Chapter 2 - Cambridge Business Publishers, 2011 Prepared by...

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Unformatted text preview: Cambridge Business Publishers, 2011 Prepared by Diane Tanner Thomas R. Dyckman Robert P. Magee Glenn M. Pfeiffer Third Edition Chapter 2 Chapter 2 Constructing Constructing Financial Statements Financial Statements FINANCIAL ACCOUNTING Cambridge Business Publishers, 2011 2 Reporting Financial Condition Reporting Financial Condition On August 31, 2009, Walgreens balance sheet reports total assets of $25,142 million, total liabilities of $10,766 million, and equity of $14,376 million. Equity Equity Assets Assets Liabilities Liabilities $25,142 $14,376 $10,766 Balance Sheet Contains the accounting equation components Is prepared at a point in time Cambridge Business Publishers, 2011 3 Assets Assets Must be owned or controlled by the company Legal title or unrestricted right to use the asset Must possess expected future benefits that can be measured Benefits can be expected as cash receipts or a reduction of liabilities A monetary value must be assignable to assets Assets are.. Resources that are expected to provide a company with future economic benefits Characteristics required for an asset to be placed (capitalized) on the balance sheet Cambridge Business Publishers, 2011 4 Acquiring Assets Acquiring Assets Why do companies acquire assets? To yield a return for shareholders Assets generate revenue Directly through selling inventory, or Indirectly through manufacturing inventory that will be sold Income in excess of the cost of funds used to acquire assets creates shareholder value Cambridge Business Publishers, 2011 5 Assets on Targets Balance Sheet Assets on Targets Balance Sheet Target Corp.s balance sheet shows $44,533,000,000 of assets at January 30, 2010. Note that Targets fiscal year end does not occur at December 31. Cambridge Business Publishers, 2011 6 Categories of Assets Categories of Assets Current assets Assets expected to be converted into cash or used in operations within the next year Listed in order of liquidity Non-Current assets Listed after current assets on the balance sheet Not expected to expire or be converted into cash within one year Referred to as long-term assets Cambridge Business Publishers, 2011 7 Cash Cash currency, bank deposits, certificates of currency, bank deposits, certificates of deposit and other cash equivalents deposit and other cash equivalents Marketable securities Marketable securities short-term investments short-term investments that can be quickly sold to raise cash that can be quickly sold to raise cash Accounts receivable Accounts receivable amounts due to the amounts due to the company from customers arising from the sale of company from customers arising from the sale of products or services on credit products or services on credit Inventory Inventory goods purchased or produced for goods purchased or produced for sale to customers...
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This note was uploaded on 08/16/2011 for the course ECON 300 taught by Professor Laren during the Spring '11 term at Missouri State University-Springfield.

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Chapter 2 - Cambridge Business Publishers, 2011 Prepared by...

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