chapter 2

chapter 2 - Chapter 2: Financial Statements The Conceptual...

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Chapter 2: Financial Statements
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The Conceptual Framework (FASB) Objectives of Financial Reporting Elements of Financial Statements Qualitative characteristics of Accounting information Usefulness characteristics Assumptions Principles Constraints
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Primary Objective The primary objective of external financial reporting is to provide useful economic information about a business to help external parties make sound financial decisions
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Qualitative Characteristics Understandability Relevance and Reliability Comparability and Consistency Materiality and Conservatism
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Elements of Financial Statements Asset Liability Stockholders’ Equity Revenue Expense Gain Loss
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The Operating Cycle The operating cycle Pay suppliers for goods, sell goods to customers, collect cash from customers. Impact of the operating cycle on the balance sheet and income statement.
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The Balance Sheet Re-examined Assets in order of liquidity (decreasing) Liabilities in order of maturity Classified: separate sub-totals for Current assets and current liabilities Stockholders’ Equity: Contributed capital and retained earnings Comparative data (two years: current year and prior year)
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Consolidated Balance Sheet PepsiCo, Inc. and Subsidiaries (in millions except per share amounts) December 27, 2008 and December 29, 2007 2008 2007 ASSETS Current Assets Cash and cash equivalents $ 2,064 $ 910 Short-term investments 213 1,571 Accounts and notes receivable, net 4,683 4,389 Inventories 2,522 2,290 Prepaid expenses and other current assets 1,324 991 Total Current Assets 10,806 10,151 Property, Plant and Equipment, net 11,663 11,228 Amortizable Intangible Assets, net 732 796 Goodwill 5,124 5,169 Other nonamortizable intangible assets 1,128 1,248 Nonamortizable Intangible Assets 6,252 6,417 Investments in Noncontrolled Affiliates 3,883 4,354 Other Assets 2,658 1,682 Total Assets $35,994 $34,628
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December 27, 2008 and December 29, 2007 2008 2007 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Short-term obligations $ 369 $ Accounts payable and other current liabilities 8,273 7,602 Income taxes payable 145 151 Total Current Liabilities 8,787 7,753 Long-Term Debt Obligations 7,858 4,203 Other Liabilities 7,017 4,792 Deferred Income Taxes 226 646 Total Liabilities 23,888 17,394 Commitments and Contingencies Preferred Stock, no par value 41 41 Repurchased Preferred Stock (138) (132) Common Shareholders’ Equity Common stock, par value 1 2/3¢ per share (Authorized 3,600 shares, issued 1,782 shares) 30 30 Capital in excess of par value 351 450 Retained earnings 30,638 28,184 Accumulated other comprehensive loss (4,694) (952) Repurchased common stock, at cost (229 and 177 shares, respectively) (14,122) (10,387) Total Common Shareholders’ Equity 12,203 17,325 Total Liabilities and Shareholders’ Equity $35,994 $34,628
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Exercise 2-2 Classification of Assets and Liabilities Indicate the appropriate classification of each of the following
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chapter 2 - Chapter 2: Financial Statements The Conceptual...

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