Accounting 310 test 2 notes

Accounting 310 test 2 notes - Accounting Chapters 4, 5...

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1. Identify the elements of the balance sheet (statement of financial position) and state the recognition and measurement criteria for those elements. a. Assets : economic resources of a firm, probable future economic benefits or controlled by a past transaction; obtained either by exchange for other assets, borrowing of money (liab.), or owner contrib. (capital) or earnings; i. Going concern: firm will continue to operate in future if it will consume benefits from its assets (except inventories) through use rather than sale ii. Historical cost: recorded at original/historical cost because they are more easily determinable, more objective and more reliable iii. CA: net realizable value (monetary) or lower of historical costs (non monetary) iv. Investments & funds: fair market value v. Operating assets: vi. Intangible Assets : book value (hist cost-amort) reduced to fair if impaired special rules for goodwill vii. Other Assets: historical costs b. Liabilities: economic liabilities of a firm, probable future economic sacrifices arising from present obligations to transfer assets or provide services in the future as a result of past transactions i. Historical cost ii. CL: historical cost iii. Non current: discounted present value of principle & interest at the yield at the time they were issued c. Owners Equity: residual interest in the assets of an entity that remains after deducting liab. d. very important bc they describe methods & assumptions used in calculating amounts, can be over 10 pages long 2. Classification of balance sheet elements a. Assets: classified as either current or non current i. Current assets: usually classified in decreasing order of liquidity beginning with cash; are reasonably expected to be realized in cash, sold or consumed within 1 yr of balance sheet date or normal operating cycle (period which company purchases inventory, sells for cash/credit & collects cash), whichever is longer. 1. Listed as: stated net realizable value or cash equivalent a. Monetary : shown at cash equivalents on the balance sheet- easily converted into fixed amounts of cash as i. Cash ii. Short term investments: fair value as of the date of bal. sht iii. receivables (net of uncollectible accts) b. Non monetary : not convertible into fixed amts of cash as i. Inventories: carried at lower of historical cost based on LIFO, FIFO or avg) like CIP ii. prepaid expenses c. Other current assets: description is disclosed in the notes ii. Non current assets: expected to be used up/realized in over a year 1. Listed as a. Longterm investments: investments & bonds set aside for long-term use & not for current liab; long term notes receivable, long term investments in other companies debt or equity that isn’t intended to be sold in current period, investments in subsidiaries, notes rec. from subsidiaries, bond
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Accounting 310 test 2 notes - Accounting Chapters 4, 5...

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