510chapter5fall2009bb

510chapter5fall2009bb - Chapter 5 Balance Sheet and...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 5: Balance Sheet and Statement of Cash Flows What’s Important • Usefulness/limitations of balance sheet • How elements are classified in the balance sheet • Balance sheet format • Techniques of disclosure • Purpose/content/format of statement of cash flows The balance sheet provides information for evaluating: Capital structure Assessing risk and future cash flows Analyzing an enterprise’s: Liquidity Solvency Financial flexibility Balance Sheet: Usefulness Balance Sheet: Usefulness • Most assets and liabilities are stated at historical cost . • Judgments and estimates are used in determining many of the items. • The balance sheet does not report items that can not be objectively determined. • It does not report information regarding off- balance sheet financing . Balance Sheet: Limitations Balance Sheet: Limitations • Current Assets • Long-term investments • Property, plant, and equipment • Intangible assets • Other assets • Current liabilities • Long-term debt • Owners’ equity • Capital Stock • Additional paid-in capital • Retained earnings Assets Liabilities and Equity Balance Sheet: Classification Balance Sheet: Classification Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is longer. Current Assets Balance Sheet Generally any monies available “on demand.” Cash equivalents are short-term highly liquid investments that will mature within three months or less. Any restrictions or commitments must be disclosed. Cash Balance Sheet – “Current Assets” Portfolios Short-Term Investments Type Valuation Classification Held-to-Maturity Debt Amortized Cost Current or Noncurrent Trading Debt or Equity Fair Value Current Available- for-Sale Debt or Equity Fair Value Current or Noncurrent Balance Sheet – “Current Assets” Claims held against customers and others for money, goods, or services. Accounts receivable – oral promises Notes receivable – written promises Major categories of receivables should be shown in the balance sheet or the related notes. Receivables Balance Sheet – “Current Assets” Accounts Receivable – Presentation Options Current Assets: Cash $ 346 Accounts receivable 500 Less allowance for doubtful accounts 25 475 Inventory 812 Total current assets $1,633 Current Assets: Cash $ 346 Accounts receivable, net of $25 allowance 475 Inventory 812 Total current assets $1,633 1 2 Balance Sheet – “Current Assets” Inventories Balance Sheet – “Current Assets” Company discloses: Basis of valuation (e.g., lower-of-cost-or-market). Method of pricing (e.g., FIFO or LIFO). Payment of cash, that is recorded as an asset because service or benefit will be received in the future....
View Full Document

This note was uploaded on 12/29/2009 for the course ACC 5100 taught by Professor Andrews during the Fall '09 term at Wayne State University.

Page1 / 69

510chapter5fall2009bb - Chapter 5 Balance Sheet and...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online