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Notes Chapter 2 - Notes Chapter 2 I The Classified Balance...

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Notes Chapter 2 I. The Classified Balance Sheet a. Classifications include: a.i. Assets a.i.1. Current assets a.i.2. Long-term investments a.i.3. Property, plant, and equipment a.i.4. Intangible assets a.ii. Liabilities and SE a.ii.1. Current liabilities a.ii.2. Long-term liabilities a.ii.3. Stockholders’ equity b. Current Assets- assets that a company expects to convert to cash or use up within 1 yr. b.i. Operating cycle- the average time that it takes to purchase inventory, sell it on account, and then collect cash from customers (some company’s operating cycle is over 1 year so their current assets can cover over one year. Ex. Vineyards) b.ii. 1) Cash 2) short-term investments—U.S. gov. securities 3) receivables— notes, accounts, interest 4) inventories 5) prepaid expenses—insurance, supplies. c. Long –term Investments- investments in stocks and bonds of other corporations that are normally held for many years. c.i. Can also include investments in long-term assets such as land or buildings that a company is not currently using in its operating activities. d. Property, Plant, and Equipment- assets with relatively long useful lives that a company is currently using in operating the business d.i. Ex. Land, buildings, machinery and equipment, delivery equipment, furniture… d.ii. Depreciation- the practice of allocating the cost of assets to a number of years (by systematically assigning a portion of an asset’s cost as an expense each yr.) d.iii. An accumulated depreciation account shows the total amount of depreciation that a company has expensed thus far in the asset’s life. e. Intangible Assets- assets that do not have physical substance yet often are very valuable e.i. Patents, copyrights, trademarks/trade names give company exclusive right f. Current Liabilities- obligations that the company is to pay within the coming year.
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