Chapter 8 - Solution Manual

210 balance sheet 10 overall 05 overview and

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210 Balance Sheet 10 Overall 05 Overview and Background General 210-10-05-1 The Balance Sheet Topic includes the following two Subtopics: a. Overall b. Offsetting. 210-10-05-2 The balance sheet is commonly referred to as statement of financial position. For purposes of the FASB ASC, both titles are interchangeable. 210-10-05-3 The Offsetting Subtopic provides guidance about offsetting amounts for certain contracts and repurchase and reverse repurchase agreements. 210-10-05-4 The Overall Subtopic provides general guidance on the classification of current assets and current liabilities and discusses the determination of working capital . The balance sheets of most entities show separate classifications of current assets and current liabilities (commonly referred to as classified balance sheets) permitting ready determination of working capital. 210-10-05-5 Financial position, as it is reflected by the records and accounts from which the statement is prepared, is revealed in a presentation of the assets and liabilities of the entity. In the statements of manufacturing, trading, and service entities, these assets and liabilities are generally classified and segregated; if they are classified logically, summations or totals of the current or circulating or working
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153 assets (referred to as current assets) and of obligations currently payable (designated as current liabilities) will permit the ready determination of working capital. 210-10-05-6 The ordinary operations of an entity involve a circulation of capital within the current asset group. Cash is expended for materials, finished parts, operating supplies, labor, and other factory services, and such expenditures are accumulated as inventory cost. Inventory costs, upon sale of the products to which such costs attach, are converted into trade receivables and ultimately into cash again. 210-10-05-7 [Paragraph not used] 210-10-05-8 In addition to the classification guidance provided in this Subtopic, other Topics in the FASB ASC also address specific classification matters. 210 Balance Sheet 10 Overall 45 Other Presentation Matters General > Classification of Current Assets 210-10-45-1 Current assets generally include all of the following: a. Cash available for current operations and items that are cash equivalents b. Inventories of merchandise, raw materials, goods in process, finished goods, operating supplies, and ordinary maintenance material and parts c. Trade accounts, notes, and acceptances receivable d. Receivables from officers, employees, affiliates, and others, if collectible in the ordinary course of business within a year e. Installment or deferred accounts and notes receivable if they conform generally to normal trade practices and terms within the business f. Marketable securities representing the investment of cash available for current operations, including investments in debt and equity securities classified as trading securities under Subtopic 320-10 g. Prepaid expenses such as the following: 1. Insurance 2. Interest
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154 3. Rents 4. Taxes 5. Unused royalties 6.
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