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Balance Sheet and Statement of Cash Flows: Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield
Balance Sheet and Statement of Cash Flows: Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield
Chapter
5
Intermediate Accounting
12th Edition
Kieso, Weygandt, and Warfield
Chapter
5-1
Learning Objectives
1.
2.
3.
4.
5.
6.
7.
8.
9.
Chapter
5-2
Balance
Sheet
Usefulness
Purpose
Limitations
Content and
format
Classification
Additional
information
reported
Techniques of
disclosure
Chapter
5-3
Statement of
Cash Flows
Preparation
Usefulness
Balance Sheet
Usefulness of the Balance Sheet
Evaluating the capital structure.
Assess risk and future cash flows.
Analyze the companys:
Chapter
5-4
Liquidity,
Solvency, and
Financial flexibility.
Balance Sheet
Limitations of the Balance Sheet
Most assets and liabilities are reported at
historical cost.
Use of judgments and estimates.
Chapter
5-5
Balance Sheet
Classification in the Balance Sheet
Three General Classifications
Assets, Liabilities, and Stockholders Equity
Companies further divide these classifications:
Illustration 5-1
Balance Sheet
Classification
Chapter
5-6
Balance Sheet
Current Assets
Cash and other assets a company expects to
convert into cash, sell, or consume either in one
year or in the operating cycle, whichever is longer.
Illustration 5-2
Accounts and
basis of valuation
Chapter
5-7
Balance Sheet
Review
The correct order to present current assets is
a.
Chapter
5-9
Illustration 5-3
Type
Valuation
Classification
Held-toMaturity
Debt
Amortized
Cost
Current or
Noncurrent
Trading
Debt or Equity
Fair Value
Current
Fair Value
Current or
Noncurrent
Availablefor-Sale
Chapter
5-10
Debt or Equity
Chapter
5-11
Chapter
5-12
Current Assets:
Cash
Accounts receivable
Less allowance for doubtful accounts
Inventory
Total current assets
Current Assets:
Cash
Accounts receivable, net of $25 allowance
Inventory
Total current assets
$ 346
500
25
475
812
$1,633
$ 346
475
812
$1,633
Chapter
5-13
Cash Payment
BEFORE
Expense Recorded
rent
maintenance on equipment
Special funds
Nonconsolidated subsidiaries or
affiliated companies.
Chapter
5-15
Investments:
Invesment in ABC bonds
Investment in UC Inc.
Notes receivable
Land held for speculation
Sinking fund
Pension fund
Cash surrender value
Investment in Uncon. Sub.
Total investments
Property, Plant, and Equip.
Building
Land
$ 285,000
321,657
253,980
150,000
550,000
225,000
653,798
84,321
457,836
2,696,592
1,375,778
975,000
Chapter
5-17
Investments:
Invesment in ABC bonds
Investment in UC Inc.
Notes receivable
Land held for speculation
Sinking fund
Pension fund
Cash surrender value
Investment in Uncon. Sub.
Total investments
Property, Plant, and Equip.
Building
Land
$ 285,000
321,657
253,980
150,000
550,000
225,000
653,798
84,321
457,836
2,696,592
1,375,778
975,000
Investments:
Invesment in ABC bonds
Investment in UC Inc.
Notes receivable
Land held for speculation
Sinking fund
Pension fund
Cash surrender value
Investment in Uncon. Sub.
Total investments
Property, Plant, and Equip.
Building
Land
$ 285,000
321,657
253,980
150,000
550,000
225,000
653,798
84,321
457,836
2,696,592
1,375,778
975,000
Nonconsolidated
Subsidiaries or
Affiliated
Companies
Chapter
5-19
Investments:
Invesment in ABC bonds
Investment in UC Inc.
Notes receivable
Land held for speculation
Sinking fund
Pension fund
Cash surrender value
Investment in Uncon. Sub.
Total investments
Property, Plant, and Equip.
Building
Land
$ 285,000
321,657
253,980
150,000
550,000
225,000
653,798
84,321
457,836
2,696,592
1,375,778
975,000
Chapter
5-20
Total investments
Property, Plant, and Equip.
Building
Land
Machinery and equipment
Capital leases
Leasehold improvements
Accumulated depreciation
Total PP&E
Intangibles
Goodwill
Patents
Trademarks
$ 285,000
2,696,592
1,375,778
975,000
234,958
384,650
175,000
(975,000)
2,170,386
3,000,000
177,000
40,000
Intangibles
Lack physical
substance and are not
financial instruments.
Limited life
intangibles amortized.
Indefinite-life
intangibles tested for
impairment.
Chapter
5-21
Current assets
Cash
Accumulated depreciation
Total PP&E
Intangibles
Goodwill
Patents
Trademark
Franchises
Copyright
Total intangibles
Other assets
Prepaid pension costs
Deferred income tax
Total other
$ 285,000
(975,000)
2,170,386
2,000,000
177,000
40,000
125,000
55,000
2,397,000
133,000
40,000
173,000
47,000
Patents
33,000
Trademarks
10,000
Total
Chapter
5-22
$ 40,000
$130,000
Chapter
5-23
Intangibles
Goodwill
Patents
Trademark
Franchises
Copyright
Total intangibles
Other assets
Prepaid pension costs
Deferred income tax
Total other
Total Assets
$ 285,000
2,000,000
177,000
40,000
125,000
55,000
2,397,000
133,000
40,000
173,000
$ 9,210,978
Balance Sheet
Current Liabilities
Obligations that a
company reasonably
expects to liquidate
either through the use
of current assets or the
creation of other
current liabilities.
Chapter
5-24
Balance Sheet
Long-Term Liabilities
Obligations that a
company does not
reasonably expect to
liquidate within the
normal operating cycle.
All covenants and
restrictions must be
disclosed.
Chapter
5-25
Bonds payable
Discount on bonds payable
Total
Chapter
5-26
$375,000
400,000
(24,000)
751,000
Balance Sheet
Owners Equity
Companies usually divide equity into three parts,
(1) Capital Stock, (2) Additional Paid-In Capital,
and (3) Retained Earnings.
Illustration 5-15
Chapter
5-27
Classification
(b) Equity
(c) Equity
(e) Contra-asset
(g) Deficit
(g) Equity
Chapter
5-28
Chapter
5-29
LO 3 Prepare a classified balance sheet using the report and account formats.
Chapter
5-30
Techniques of Disclosure
Parenthetical Explanations
Notes
Cross-Reference and Contra Items
Supporting Schedules
Terminology
Chapter
5-31
Chapter
5-32
Financing
Illustration 5-24
Chapter
5-34
Investing
Financing
Cash inflows
and outflows
from
operations.
Cash inflows
and outflows
from
non-current
assets.
Cash inflows
and outflows
from
non-current
liabilities and
equity.
Chapter
5-36
40,000
(10,000)
5,000
40,000
75,000
Noncash credit to
revenues.
Noncash charge to
expenses.
(8,000)
20,000
(5,000)
15,000
82,000
Balance Sheet
Review
In preparing a statement of cash flows, which of the
following transactions would be considered an investing
activity?
a.
Chapter
5-39
Examples include:
Issuance of common stock to purchase assets.
Conversion of bonds into common stock.
Issuance of debt to purchase assets.
Exchanges on long-lived assets.
Chapter
5-40
Chapter
5-41
Chapter
5-42
Balance Sheet
Review
The current cash debt coverage ratio is often used to
assess
a. financial flexibility.
b. liquidity.
c. profitability.
d. solvency.
Chapter
5-45
The End
Chapter
5-46