Intro%20to%20the%20Balance%20Sheet%20Spring%202010

Intro%20to%20the%20Balance%20Sheet%20Spring%202010 - Major...

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Major Components of the Balance Sheet
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Dr. Mimi Alciatore 2 Major Components of the Balance Sheet Assets: Probable Future Economic Benefits Statement of Financial Accounting Concepts 6: “Assets are Probable Future Economic Benefits obtained or controlled by a particular entity as a result of past transactions or events.”
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Dr. Mimi Alciatore 3 Current Versus Long-Term Assets Current Assets: Expect to Use or Convert to Cash Within One Year
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Dr. Mimi Alciatore 4 Current Assets Cash (Currency, Checking & Savings Accounts) & Cash Equivalents (Highly Liquid Investments with Maturity of 3 Months or Less Such as T-Bills)
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Dr. Mimi Alciatore 5 Current Assets Short-Term Investments: Stocks, Bonds Can Easily Sell & Expect to Sell in the Short Term (Within 1 Year)
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Dr. Mimi Alciatore 6 Accounts Receivable Amounts Due from Customers that Bought from the Firm on Credit Firms Report on the Balance Sheet the Estimated Value of Collectible Accounts Receivables (“A/R”) (Generally < Total Accounts Receivables)
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Dr. Mimi Alciatore 7 Accounts Receivable Firms Must Estimate the Uncollectible Accounts Receivables or “Bad Debts” Because They Do Not Know the Amount When They Record the Credit Sales
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Dr. Mimi Alciatore 8 Use an “Allowance for Doubtful Accounts” to Reduce A/R to Amount Expect to Collect The Allowance Account is Subtracted From the A/R account. The Allowance Is a “Contra-Asset Account”
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Dr. Mimi Alciatore 9 Exxon Mobil 2008 10-K On its 2008 Balance Sheet, Exxon Mobil Had Total Trade Notes & Accounts Receivable of $18,926 Million Less Reserves (or “Allowance”) of $219 Million Which Equals $18,707 million in Net Receivables
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Dr. Mimi Alciatore 10 Inventory: A Stock of Goods Merchandise Inventory: Products Firm Intends to Sell
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Dr. Mimi Alciatore 11 Prepaid Expenses: Costs firm has already paid for Will use the service later (Such as Rent, Insurance) In January Year 1, Firm A Prepays 1 year’s rent of $12,000: Prepaid Expense 12,000 Asset Cash 12,000 Asset At end of January, record: Rent Expense 1,000 Equity Prepaid Expense 1,000 Asset
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Dr. Mimi Alciatore 12 Property, Plant & Equipment (PP&E) Property: Land Used in Operations Plant: Factory, Office Buildings Equipment: Cars, Trucks, Machinery, Furniture
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Dr. Mimi Alciatore 13 Intangible Assets Long-lived assets that Do Not Have Physical Characteristics Copyrights, Patents, Trademarks
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Dr. Mimi Alciatore
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