LN - BS and notes (Ch5 and Ch24)

LN BS and notes - Ch 5 Balance Sheet Ch 24 Post-Balance-Sheet events note disclosures ACCT 401 SP 11 Part I Balance Sheet(Ch 5 1 The Balance

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Ch 5: Balance Sheet Ch 24: Post-Balance-Sheet events, note disclosures ACCT 401, SP 11 Part I: Balance Sheet (Ch 5) 1. The Balance Sheet (a.k.a., the Statement of Financial Position) reports a snapshot of the company’s assets, liabilities, and shareholder’s equity at a point in time. 1) Limitations of the Balance Sheet. Equity (measured under GAAP as Assets minus liabilities ), is not likely to be representative of the market value of the entity (i.e., number of common stock shares outstanding multiplied by price per share). 2) Usefulness of the Balance Sheet. It describes many of the resources a company has for generating future cash flows. It provides liquidity information useful in assessing a company’s ability to pay its current obligations. It provides long-term solvency information relating to the riskiness of a company with regard to the amount of liabilities in its capital structure. 2. Classification in the Balance Sheet The FASB requires that items be grouped by expected function, flexibility and liquidity so that investors can better assess the AMOUNTS, TIMING and UNCERTAINTY of cash flows. 1) Assets (resources) – Probable future economic benefits that are owned (controlled/obtained) by an entity as a result of past transactions or events. A) . Current assets include cash and all other assets expected to become cash or be consumed within one year or the operating cycle, whichever is longer. Examples: B) . Noncurrent assets are those assets that are expected to provide benefits beyond the next year (or operating cycle). Examples:
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2) Liabilities (claims against resources) – Probable future sacrifices of economic benefits that are owned by the entity that result from past transactions or events. A) . Current liabilities, in general, are expected to be satisfied within one year or the operating cycle, whichever is longer (i.e., obligations expected to be satisfied with current assets or by creating other current liabilities. ) Examples: B). Long-term liabilities are obligations that will not be paid in the current year or operating cycle, whichever is longer. Examples: 3) Equity (remaining claims accruing to owners) – Shareholders' equity is the residual interest in the assets of an entity that remains after deducting liabilities (Residual interest = Assets – Liabilities). Examples:
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Ch 5: Balance Sheet Ch 24: Post-Balance-Sheet events, note disclosures ACCT 401, SP 11 3. Examples 1) Example 1: 2009 WELLS FARGO 2 ND QUARTER FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET March 31 , December 31, March 31 , (in millions, except shares) 2009 2008 2008 ASSET S Cash and due from bank s $ 22,186 $ 23,763 $ 13,146 Federal fund s sold, secu rities purc hase d unde r resal e agre eme nts and othe r short - term inve stme nts 18,625 49,433 4,171 Trading asse ts 46,497 54,884 8,893 Securiti es avail able for sale 178,468 151,569 81,787 Mortga ges held for 36,807 20,088 29,708
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sale (incl udes $35, 205,
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This note was uploaded on 02/22/2012 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.

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LN BS and notes - Ch 5 Balance Sheet Ch 24 Post-Balance-Sheet events note disclosures ACCT 401 SP 11 Part I Balance Sheet(Ch 5 1 The Balance

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