ch02 - 2 Chapter 2 Chapter 2 The Financial Statements...

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Unformatted text preview: 2 Chapter 2 Chapter 2 The Financial Statements Business Activities Business activities are reflected in financial statements; business activities include: Operating activities selling goods and services. Investing activities acquisition and sale of productive assets. Financing activities issue and retirement/repayment of liabilities and equity. 4 The Balance Sheet The Balance Sheet The balance sheet reports the financial position at a point in time (end of the quarter or year). The Balance Sheet is also called: Statement of Financial Position The components of the Balance Sheet are: Assets Liabilities Shareholders (Owners) Equity Other names? 5 The Balance Sheet The Balance Sheet The balance sheet is represented by the fundamental accounting equation: Assets = Liabilities + Shareholders Equity A = L + SE The effects of all business transactions may be represented in this formula. 6 Assets Assets Current assets: 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. Cash and cash equivalents Short-term investments (e.g., Held-to-Maturity, Trading, Available- for-Sale) Accounts receivable: Claims held against customers and others for money, goods, or services. Inventory: items or products for sale Prepaid expenses: Payment of cash, that is recorded as an asset because service or benefit will be received in the future. 7 Assets Assets Long-term investments: acquired by companies to provide benefits for periods of time usually extending beyond one year (e.g. land held for speculation) Property, plant, and equipment: assets acquired for use in the day-to-day operations of the business (e.g., land used in the operations) Intangible assets: Lack physical substance Chapter 5-8 Long-Term Investments Securities Securities I nvest ment s: I nvesment in ABC bonds 321,657 I nvest ment in UC I nc. 253,980 Not es r eceivable 150,000 Land held f or speculat ion 550,000 Sinking f und 225,000 Pension f und 653,798 Cash sur r ender value 84,321 I nvest ment in Uncon. Sub. 457,836 Tot al invest ment s 2,696,592 Propert y, Plant , and Equip. Building 1,375,778 Land 975,000 LO 2 Identify the major classifications of the balance sheet. LO 2 Identify the major classifications of the balance sheet. Balance Sheet Noncurrent Assets Balance Sheet Noncurrent Assets bonds, stock, and long-term notes For marketable securities, managements intent determines current or noncurrent classification. Balance Sheet (in t housands) Current asset s Cash 285,000 $ Chapter 5-9 Fixed Assets Fixed Assets I nvest ment s: I nvesment in ABC bonds 321,657 I nvest ment in UC I nc. 253,980 Not es r eceivable 150,000 Land held f or speculat ion 550,000 Sinking f und 225,000 Pension f und 653,798 Cash sur r ender value 84,321 I nvest ment in Uncon. Sub. 457,836 Tot al invest ment s 2,696,592...
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ch02 - 2 Chapter 2 Chapter 2 The Financial Statements...

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