CHAPTER 5 Balance Sheet and Statement of Cash Flows

CHAPTER 5 Balance Sheet and Statement of Cash Flows -...

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Unformatted text preview: 5-1CHAPTER 5Balance Sheet and Statement of Cash Flows5-2LECTURE OUTLINEIt should be emphasized that this chapter is a review chapter and the intent is toprovide an overview for topics that will be dealt with in greater detail in later chapters.As a review of Chapters 4 and 5, we recommend that you encourage students toexamine a set of actual financial statements and the accompanying notes. Appendix 5-B in the text contains specimen financial statements for Intel Corporation.The material in the chapter can be covered in two class sessions. The first session canbe used for lecture on the concepts covered in the chapter. Most students should havehad previous exposure to these concepts, except for the topic of subsequent events,with which many students will be unfamiliar. The first session can also be used forreviewing some of the shorter problem material such as Exercises 5-1 through 5-4 andCases 5-1 through 5-3. You may wish to call upon students for their answers to theitems in these cases and exercises. Most items are straightforward, but some of themwill stimulate class discussion and highlight areas of misunderstanding.The second class session can be used for final review and for going over the longerproblem material. This material allows students to apply chapter concepts by critiquingand preparing financial statements.TEACHING TIPAs a comprehensive review of Chapters 4 and 5, use Illustration 5-7to discuss thespecimen financial statements of Intel Corporation that appear in Appendix 5-B in thetextbook. Reproduce and distribute Illustration 5-7. The exercise can be used aseither an in-class assignment or as a homework assignment.The following lecture outline is appropriate for the chapter.A. Usefulness and Purpose of the Balance Sheet.1.Provides information about entity’s assets, liabilities, and equity.2.Evaluation of liquidityand financial flexibility.3.Aids in assessing riskand predicting future cash flows.5-3B. Limitations of the Balance Sheet.1.Current value is not reflected.2.Estimates and judgments must be utilized:a.in determining the collectibility of receivables.b.in assessing the salability of inventory.c.in determining the useful lives of long-term assets.3.Omits many items that are of financial value to the business.a.Assets such as the value of a company’s human resources and researchand development are not reported.b.Some liabilities or commitments such as leases and certain contractualarrangements are reported in an "off balance sheet" manner.C. Classifications in the Balance Sheet. Review definitions on text page 207.TEACHING TIPIllustration 5-1can be used in a discussion of the major classifications andsubclassifications in the balance sheet....
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CHAPTER 5 Balance Sheet and Statement of Cash Flows -...

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