After completing this chapter you should be able to: Explain the uses and limitations of a balance sheet, identify the major classifications of the balance sheet, prepare a classified balance sheet using the report and account formats, determine which balance sheet information requires supplemental disclosure...and other contents.
Trang 2C H A P T E R 5
BALANCE SHEET AND STATEMENT OF CASH FLOWS
Trang 4Balance Sheet Statement of Cash
Flows
Usefulness Limitations Classification Additional information reported
Purpose Content and format Preparation
Usefulness
Balance Sheet and Statement of Cash Flows
Balance Sheet and Statement of Cash Flows
Trang 8Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is
Trang 10Cash equivalents shortterm highly liquid investments that mature within three months or less.
Trang 11ShortTerm Investments
Type Valuation Classification
HeldtoMaturity Debt Amortized Cost Noncurrent Current or
Available forSale Debt or Equity Fair Value Noncurrent Current or
Balance Sheet – “Current Assets”
Balance Sheet – “Current Assets”
Trang 12Balance Sheet – “Current Assets”
Balance Sheet – “Current Assets”
Illustration 55 Balance Sheet Presentation
of Investments in Securities
Trang 13Accounts receivable – oral promises Notes receivable – written promises
Trang 15Balance Sheet – “Current Assets”
Balance Sheet – “Current Assets”
Illustration 56 Balance Sheet Presentation
of Receivables
Trang 17will be received in the future.
insurance supplies advertising
Cash Payment BEFORE Expense Recorded
rent maintenance on equipment Prepayments often occur in regard to:
Prepaid Expenses
Balance Sheet – “Current Assets”
Balance Sheet – “Current Assets”
Trang 18Balance Sheet – “Current Assets”
Balance Sheet – “Current Assets”
Illustration 59
Trang 19Current Assets “Summary”
Ba la nc e S h e e t (in thous and s ) Cur r e nt a s s e t s
Trang 20Securities Fixed assets Special funds Nonconsolidated subsidiaries or affiliated companies.
LongTerm Investments
Balance Sheet – “Noncurrent Assets”
Balance Sheet – “Noncurrent Assets”
Trang 21LongTerm Investments
Securities
I nve s tm e nt in UC I nc 2 5 3 ,9 8 0 Note s r e c e ivab le 15 0 ,0 0 0 Land he ld f or s pe c ulation 5 5 0 ,0 0 0
S inking f und 2 2 5 ,0 0 0
Pe ns ion f und 6 5 3 ,7 9 8 Cas h s ur r e nd e r value 8 4 ,3 2 1
I nve s tm e nt in Unc on. S ub 4 5 7 ,8 3 6
T otal inve s tm e nts 2 ,6 9 6 ,5 9 2
Pr ope r t y , Pla nt , a nd Equip.
Build ing 1,3 7 5 ,7 7 8 Land 9 7 5 ,0 0 0
Trang 22S inking f und 2 2 5 ,0 0 0
Pe ns ion f und 6 5 3 ,7 9 8 Cas h s ur r e nd e r value 8 4 ,3 2 1
I nve s tm e nt in Unc on. S ub 4 5 7 ,8 3 6
Ba la nc e S h e e t (in thous and s ) Cur r e nt a s s e t s
Trang 23S inking f und 2 2 5 ,0 0 0
Pe ns ion f und 6 5 3 ,7 9 8 Cas h s ur r e nd e r value 8 4 ,3 2 1
I nve s tm e nt in Unc on. S ub 4 5 7 ,8 3 6
T otal inve s tm e nts 2 ,6 9 6 ,5 9 2
Pr ope r t y , Pla nt , a nd Equip.
Build ing 1,3 7 5 ,7 7 8 Land 9 7 5 ,0 0 0
Ba la nc e S h e e t (in thous and s ) Cur r e nt a s s e t s
Trang 24S inking f und 2 2 5 ,0 0 0
Pe ns ion f und 6 5 3 ,7 9 8 Cas h s ur r e nd e r value 8 4 ,3 2 1
I nve s tm e nt in Unc on. S ub 4 5 7 ,8 3 6
Balance Sheet – “Noncurrent Assets”
Balance Sheet – “Noncurrent Assets”
LongTerm Investments
Ba la nc e S h e e t (in thous and s ) Cur r e nt a s s e t s
Trang 25Le as e h old im pr ove m e nts 17 5 ,0 0 0
Ac c um ulate d d e pr e c iation (9 7 5 ,0 0 0 )
T otal PP&E 2 ,17 0 ,3 8 6
I nt a ngib le s Good will 3 ,0 0 0 ,0 0 0 Pate nts 17 7 ,0 0 0
Trang 26Ac c um ulate d d e pr e c iation (9 7 5 ,0 0 0 )
T otal PP&E 2 ,17 0 ,3 8 6
I nt a ngib le s Good will 2 ,0 0 0 ,0 0 0 Pate nts 17 7 ,0 0 0
T r ad e m ar k 4 0 ,0 0 0
Fr anc h is e s 12 5 ,0 0 0 Copyr ight 5 5 ,0 0 0
Trang 29I nc om e tax pay ab le 2 3 ,4 0 0 Cur r e nt m atur itie s LT d e b t 12 1,0 0 0
T o tal c ur r e nt liab ilitie s 5 6 9 ,6 5 0 Long t e r m lia b ilit ie s
Trang 30Balance Sheet
Ba la nc e S h e e t (in thous and s ) Cur r e nt lia b ilit ie s
Note s pay ab le $ 2 3 3 ,4 5 0
Ac c o unts pay ab le 13 1,8 0 0
Ac c r ue d c o m pe ns atio n 4 3 ,0 0 0 Une ar ne d r e ve nue 17 ,0 0 0
I nc om e tax pay ab le 2 3 ,4 0 0 Cur r e nt m atur itie s LT d e b t 12 1,0 0 0
T o tal c ur r e nt liab ilitie s 5 6 9 ,6 5 0 Long t e r m lia b ilit ie s
Trang 33(e) Contraasset (f) Current liability (g) Stockholders’ Equity (h) Current asset
(i) Current liability
Classification
Trang 34Account form Report form
Trang 35Balance Sheet Format
Trang 37Contingencies Accounting Policies Contractual Situations Fair Values
Trang 38Parenthetical Explanations Notes
CrossReference and Contra Items Supporting Schedules
Terminology
Techniques of Disclosure
Techniques of Disclosure
Trang 42Financing
Cash inflows and outflows from noncurrent
liabilities and equity.
Trang 43The Statement of Cash Flows
Illustration 525
Trang 46The Statement of Cash Flows
Illustration 526
Illustration 527
Trang 48The Statement of Cash Flows
Trang 50The Statement of Cash Flows
Statement of Cash Flows (BE 512): Keyser Beverage Company reported the following items in the most recent year.
Activity Operating Financing Operating Operating Investing
Trang 51S t a t e m e nt of Ca s h Flow (in thous and s )
O pe r a t ing a c t ivit ie s
Ne t inc om e $ 4 0 ,0 0 0
I nc r e as e in ac c ounts r e c e ivab le (10 ,0 0 0 )
I nc r e as e in ac c ounts payab le 5 ,0 0 0
De pr e c iation e x pe ns e 4 0 ,0 0 0
Cas h f low f r om ope r ations 7 5 ,0 0 0
I nve s t ing a c t ivit ie s
Pur c has e of e quipm e nt (8 ,0 0 0 )
Fina nc ing a c t ivit ie s
Noncash charge to expenses.
Statement of Cash Flows (BE 512)
Trang 52In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?
Trang 54High amount company able to generate sufficient cash to pay its bills.
Low amount company may have to borrow or issue equity securities to pay bills.
Usefulness of the Statement of Cash Flows
Usefulness of the Statement of Cash Flows
Without cash, a company will not survive.
Cash flow from Operations:
Trang 55Ratio =
Trang 59 Comparative priorperiod information must be presented and financial statements must be prepared annually.
Current/noncurrent classification for assets and liabilities is normally required.
Trang 60 Interestingly, iGAAP statements may report property, plant, and equipment first in the
balance sheet. Some companies report the subtotal “net assets,” which equals total assets minus total liabilities.
While the use of the term “reserve” is discouraged in U.S. GAAP, there is no such
prohibition in iGAAP.
Trang 61Analysts and other interested parties can gather qualitative information from
financial statements by examining relationships between items on the statements and identifying trends in these relationships.
Trang 62Illustration 5A1
A Summary of Financial Ratios
Trang 63Illustration 5A1
A Summary of Financial Ratios
Trang 64Using Ratios to Analyze Performance Illustration 5A1
A Summary of Financial Ratios
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