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Chapter 3 - Financial Statements The Balance Sheet Chapter 3: Balance Sheet - Question 1 Identify the date shown at the top of your selected

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Chapter 3 - Financial Statements The Balance Sheet Chapter 3: Balance Sheet – Question 1 Identify the date shown at the top of your selected company’s balance sheet. Current Year Prior Year Does the company’s fiscal year follow the calendar year? Yes _____ No ___ If not, why do you think it is different? Chapter 3: Balance Sheet – Question 2 Review the current asset section of your selected company’s balance sheet. Explain why the order of individual items begins with cash. In your opinion, would it be more or less appropriate to order these items according to dollar magnitude? Explain. Chapter 3: Balance Sheet – Question 3 Review your company’s balance sheet (or SEC Form 10-K) and compare accumulated depreciation to the historical cost of Plant and Equipment (PE) using the following ratio. Compute the following: Accumulated depreciation / Plant and Equipment Percentage of Asset Life Remaining High percentage means older assets Low percentage means newer assets Is the investment in fixed assets, on average, relatively recent? If not, can we assume that these assets will be replaced shortly?
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Chapter 3: Balance Sheet – Question 4 Since property, plant, and equipment (PPE) and long-term investments in stock represent a company’s investment, why do we distinguish between them in the balance sheet? Chapter 3: Balance Sheet – Question 5 Review the noncurrent asset section of your company’s balance sheet. Are any intangible assets listed? If so, identify the types of intangible assets and the percent of total assets that the intangible assets represent. Intangible Asset 1: Intangible Asset 2: Intangible Asset 3: Total Intangible Assets ÷ Total Assets = If this company were to be acquired by another company, would the intangible assets influence the purchase price? Explain your answer. Chapter 3: Balance Sheet – Question 6 Now review your company’s total assets for the most recent year. What percentage of total assets is current? Noncurrent? Current Noncurrent Should companies have a greater investment in current assets or noncurrent assets, or does it depend on the nature of their business? Explain your answer. Chapter 3: Balance Sheet – Question 7 Review your company’s balance sheet. Does it report a deferred tax asset? A deferred tax liability? If so, are the deferred tax assets and/or liabilities reported as current or noncurrent?
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