alone for a few minutes. He
had smiled still more when he had returned. Guy remembered
seeing the man who had beaten him later that same day with a
bruised face and an arm hanging helpless in a sling from his neck.
But that was not his most vivid memory of Hora's return. Chiefly
it was a conversation that took place when Hora had taken the boy's
hand and led him up into the mountains. Often the boy had recalled
the words which had been spoken to him. He could never see a pine
tree without their being fresh spoken to his ear, for they had been
uttered beneath the pine woods, on the edge of a translucent
mountain lake, which mirrored the snowy peaks above it so perfectly
that it seemed strange that the pebbles at the bottom could not be
counted.
Hora had taken the boy's tears as his text.
"Women weep when they are hurt," he said. "Men strike back.
Remember that, Guy; remember too that if you cannot strike with the
arm, there are other ways of driving the blow home."
Though Guy had understood the meaning of Hora's words but
dimly then, he had remembered them, and later he understood. Hora
had often given him practical illustration of his precepts. He never
forgot an injury or a slight, and Guy was often allowed to see how
Hora avenged either. Memory has no chronological exactitude, and
as Guy allowed his thoughts to drift, an instance occurred to him
which had happened some years later. They had been travelling in
France together and had been hurrying on to Italy. The one other
traveller in the same compartment had been a blusterous
Englishman of the most unpleasantly self-assertive type. Hora had
attempted to engage him in conversation and had met with a surly
repulse. When the frontier was reached, the assertive person was
asleep. Hora had dexterously possessed himself of the man's watch
and when the custom's official made his appearance had transferred,
with equal dexterity, the watch to his pocket, leaving a portion of the
chain visible. When awakened, the Englishman discovered his loss
almost immediately. The official was before him asking him in a
language he did not comprehend, whether he had any dutiable
articles to declare. The visible piece of chain caught the eye of the
excited passenger. He made a grab at the presumed thief. The
official, thinking he was being attacked by a madman, made a wild
dive for the door and reached the platform. The Englishman followed
in pursuit and captured his man. There was a wild melée, from which
the victim did not emerge victorious. When the train moved on, Hora
was gratified by seeing their late companion ineffectually struggling
in the grasp of half-a-dozen stalwart carabinieri.
Guy was fifteen years old when this event had happened, and
long before then he had imbibed from his father ideas of morality
which were directly at variance with those generally accepted. Guy
could never remember a time when Hora had bade him restrain any
desire. How well he recalled a day, he could not have been more
than six, when they had passed a shop wherein a basket of golden
oranges were displayed. "Buy me one," he had cried. Hora had
stopped. There was no one in the shop. "I'll teach you a new game,"
he said. "Go and fetch a couple, Guy. Mind you choose the best," he
said.
Guy had obeyed and Hora had praised him. As Guy ate the
oranges he thought the game the best he had ever heard of. Next
day they had passed the shop and Guy was about to repeat the
foray, but Hora had restrained him.
"Look, Guy," he said. "There is somebody there now; when you
want oranges or anything else without paying you must be quite sure
there is no one about, or you will lose the game."
Guy remembered the precept and acted upon it. It was a
delightful new game for anyone to play, if you were only clever
enough to play it properly. He used to beg Hora to take him out for a
day's stealing, and sometimes, as a reward for perseverance in his
studies, Hora would accede to the boy's request. He had no notion
that he was doing anything wrong, though he had been taught that
there were things he must not do. He knew that he must not tell his
father a lie; he knew too that he was to be silent when bidden.
Of course a time had eventually arrived when he had become
conscious that there was some lack of harmony between the life he
and his father led and the lives of those upon whom they preyed.
Hora had taken the boy to see a big penal establishment and his
curiosity had been stirred as to the reason of this gathering of men in
mud-coloured garb, marked all over with broad arrows. "Why are
they all dressed alike? Why do their masters carry guns?" he asked.
Hora had silenced him with a sign at the time, but later, when
they were alone, he had explained.
"They are all men who have been trying to play the game of
stealing and have lost," he said. "If you were to get caught, you
would be taken away and shut up at night in a cell all alone, and
dressed in ugly clothes, and when you went out men with guns
would be set to watch you so that they should shoot you if you tried
to run away."
"Have you ever been caught, father?" Guy asked.
Hora had never replied to that question. His face had grown so
dark that Guy had forborne to press for an answer, and the memory
of the singular expression which had passed over his countenance
had been sufficient to prevent Guy ever repeating the enquiry.
After the visit to the convict establishment, Guy had been
timorous at playing his new game, but Hora had chaffed him,
advised him, stood beside him, protected him, until he became
exceedingly dexterous in a variety of forms of petty larceny. He was
never allowed at this time to mix with other boys. Hora had him
always under his own eye, educating him according to a system
which was a fair sample of the average boy's education as regards
matter, but differing vastly from the average boy's education as
regards the application of the knowledge imparted to him.
Cæsar was never to him a mere handbook by which the
intricacies of a dead language were revealed, but a wonderful history
of a man who played the game of stealing in a great way. Hora made
quite clear to the boy's mind that there was only a difference in
degree between the stealing of oranges and the stealing of
kingdoms, but that if one wanted to steal kingdoms it was just as well
to begin early and learn the principles of the art by stealing oranges.
He explained, too, that the world looked with very different eyes
upon the theft of a crown and the theft of an orange or an apple. The
man who annexed an empire was an emperor whom men acclaimed
and set on a throne in a garb of purple, while the man who stole a
loaf of bread to assuage his hunger was a petty thief at whom the
world hurled opprobrium and thrust into a prison, garbed in mud-
coloured clothes and covered over with broad arrows.
Guy began to comprehend what Hora intended him to
comprehend, that there was something mean about petty theft, and
he no longer found pleasure in his game, but turned instead to the
weaving of romances of magnificent depredations.
Even the fiction which was supplied by Hora for the boy's
amusement was insidiously utilised for the inculcation of the same
perverted morality. With Robinson Crusoe, for instance, it was easy
for a man of Hora's equipment to make fun of Crusoe's naïve
dependence upon Providence and his exhibition of piety in moments
of stress. Hora pointed out that Crusoe's prayers were mere
expression of the terror of an uneducated mind when confronted with
personal danger—of a mind which had been trained in youth to rely
upon supernatural agencies for relief and comfort. He pointed out
that Crusoe really secured his own safety through the exercise of his
own constructive and observatory powers, and through no other
agency.
As Guy grew older, Hora sedulously built upon the foundation of
disbelief which he laid down as the basis of the boy's education. Guy
was taught that religion was merely the means by which a
priestarchy levied toll upon the body corporate by playing upon
inherited superstitions—while history supplied him with plenty of
illustrations. History supplied him, too, with plenty of examples to
point the arguments with which he supported what was in effect a
complete criminal philosophy. Guy was not taught only that atheism
was the hope of humanity. Hora had read much of Nietzsche, and he
skilfully adopted the Nietzschean philosophy to his purpose. A
particular appeal to Guy's mind was to be found in Hora's definition
of virtue, as a thirst for danger and courage for the forbidden. As
translated by Hora, both in precept and in practice, the highest virtue
was to be found in the breaking of laws. He imbibed the doctrines
with avidity, for Hora had a persuasive tongue. He learned at the
same time to keep them to himself, for, as Hora explained, if sheep
knew as much as men, men would have no mutton.
Until eighteen, Guy's education progressed under his father's
tuition, and then, feeling sure of him, Hora thought it time to launch
him on the world. Guy went to Oxbridge to make acquaintance with
his fellows, to survey the flock of sheep which were to supply him
with mutton in the future. The time then passed pleasantly enough,
and plenty of active exercise supplied him with a vent for his
energies. He did not shear any of the sheep, for Hora had bidden
him stay his hand. A blameless university career would, he knew, be
of great value in the future.
When Guy came down from the University it was with the
reputation of being one of its wildest spirits. Great things were
predicted of him. Others might excel him in individual efforts in the
field and the schools, but none could excel him in fearlessness of
demeanour. Besides, Hora's education had supplied him with a
serene belief in himself, which had been communicated to those with
whom he came in contact. He had been the leader of a set, the
model for the freshman, the autocrat of his time. Like most autocrats,
he cherished a profound contempt for those who bowed down before
him. He was to them as his father was to him, something so much
greater than they that their tribute became merely a thing of no
account. He understood why his father had no affection for him. How
could anyone love the thing beneath; the moth could love the star,
but the star could not love the moth—and——
Guy awoke from the reverie into which he had been betrayed by
his father's emotion on hearing the name of Captain Marven
mentioned. He was quite alone. Myra had left the room after vainly
trying to engage his attention. His hand unconsciously sought his
pocket, and, when he drew it out, he held in his palm the snuff-box
he had reserved for himself from the booty he had brought home on
the previous night. He gazed earnestly at the miniature set in the lid.
"So Captain Marven is father's enemy," he muttered, "and this—
this must be a portrait of Captain Marven's daughter."
His face grew troubled. His brow puckered. He thrust the box
back into his pocket and rose impatiently from his seat.
"Bah!" he said, "what says the Commandatore? Man is trained
for war, and woman for the relaxation of the warrior; all else is folly."
CHAPTER IV
THE REFLECTIONS OF LYNTON HORA
There was undoubted reason why the name of Marven should

move Lynton Hora to emotion. It swept him back over the thirty years
which bridged him from his youth. He would not have answered to
the name of Hora in those days; the days when he and Richard
Marven—"Gay" Marven—had been subalterns together in the same
cavalry regiment. But the name he had borne then was buried and
forgotten long since, and the young man who had borne it was dead
to the knowledge of the world, though his virtues and his sins, his
memories and hatreds—most certainly his hatreds—lived actively in
the recluse connoisseur and antiquarian, Lynton Hora.
He had had good reason for burying his earlier self—an all-
sufficing excuse for blotting out his existence from his regimental
companions, from the friends of his youth, from the parents who had
wept over his downfall perhaps even more than they had mourned
the presumed death which had followed his punishment.
The name of Marven had brought vividly before his mind a
picture of the bitterest moment of his life. Never could the memory of
that moment lose the poignancy of its sting. The hollow square in the
barrack yard, the epaulets he had once worn on his shoulder lying
on the ground, the look of scorn on the faces of his brother officers
and reflected on the faces of the men who had been till then beneath
him, for the convicted thief, he saw these things clearly at the
mention of Captain Marven's name.
He had always held that Marven was responsible for his
dishonour, Marven who had everything which he, Hora, had desired
and which fate had denied him. On the day he had first met him envy
had entered into his heart. The contented smile on Marven's face,
the expression which declared that everything is the best possible in
the best possible world, had irritated him. Hora had not shown his
irritation! Early in his youth he had learned to control the expression
of his feelings. But companionship had deepened the irritation day
by day. Gay Marven was the most popular man in the mess, Hora
the least. Marven was wealthy, a credit to a smart cavalry regiment;
Hora's allowance barely sufficed to meet the bare necessary
expenditure, and so he was debarred from indulging in the
extravagances which his comrade affected.
Some of them sneered at him and Hora attributed the sneers to
Marven's influence, though wrongfully, and his irritation became
anger.
Later, a greater cause of jealousy arose through the
interposition of the essential feminine element in all drama. Hora had
fallen hopelessly in love, and he had reason to think that the
affection he had bestowed would be returned. Then Marven
appeared on the scene, and Hora's hopes had vanished. Marven
had only to be natural to dazzle the eyes of all beholders with the
rays of his sunshiny disposition. Hora's temperament was of an
intellectual coldness more likely to provoke esteem than love. The
attack of aerotitis which affected both of them accentuated in each
his natural characteristics. Marven became more brilliant than ever,
Hora more passionately reserved. Then Hora, his natural judgment
in suspension, had imagined that it would be possible to out-dazzle
Marven. Reckless of consequences, he joined in all the pursuits from
which he had hitherto stood aloof. His useful charger had been
replaced by two magnificent mounts. His tailor had been made
temporarily happy by a swiftly swelling account. He had begun to
entertain lavishly—a year's income, apart from his pay, would not
have met one single week's expenditure. He had known that the
pace could not last, but fate had been kind to him at the outset. He
had speculated on the turf and had won. From the card table, too, he
rarely rose a loser and the play that went on in the card room of the
mess, when the Colonel was not there, would have genuinely
shocked the commanding officer, had he been aware of the amount
of the stakes at issue. Hora's comrades thought he had come in for a
legacy, and he was no longer deemed a discredit to their ranks.
Though delayed, the day when the inevitable reckoning was to
be met could not be averted forever. When fortune frowned, instead
of smiling upon his turf speculations, he was forced to visit the Jews.
There he could obtain but trifling accommodation, for he had never
had any expectations, and was heir to nothing but an unstained
name. Even the five hundred pounds he had ultimately raised was
only advanced at ruinous interest on a three months' bill. He had
plunged more wildly than ever. He had lost. He had become short of
cash to meet his daily out-of-pocket expenses. Even then, he might
have been saved from utter extinction had not he imagined that he
had succeeded in putting his rival in the shade. He had staked
everything upon one last hazard. There had been under his control
certain regimental funds. He had made use of them, knowing full well
that so soon as his anticipated engagement was announced he
would have no difficulty in obtaining a further loan, since the object of
rivalry between Marven and himself was wealthy, as well as
beautiful. With that loan he had counted on being able to replace the
money he had embezzled. But Marven was before him, and the day
Marven's engagement to Beatrice Challys was announced an
unexpected investigation of Hora's accounts by the Colonel of the
regiment disclosed the defalcation. Hora was placed under arrest,
and the torrent rushed over him.
When he had reached his own apartment, Lynton Hora spared
himself not a single pang of bitterness of the memories of what had
followed. The weary days under arrest, the long-drawn-out inquiries,
the court martial, the day of the promulgation of the sentence, when
he was drummed out of the regiment, and had walked out of the
barrack yard into the hands of the civil police, who were awaiting him
to bring him to further trial.
He had been spared nothing. There was no influence which
could have been exerted to save him from any one of the ignominies
which he had incurred. He had supplied an excellent example for
exhibiting the impartiality of the law. No private in the ranks should
be able to say that he received harsher treatment than the officer of
a crack cavalry regiment.
He had faced his punishment bravely, indeed, he had welcomed
the solitude of the cell when he had eventually exchanged his
cavalry dress for another of H. M.'s uniforms. There he had not to
meet the scorn of men's eyes.
One by one he recalled the incidents. They had never ceased to
pain him, even though he tried to laugh at his weakness in imagining
that the wound to his pride still rankled. But he would not have been
without that smarting sore. He took the same fierce satisfaction in
the pain with which the martyrs of Smithfield solaced themselves as
they thrust their arms into the fire. He told himself always that the
mental suffering, the intolerable scorn he had faced, had shown him
the world as it is, and not as it pretends to be. He postulated a
deceitful, hypocritical world with a smile on its face for the man of
wealth, and a frown and a brick for the poor devil who had the will to
enjoy and not the means to gratify his longings.
Before his disgrace he had hated only one man—afterwards he
hated all men, and at least one woman—she who preferred Gay
Marven, fortune's favourite, to himself, fortune's scapegoat. But in
addition to enabling him to appreciate the smiles and frowns of the
world at their proper worth he told himself that his experience had
made a man of him. It certainly left him a purposeful, resourceful,
scrupleless being, with a definite object in existence.
That object was revenge. Revenge on the world which had
scorned him, revenge on the world which had labelled him criminal,
revenge above all upon Marven.
He had made all his plans long before his sentence had expired.
He saw that he must die to the world if the future was to have any
promise at all, for a past, such as his, would have been an incubus
no man might carry for long. So, when his term of imprisonment was
over, he disappeared in the broad light of day. At least the ex-convict
disappeared from English eyes when he sculled out to sea in a fair-
weather craft from a south coast watering-place. A day or two later
the overturned boat was picked up with the ex-convict's coat still
entangled in the seat, and with his ticket-of-leave still in the pocket.
There was nothing to connect the Lynton Hora who a few weeks
later landed from an English tramp steamer at an Italian port with the
missing man.
Hora had not found existence present many difficulties. He had
buried his scruples with his identity, and a man of brains, with
courage and no scruples, need never look very far for the means of
subsistence. For a while he preyed on British tourists. They were of
his own race, and, therefore, his chiefest enemies, and, besides, he
knew that, since he would need a place where he might build a
reputation and a new identity if his purposes were to be fulfilled, it
would be unwise to prey upon the inhabitants of the selected spot.
Italy appealed to him. He became to all intents and purposes Italian.
An English soap-maker's wife, "seeing" the Eternal City, supplied
him, unwittingly, with funds to purchase a vineyard in Tuscany. He
stocked his farm and furnished a house with the contents of a
duchess' jewel casket. The capital necessary for pursuing his
agricultural operations was provided indirectly by the Casino
authorities at Monte Carlo. Hora had ventured no stake at the tables.
He had merely relieved a successful gambler of his winnings. Thus
provided with a home, he had paid a visit to England. When he
returned, six months later, he brought his reputed son with him, a
child of three; and away in England, his old comrade, now Captain
Marven, together with Mrs. Marven, had mourned beside an empty
cot in their nursery.
Hora had succeeded in the initial step towards the
accomplishment of his revenge. But this had been only the first step.
His appetite was not to be sated with one simple meal of vengeance.
His rival, like himself, should never be allowed to forget his loss. So
punctually every year, on the anniversary of the stolen boy's birthday,
Marven had received a brief type-written note stating that the child
was alive and well—nothing more. Hora would gladly have signed
the note with his forgotten name, but that thereby he might have
incurred danger to himself and the overthrow of his whole scheme of
revenge. When the appointed time came, when the child was full
grown, when by his own acts the child should be damned beyond all
redemption—then the woman who had refused his offer of marriage
should have her son restored to her, the rival who had won that
woman's love from him should have the paternity of the criminal
thrust upon him, and the whole world should be made aware of
Guy's real parentage. That was the complete scheme of revenge
Hora contemplated; to consummate which he had instilled into the
baby ears the subtle poison of his perverted morality, had skilfully
taken advantage of the boy's adventurous nature to interest him in
the romantic possibilities of a criminal career, had laboured and
watched the unfolding of a mind with the patience of a Japanese
gardener producing a dwarfed and twisted miniature of a fair tree of
the forest.
He had been discreet in his work. He had no intention of making
of his pupil a rod for his own scourging. His conception of the great
criminal he desired to make of Guy had nothing in common with the
average conception of a person given to indulgence in all the
commonplace vices of humanity. Self-control he had early realised
was of more importance to the man who was waging single-handed
warfare with the world, than to the units of the community with whom
he was at issue. His own predilections, too, were instinctively
refined. The grosser forms of self-indulgence had never appealed to
him. He was an epicure of life, and had no desire to spoil his palate
with a surfeit of coarse pleasures. Clean living himself, he demanded
cleanliness of life in those about him. To what happened outside of
his own household he was cynically indifferent.
Guy had proved a credit to his training. He was healthy in body,
full of the enthusiasm of living, and possessed of a fine rapture for
the profession to which he had served his apprenticeship. Almost the
time was ripe for the consummation of Hora's revenge, when chance
had brought Guy into contact with his real parents. This was a
contingency Hora had not foreseen, and it needed careful
consideration. He did not fear that the relationship would be
disclosed. Guy himself had no suspicion of the facts. He knew no
parent but Hora, though he believed that he remembered the mother
whom Hora had invented for his benefit, whose portrait hung on the
wall of his bedroom, and of whom Hora had spoken to him on many
occasions. Yes, Guy Marven's real identity was sufficiently sunken in
that of Guy Hora to ensure him against discovery, even though
physical likeness should lead to comment.
Yet, Hora's first emotion, on learning that his foster-son had met
his father and mother, was one he thought he had banished forever.
A sensation of fear had passed over him, a dread lest the natural
inclination of son to mother should manifest itself, lest the blood
which pulsed eagerly in the son's arteries should cry out to the blood
which ran more sluggishly in his father's veins, and, his own mock
relationship disestablished, there be destroyed the living instrument
for his revenge he had spent so many years in fashioning. Nor had
his only fear been for the loss of his whole scheme of revenge. He
realised, for the first time, that his interest in Guy was more than that
of the artist in his artistry. Guy had always looked to him, had repaid
him for his attention with all the warmth of an affectionate nature. He
was the one being in whom, save Myra, Hora had taken a personal
interest. Suppose someone else were to take his, Hora's, place in
the young man's thoughts? The dread was in his mind, though he
would not acknowledge it—though he denied its existence. That
would be a piece of sentimentalism utterly foreign to his whole
nature. He told himself that he had no affection for the child of his
adoption, save that of the master craftsman in his tool. Of course he
would regret the necessity, when it arose, of giving the tool to
destruction, but he would admit to himself no warmer interest in
Guy's fate than that.
Self-persuaded on the point, he considered whether the
meeting, of which he had been apprised, might not be utilised for the
furtherance of his plans. Nor was it long before he became
persuaded that Fate was playing into his hands. Supposing that the
acquaintance developed into intimacy. A thousand vague
possibilities floated, shadow-like, before Hora's eyes. He determined
that the acquaintance should be continued, but still fearful, he
determined also that Guy should be plunged more deeply into the
vortex of crime than hitherto, so that, struggle and strive as he might,
he should find it impossible to escape. Fortunately for his purpose,
Guy had expressed himself as hungering for further adventure. Well,
Hora was fertile of plans, and he saw very good reasons why Guy's
desires should be humoured. His household saw nothing more of the
Commandatore that day. He remained alone with his thoughts.
CHAPTER V
THE COMMANDATORE MAKES A DEDUCTION
"We are getting near the end of our resources, Guy," remarked
Hora quietly, as he held a glass of port up to the light, sipped the
wine, nodded his head approvingly, and set the glass down gently.
It was the evening of the second day after Hora's exhibition of
emotion upon hearing the name of Marven. He had not referred
again to the object of his hatred, and neither Myra nor Guy, who sat
with him at the table, had prompted his memory.
Guy looked round the room before he answered. He had been
well trained in the observance of caution. But the servants had
retired, the door was closed. The three were alone.
"All London offers replenishment of our empty coffers," he
answered light-heartedly. "Who is to have the honour?" He turned to
Myra. "Shall I peel a peach for you?" he asked.
The woman seemed not to hear the question. She was looking
at Hora, with an appeal in her glance.
Hora answered her glance. "Myra is tired of London," he
remarked. "What do you say, Guy? Shall we finish the campaign
now, strike our tents and retire like contented bourgeoisie to our
vineyard to watch the grapes ripen?"
Guy's eyebrows arched in surprise. "Retire empty-handed?" he
asked incredulously. "Why, what has come upon you,
Commandatore?"
"Myra is tired," he answered briefly.
Guy looked, smilingly, at her. She flushed slightly. "Not a bit of
it," he answered. "I am quite sure she does not desire to exchange
the delights of a London season, even for the dolce far niente of an
Italian summer."
"I should not mind," she answered. "London is a beastly place.
The Commandatore is right. I am sick of the sight and sound of
people, and of the perpetual menace of our life—I——"
Hora checked her speech with a gesture. The door opened and
a servant entered with coffee, and while he was present the
conversation passed lightly over topics of the day.
"I don't like that man," said Guy, as the servant withdrew. "I
caught him prying about amongst my belongings the other day when
I returned to the flat unexpectedly."
"All servants do that," murmured Hora indifferently. "Curiosity is
the mental badge of servitude. The servant is never happy until he
has surprised one of his master's secrets. It would be just as well,
Guy, if you were to supply him with a few facts to exercise his
imagination upon. Get some girl to write you a few love letters and
hide them where he can find them. He will never be at a loss then to
supply a reason for any erratic movement of yours."
Guy laughed. "Not a bad suggestion," he agreed. "Do you adopt
the same plan to protect yourself?"
Hora shrugged his shoulders. "I carefully built up my own
reputation in advance," he remarked. "Haven't I told you? I suppose
not, for you were both too young when I first located myself here."
He looked round the pleasant dining-room complacently. "I've had
the place for ten years now, and for one's name to be for ten years in
the London directory, at the same address, is a certificate of
respectability which is not easily discredited."
"Still I wonder that you did not seek greater privacy," remarked
Guy, as he lit a cigarette.
Hora smiled. "A decision for privacy always awakens suspicion,
and thus in our profession privacy de facto is perhaps the one luxury
we cannot afford. Nevertheless a greater degree of privacy is
possible in the midst of a crowd than would be possible anywhere
else in the wide world. This is not such a paradoxical statement as it
sounds. In the crowd no one is intent on the doings of his
neighbours. Put a ring-fence round a man, and every eye would be
fixed upon him. Thus you see my reason for selecting a residential
flat for my London residence. The servants are not mine. Each of
them has half a dozen other objects of curiosity. When they have
attended to our requirements they disappear."
"But, nevertheless, they must be curious concerning the
contents of the art gallery?"
The allusion was to a portion of the abode into which the
servants were not supposed to enter. Though situated on the eighth
story, Hora's flat at Westminster Mansions was not the ultimate
achievement of the builder. Above were attics to which a narrow
staircase gave entrance. The stairs were shut off by a door, and the
door was always locked.
"When I see any signs of curiosity I always take an early
opportunity of gratifying it," said Hora. "Every one of the servants
who has ever waited upon me has had the privilege of inspecting
that chamber, and not one of them has ever been sufficiently
interested to enter it a second time, except at my especial request.
You see they are all aware why I took possession of the attic. They
think it is the fad of a nervous invalid. Those attics were entered from
another staircase when first I took the flat, and some of the servants
slept there. I complained of the noise, continually. Half a dozen of the
poor devils must have been dismissed at one time or another for
purely imaginary offences in consequence. Then I declared I could
stay no longer, and I gave notice to leave. The agent for the landlord
was apologetic, and asked if there was no way in which he would not
be able to meet me. I offered to rent the place, saying that I would
make it into a storeroom for the books and trifles which I am
continually accumulating. He jumped at the offer I made, and I know
he thought me a fool." Hora chuckled. "How surprised he would be to
learn that the proceeds of many a rich haul have been stored there
for months. But I have drifted away from my original point. I was
telling you of the manner in which I built up my original reputation for
eccentricity, the safest cloak a man may wear. It was a simple
matter. I merely answered for myself the references I gave to my
landlord. I described myself as an unfavourable tenant from every
point of view, but the pecuniary one. My habits I described as
irregular, my requirements exacting to a degree, my manner brusque
and overbearing, and my disposition faddy and changeable, and
further said I was given to making continual requests for structural
alterations in any dwelling place that I occupied in order to make
accommodation for any new collecting craze which seized me."
"I wonder any landlord ventured to accept you," laughed Myra.
"The London landlord has a high opinion of his capability for
withstanding the demands of his tenants," said Hora drily. "He is a
man lavish of promises, but meagre of fulfilments, and possessed of
a genius for extracting the uttermost farthing of his rent. Moreover,
he would take Satan himself as a tenant if he offered to pay six
months' rent in advance. Naturally I proved acceptable, and not
turning out to be the terror I depicted myself I am now looked upon
as the best tenant in the whole building. I am free to do as I like. My
treasure-house ceases to excite curiosity, and I believe if I were to
place the crown jewels upon one of the tables up there they would
be undisturbed, so long as my rent was paid regularly, until they
were hidden beneath the accumulated dust of ages."
The allusion gave Guy an idea.
"Do you contemplate an imitation of Colonel Blood's exploit for
the replenishment of our empty exchequer?" he said, smiling.
"I have often envied Blood's opportunities," answered Hora
thoughtfully, "but at the present day there are much greater
difficulties in the way than Blood had to contend with. Some day,
perhaps, but just now I have another scheme in my mind." He rose
from the table. "I have something to tell you," he remarked. "You will
excuse me for a minute."
He left the room. As the door closed on Hora, Myra turned
eagerly to her companion. She felt that, despite her promise to Hora,
she must give utterance to the fears which once again possessed
her mind.
"Guy," she said, "I wish you would persuade the Commandatore
to leave London for a while. He would listen to any wish of yours."
"Do you think so?" he asked. "I don't think that any expression
of mine would turn him from any purpose he has in view."
"But can you not try?" she persisted. "For my sake, Guy."
"Why, whatever is the matter with you, Myra?" asked the young
man, his attention captured by the obvious anxiety in her voice.
"Surely you are not becoming afraid?"
"Becoming afraid?" she repeated after him mechanically. "No, I
am not becoming afraid. I learned what fear was long ago, when first
I ventured to put my own desires in opposition to the will of the
Commandatore. I have always been afraid since then." She fell to
silence.
"There's no reason to fear the Commandatore," answered Guy
cheerfully. "You are growing morbid, Myra."
She paid no heed to his comment. "It is not fear now, or at least
not what is generally understood by fear. There is an oppression in
the air, the weight of something unseen and unknown presses on
me."
"But there is nothing for you to fear. Whatever were to happen
you would be quite safe," argued Guy.
"Myself? It is not myself I am thinking about," she cried
passionately. "Whatever impends does not threaten me. It is you,
Guy, I fear for. Ever since the night of Lady Greyston's dance I have
felt it. I thought you would never return that evening, but you came
back, and for a while I could laugh at my fears. But, now the
Commandatore has some other proposal to make, my dread has
returned. I shall not have a moment's rest."
"Why this is sheer hysteria, if not madness," said Guy in great
concern.
"Call it what you like," she replied earnestly, "but listen to what I
say—promise me!"
She heard Hora's lagging footstep in the passage outside, and
she ceased speaking suddenly. "Not a word of this to the
Commandatore," she said hastily, as the door opened, and Hora re-
entered.
If the elder man observed that his re-entry had broken in upon a
confidence from which he was excluded, he gave no signs of having
done so. Myra breathed more freely when he seated himself again at
the table, and spread out a newspaper he had brought with him on
the table.
"There are three items of news in this evening's paper," he
remarked quietly, "which supply the data from which may be
deduced the means whereby an enterprising man may build a
fortune."
Guy was all attention on the instant, and Myra, viewing his keen
face, let her head droop upon her hand.
"Those items are?" queried the young man, as Hora paused.
"You will find the first in the Court News," was the reply. "The Rt.
Hon. Sir Gadsby Dimbleby, who is the minister in attendance upon
His Majesty the King, arrived at Sandringham last night."
"The Minister of Foreign Affairs, is he not?" asked Guy.
Hora nodded, and turned to another page from which he read:
"Just before the close all markets sagged badly on selling orders
from Berlin. A variety of rumours were afloat as to the reason, but no
definite information which would supply justification for a bear raid on
the market was forthcoming from any well-informed quarter. In the
street, afterwards, prices were put up again generally, though
fluctuations were considerable."
"Yes," said Guy, beginning to look puzzled.
"The third item is a mere addition to the Reuter's telegram from
Australia, giving particulars of the cricket match between the English
and Australian teams. The result is placed in the space left for late
news, and over it are the words "delayed in transmission.""
Hora ceased speaking.
"If the rehabilitation of our fortunes depends upon translating
that puzzle we shall end our days in the workhouse yet," said Guy.
"Yet, there is much wealth for the man who can piece together
those scraps of information, and will act promptly on the knowledge,"
answered Hora.
"How? By speculation on the Stock Exchange?" asked Guy. "I
thought, Commandatore, that you eschewed all forms of gambling."
"I do," said Hora drily. "But to buy and sell on a certainty has
nothing of the gambling element about it. I feel inclined to make
either the bulls or the bears contribute to our maintenance. But
action must be prompt if it is to succeed. There is work for you to do
to-night, Guy, if you care about it."
"Care about it?" The young man sprang to his feet, every fibre of
his frame quivering for action.
Hora laughed good-naturedly. "There—there, Guy, take matters
a bit easily. There's plenty of time before you yet, if you decide to go
on with the job. It's more risky than the last."
"The greater the risk, the better I shall be pleased," exclaimed
Guy, as he dropped again into his chair, "though how you are going
to evolve anything of a risky nature from those paragraphs you have
just read, I entirely fail to understand."
"You'll understand soon enough," remarked Hora quietly, "and
you will then be surprised that the meaning of these three items of
news should have conveyed so little to you. Let me reverse the order
and read into these three facts my own conclusions. What can be
the reason for the delay in the transmission of the cable containing
the cricket result? Either the cable had broken down, or it was
monopolised for more important work. The former theory is
untenable, for if you take the trouble to compare the time of the
insertion of the news with the time when it should have been
inserted, you will find a delay of three or four hours only has to be
accounted for. Thus I arrive at the decision that the cable was fully
occupied by someone with a prior claim for its use. Who could that
be? Here again the choice is between two possibilities. Either some
big financier or body of financiers or the Government. Again the
indications point to one conclusion. The City was merely uneasy by
reason of German selling, which could not be accounted for, and not
because of information which had come over the wires. Therefore,
the wires must have been occupied by important despatches to the
British Government. I think," said Hora, "that if the knowledge of
what has passed over the cable is in my possession by to-morrow
morning, we shall be in a position to spoil the Egyptians of
Throgmorton Street to some purpose."
Guy looked at Hora with admiration. Some idea of his
companion's purpose dawned upon him—but only faintly. He asked
eagerly for further guidance.
"As to the nature of the despatch which has been received at
the Foreign Office, I have no more idea than yourself," he continued,
"though it probably affects Germany, and it is hardly worth while
troubling to guess. I am only concerned with times, places, and
people. As I calculate, the cable was not clear for ordinary business
until close upon six o'clock. Six would, therefore, be very near the
time when the end of the message was delivered at the Foreign
Office. Of course it would have been cabled in the official cypher. By
the time the message would be de-coded there is only one train by
which a special messenger could take the de-coded despatch to his
chief, who happens to be the minister in attendance upon His
Majesty at Sandringham."
Hora looked up at the clock. "That train starts from St. Pancras
at 9.50. It proceeds as far as Lynn, where the messenger carrying
the despatch will probably be met by a motor-car. It is just nine
o'clock now, Guy, so there is plenty of time for you to decide whether
it is worth while making an effort to obtain the information which will
be in his despatch box."
Guy's eyes sparkled. "It's worth while trying any way,
Commandatore." He turned to the young woman. "Wish me luck,
Myra," he said.
CHAPTER VI
WHEREIN A KING'S MESSENGER IS DESPOILED
OF HIS DESPATCHES
Guy had ten minutes to spare as he stepped out of the cab at

St. Pancras Station, and, handing a bag to a porter, made his way
leisurely to the booking office and took a ticket for Lynn. He would
have been easily recognised by any of his acquaintance, for he had
made no effort to disguise himself. Hora professed no liking for
physical or material disguises, contending, indeed, that such were
merely the clumsy devices of incompetence. "The man who
anticipates being seen in any affair in which he is not prepared to
meet scrutiny is anticipating failure," he was accustomed to declare.
"In all other cases," he had told Guy, "your own identity will be your
most certain protection. A bourgeois reputation for wealth and half a
dozen society acquaintances will provoke apologies from inquisitive
persons when a mere hint that you had dyed your moustache would
mean instant arrest." Guy was disposed to agree with him. He
disliked the theatrical, as much as he was enamoured of the
dramatic, aspect of his profession.
Yet on this occasion he had not been long on the platform
before he was betrayed into the wish that for once he had assumed
some disguise. The porter to whom he had entrusted his bag had
deposited it in the corner of a first-class smoking compartment, and
Guy strolled along the waiting train, glancing into each compartment
in turn, in order to locate the messenger who, if Hora's deductions
were correct, was to travel by it. He had made no plans as to the
means he was to take to obtain a knowledge of the despatches. Nor
had Hora made any suggestions.
"I leave the matter entirely in your hands, Guy," he had said. "If
you see a favourable opportunity, take it. Opportunity only passes by
the unobservant. Still, such may be lacking, and if none presents
itself do not strive to make one. One failure in our profession is the
end of a career. I don't want to see your career cut short yet. It is a
difficult task you have undertaken, and I shall not be surprised if no
opportunity presents itself. Don't think I shall blame you."
The words were in his mind, as he passed coach after coach,
and saw no one who seemed at all likely to be the messenger
bearing the despatches. He returned to the door of the compartment
where his bag lay. A porter came to the door, glanced in, then
opened the door of the next compartment, and pasted a little label
"reserved" on the window. Guy, standing on the platform, looked at
the entrance a dozen yards distant. He became conscious of a little
thrill of excitement in the thought that Hora's deductions were likely
to be proved accurate. It was the next instant that he wished that he
had concealed his identity. A passenger made his appearance and
the moment their eyes met Guy recognised him, even as he knew he
was himself recognised. It was too late to seek retirement in the
train. He stood still while the newcomer advanced with outstretched
hand.
"Guy Hora, if I'm not mistaken, by all that's lucky. Going
anywhere on this train, eh?"
Mechanically Guy took the offered hand. There was no need for
him to attempt to infuse any surprise into his voice. He could only
ejaculate "Captain Marven!"
"Himself," said Marven, "and as much surprised to find a friend
here as you are." He glanced into the compartment where Guy's bag
remained.
"Unless you want to sleep undisturbed, I should propose that we
travel together," he remarked.
"If I might intrude," begun Guy hesitatingly.
"Intrude? You don't know how delighted I shall be," said Marven
heartily. He beckoned the porter who stood holding open the door of
the reserved compartment. "Put this gentleman's bag in here," he
said. "Now, jump in," he continued to Guy.
The young man obeyed. The porter closed the door, touched his
cap, and turned away. Captain Marven tossed a bundle of
magazines on the seat and settled himself in a corner. "Better to look
upon than magazines is the face of a friend on a five hours' journey,"
he said laughingly.
"Much better," replied Guy. His first surprise had been
succeeded by a second much greater. Captain Marven's coat had
swung back as he entered the compartment, and Guy had observed
beneath it a despatch case. It flashed upon him that Captain Marven
must be the carrier of the despatches. There seemed to be
something uncanny in Hora's prescience. Fate had given him the
opportunity which the Commandatore had declared awaited the
observant, and it remained for Guy to take advantage of it. But there
was a bitter thought commingled with the realisation of the fact that
the opportunity he desired had been given to him. This man had
seemed so friendly disposed towards him from the moment they first
met. There seemed to Guy to be something particularly mean in an
act of treachery towards him. But he had no opportunity to brood
upon the thought, even had he desired to do so, and he did not
desire to contemplate it. Besides, not to take full advantage of the
opportunity would be treachery to the Commandatore, who was
depending upon his success. Guy put aside his new-born scruples,
and concentrated his attention on the business in hand.
He perceived that he would have to make use of all his faculties
if he were to succeed in his object. The man opposite him would not
be easily cozened. But the effort must be made. He began to turn
over in his brain a variety of plans, while he chatted with his
companion.
The whistle sounded, doors banged, the train moved out into the
night. There was no escape now. But how was he to gain possession
of the case in Captain Marven's possession without exciting
suspicion? As a stranger, there would have been greater chance of
effecting the coup by some sudden stratagem. But, positioned as he
now found himself, he was practically helpless unless Marven should
sleep. Guy looked up at the Captain's face. It was an alert face, not
the face of a man who sleeps while on duty. It would be difficult to

Original PDF Financial Accounting 12th Edition by C William Thomas PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Original PDF Financial Accounting 12th Edition by C William Thomas PDF

Uploaded by

Copyright:

Available Formats

(Original PDF) Financial Accounting

12th Edition by C. William Thomas

To my husband, Russ, who steadfastly supports me in every endeavor.

A01_HARR5987_12_SE_FM.indd 5 06/11/17 2:14 PM

A01_HARR5987_12_SE_FM.indd 7 06/11/17 2:14 PM

Walter T. Harrison Jr. is professor emeritus of accounting at the Hankamer School of

Charles T. Horngren (1926–2011) was the Edmund W. Littlefield Professor of

A01_HARR5987_12_SE_FM.indd 8 06/11/17 2:14 PM

1 The Financial Statements 1

3 Accrual Accounting and Income 120

4 Internal Control and Cash 201

5 Receivables and Revenue 248

6 Inventory and Cost of Goods Sold 305

7 Plant Assets, Natural Resources, and Intangibles 367

8 Current and Contingent Liabilities 436

9 Long-Term Liabilities 468

10 Stockholders’ Equity 522

11 The Statement of Cash Flows 594

12 Financial Statement Analysis 668

APPENDIX A: Apple Inc. Annual Report 2016 745

A01_HARR5987_12_SE_FM.indd 9 06/11/17 2:14 PM

A01_HARR5987_12_SE_FM.indd 10 06/11/17 2:14 PM

Accrued Revenues 133 Cash Receipts by Mail 212

A01_HARR5987_12_SE_FM.indd 11 06/11/17 2:14 PM

Chapter 5 Apply the Various Inventory Costing Methods 313

A01_HARR5987_12_SE_FM.indd 12 07/11/17 4:44 PM

Depreciation for Tax Purposes 383

Analyze the Cash Flow Impact of Long-Lived Asset Commitments 488

A01_HARR5987_12_SE_FM.indd 13 06/11/17 2:14 PM

Organizing a Corporation 525 Statement of Stockholders’ Equity 551

Classes of Stock 527 End-of-Chapter Summary Problems 553

Account for the Issuance of Stock 528

A01_HARR5987_12_SE_FM.indd 14 07/11/17 4:47 PM

Measuring Ability to Pay Current Liabilities 684 Consolidation Accounting 779

APPENDIX A: GLINDEX 814

A01_HARR5987_12_SE_FM.indd 15 06/11/17 4:42 PM

Financial Accounting gives readers a solid foundation in the fundamentals of account-

NEW TO THE TWELFTH EDITION

A01_HARR5987_12_SE_FM.indd 16 06/11/17 2:14 PM

■■ Deleted the “Account Formats” section.

A01_HARR5987_12_SE_FM.indd 17 06/11/17 2:14 PM

■■ Streamlined the material on the disclosure principle.

A01_HARR5987_12_SE_FM.indd 18 06/11/17 2:14 PM

A01_HARR5987_12_SE_FM.indd 19 06/11/17 2:14 PM

Dear Valued Colleagues,

Author-created instructor resources. This book has a variety of instructor

A01_HARR5987_12_SE_FM.indd 20 06/11/17 2:14 PM

A01_HARR5987_12_SE_FM.indd 21 06/11/17 2:14 PM

REACH EVERY STUDENT WITH MYLAB ACCOUNTING.

EMPOWER EACH LEARNER

IMPROVE STUDENT RESULTS

Accounting Cycle Tutorial (ACT) with

NEW—Time Value of Money Tutorial NEW!

The Time Value of Money Tutorial in MyLab ensures

Deliver trusted content

A01_HARR5987_12_SE_FM.indd 22 06/11/17 2:14 PM

There was undoubted reason why the name of Marven should

Guy had ten minutes to spare as he stepped out of the cab at

You might also like