...event creating the obligation must have already occurred 2. Current liabilities are: a. Liabilities that are due and payable on the balance sheet date b. Liabilities that may be paid out of any asset pool accumulated by the enterprise as long as payment is due within one year c. Due within one year or one operating cycle, whichever is longer d. Void of notes payable, as notes are always long-term 3. On October 1, 2003, a company borrowed cash and signed a one-year, interest-bearing note on which both the principal and interest are payable n October 1, 2004. How will the note payable and the related interest be classified in the December 31, 2003, balance sheet? Note Payable Accrued Interest a. Current liability Noncurrent liability b. Noncurrent liability Current liability c. Current liability Current liability d. Noncurrent liability Noncurrent liability 4. The Diana Co. issues a $208,000 6-month, zero-interest-bearing note to the Tang National Bank. The present value of the note is $200,000. The entry to record this transaction by Diana Co. would include: a. A credit to Notes Payable of $200,000 b. A debit to Discount on Notes Payable of $8,000 c. A credit to Discount on Notes Payable of $8,000 d. A debit to Cash of...
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...Spring 2005 Instructor J.B. Paperman Exam #1 April 19, 2005 Name: ____________________________ INSTRUCTIONS: a) This exam is closed book. You may use one double-sided sheets of notes. You may use a calculator to assist in computations. b) You must complete this exam on your own. No assistance is allowed except that provided by the instructor. c) If you feel there is ambiguity in a problem, state your assumptions clearly. d) The exam has 11 pages in total and 14 questions with 100 points. e) The last page of the exam is a set of PV tables; feel free to tear this page off. Multiple Choice (5 points each) – Circle the MOST correct answer 1. Which of the following is NOT true about the discount on short-term notes payable? a. The Discount on Notes Payable account has a debit balance. b. The Discount on Notes Payable account should be reported as an asset on the balance sheet. c. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. d. All of these are true. B – Should be reported as a contra liability. 2. Which of the following statements is correct? a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis. b. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to consummate a refinancing. c. A company...
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...Liabilities Liability: an obligation that arises from past transactions or events, which may result in a transfer of assets or provision of services. Embody a duty or responsibility Entity has little or no discretion to avoid the duty The transaction that obliges the entity has occurred Measurement and recognition: financial liabilities are typ `ically recognized initially at their FV. After acquisition, most financial liabilities that are discussed in this chapter are accounted for at their amortized cost. Consistent with the cost based method: Transaction costs that are a direct result of the issue of the liability are debited (deducted from) its original FV. A company can reclassify a short term obligation if it intends to refinance the obligation on a long term basis and demonstrates an ability to consummate the refinancing nonfinancial liabilities and their recognition method; typically measured initially, and at each subsequent reporting date, at the best estimate of the amount the entity would rationally pay at the date of the statement of financial position to settle the present obligation. (This is usually the PV of the resources needed to fulfill the obligation, measured at the expected value or...
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...CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Concept of liabilities; definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims, and assessments, asset retirement obligations. Presentation and analysis. Questions 1, 2, 3, 4, 5, 6, 8 7, 11, 29 9, 10 12 13, 14, 15 16 17, 18, 19, 20, 22 21, 23 24, 25 26, 27, 28 1, 2, 3 4 5 8 6, 7 10, 11 13, 14 15 12 5, 6, 16 7, 8, 9, 16 13, 16 10, 11, 16 12, 15, 16 14 3, 4 10, 11, 13 5, 6, 7, 12, 15 8, 9, 12, 15 2, 10, 11, 13 9 14, 15 6, 7 5, 6, 7 7, 8 Brief Exercises Exercises 1, 16 Problems 1, 2 Concepts for Analysis 1 2. 3. 4. 5. 6. 7. 8. 9. 10. 2, 16 3, 4 1, 2 1, 2 3, 4 2 11. 29, 30, 31 9, 16 17, 18, 19 20, 21, 22 3 *12. Bonus payments. *This material is covered in an Appendix to the chapter. 13-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. Describe the nature, type, and valuation of current liabilities. Explain the classification issues of short-term debt expected to be refinanced. Identify types of employee-related liabilities. Identify the criteria used to account for and disclose gain and...
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...measurement and recognition rules – Apply IAS 37 Disclosure Requirements CURRENT LIABILITIES LIABILITY – Claims against the business arising out of a past transaction that will cause an outflow of resources e.g. loans, notes payable • Long-Term Liability - Obligations that a company does not reasonably expect to liquidate within the normal operating cycle Current Liability - Obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities. • 1 CURRENT LIABILITIES E13-2 (Accounts and Notes Payable) The following are selected 2007 transactions of Sean Astin Corporation. Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 - Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note. CURRENT LIABILITIES Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Sept. 1 Purchases Accounts payable 50,000 50,000 CURRENT LIABILITIES Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 Accounts...
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...CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Concept of liabilities; definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims, and assessments, asset retirement obligations. Presentation and analysis. Questions 1, 2, 3, 4, 6, 8 7, 11 9, 10 12, 5 13, 14, 15 16 17, 18, 19, 20, 22 21, 23 24, 25 26, 27, 28 1, 2, 3 4 5 8, 9 6, 7 10, 11 13, 14 15 12 5, 6, 16 7, 8, 9, 16 13, 16 10, 11, 16 12, 15, 16 14 3, 4 10, 11, 13 5, 6, 7, 12, 14 8, 9, 12, 14 2, 10, 11, 13 9 6, 7 5, 6, 7 7, 8 Brief Exercises Exercises 1, 16 Problems 1, 2 Concepts for Analysis 1 2. 3. 4. 5. 6. 7. 8. 9. 10. 2, 16 3, 4 1, 2 1, 2 3, 4 2 11. 29, 30, 31 17, 18, 19 3 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 13-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. Describe the nature, type, and valuation of current liabilities. Explain the classification issues of short-term debt expected to be refinanced. Identify types of employee-related liabilities. Identify the criteria used to account for...
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...Corporate Financial Statements Corporate financial statements provide vital information to investors and other stakeholders of a corporation or business entity. Making investment decisions based on data from these statements is standard practice for investors, creditors and others with interest in the affairs of the business. Key metrics of the financial status of a business include financial ratios which point to the profitability, solvency and other elements of growth of a company. The first exercise in this week’s assignment explores the method of calculating current assets, Shareholder’s equity, noncurrent assets and long term liabilities when values are given for inventories (840,000), total assets (2,800,000), current ratio (2.25) and debt to equity ratios (1.8). Data used is derived from the “current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories from the December 31, 2011 balance sheet”( Spiceland Sepe & Nelson, 2011, p.162).). The second exercise measures the impact (increase, decrease or no impact) of financial action on two liquidity ratios-current and quick- and a solvency ratio-debt-to-equity ratio. Finally, the third exercise identifies and explains deficiencies in the balance sheet of the Marcus Clothing Corporation Calculating ratios 1. Current assets Acid –test ratio =1.2, therefore 1.2 = (Current Assets –Inventory)/Current Liabilities 1.2 = (Current Assets-840000)/...
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...competition for business involving both the assets and liabilities, together with increasing volatility in the domestic interest rates as well as foreign exchange rates, has brought pressure on the management of banks to maintain a good balance among spreads, profitability and long-term viability. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of banks has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Banks are exposed to several major risks in the course of their business - credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risks. 2. This note lays down broad guidelines in respect of interest rate and liquidity risks management systems in banks which form part of the Asset-Liability Management (ALM) function. The initial focus of the ALM function would be to enforce the risk management discipline viz. managing business after assessing the risks involved. The objective of good risk management programmes should be that these programmes will evolve into a strategic tool for bank management. 3. The ALM process rests on three pillars: • ALM information systems => Management Information System => Information availability, accuracy, adequacy and expediency • ALM organisation => Structure and responsibilities => Level of top management involvement • ALM process => Risk parameters => Risk...
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...competition for business involving both the assets and liabilities, together with increasing volatility in the domestic interest rates as well as foreign exchange rates, has brought pressure on the management of banks to maintain a good balance among spreads, profitability and long-term viability. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of banks has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Banks are exposed to several major risks in the course of their business - credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risks. 2. This note lays down broad guidelines in respect of interest rate and liquidity risks management systems in banks which form part of the Asset-Liability Management (ALM) function. The initial focus of the ALM function would be to enforce the risk management discipline viz. managing business after assessing the risks involved. The objective of good risk management programmes should be that these programmes will evolve into a strategic tool for bank management. 3. The ALM process rests on three pillars: • ALM information systems => Management Information System => Information availability, accuracy, adequacy and expediency • ALM organisation => Structure and responsibilities => Level of top management involvement • ALM process => Risk parameters => Risk...
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...10000 Total shareholders equity 20000 Below, I place the ratio formula in each cell. Note that I place a $ before the column letter and a $ before the row number. This is so the formula will not change when I copy the formula down to the other actions. I review the action and ascertain what accounts would be affected by the action, and then I the change the amounts above in the trial balance to ascertain the effect of the "action" on the ratio For example: Issuance of long term bonds will increase cash and increase long term liabilities. I will change cash from 1000 to 2000 and total liabilities from 9000 to 10,000 When you change cash and total liabilities, the current ratio changes from 6.25 to 6.75 it increased The Acid test ratio changed from 2.75 to 3.25, it increased. The Debt to Equity ratio changed from .45 to to .5, it increased. Action Current Ratio I/D/No effect Acid Test Ratio I/D/No effect Debt to Equity Ratio I/D/No effect 1 Issuance of long term bonds 6.75 I 3.25 I 0.5 No effect 2 Issuance of short term notes 5.25 I 3.25 I 0.5 No effect 3 Payment of accounts payable 1.25 No effect 0.5 No effect 4 Purchase of inventory on account 5 Purchase of inventory for cash 6 Purchase of equipment with a four year note 7...
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...BANGLADESH FINANCE AND INVESTMENT COMPANY LIMITED Baitul Hossain Building (2nd Floor), 27, Dilkusha C/A, Dhaka‐1000 Balance Sheet As at 31 March 2011 Provisional & Un‐audited Note PROPERTY AND ASSETS Cash Cash in hand Balance with Bangladesh Bank Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Money at call and short notice Investment in Securities Government Others Lease, Loans and Advances In Bangladesh Outside Bangladesh Fixed Assets including Premises, Furniture and Fixtures Other Assets Non Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Financing (Borrowings) from other Banks financial Institutions and Agents Deposits and other Accounts Term Deposits Other Deposits Bills Payable Other Liabilities Total Liabilities Capital/ Shareholders' Equity Share Capital Statutory Reserve General Reserve Revaluation Surplus on Land & Building Retained earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity 3 ‐ 582,162,375 582,162,375 4 2,973,703,798 ‐ 2,973,703,798 199,507,329 637,734,997 ‐ 4,577,669,191 2,956,524,869 ‐ 2,956,524,869 200,670,584 116,267,219 ‐ 4,398,727,414 ‐ 489,369,077 489,369,077 31‐Mar‐11 Taka 31‐Dec‐10 Taka 1 40,477...
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...Chapter 3 The Balance Sheet and Financial Disclosures AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise, and problem in Intermediate Accounting, 7e with the following AACSB learning skills: |Questions |AACSB Tags |Exercises (cont.) |AACSB Tags | |3–1 |Reflective thinking |3–3 |Reflective thinking | |3–2 |Reflective thinking |3–4 |Analytic | |3–3 |Reflective thinking |3–5 |Analytic | |3–4 |Reflective thinking |3–6 |Analytic | |3–5 |Reflective thinking |3–7 |Analytic | |3–6 |Reflective thinking ...
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...Chapter 3 The Balance Sheet and Financial Disclosures Questions for Review of Key Topics Question 3-1 The purpose of the balance sheet, also known as the statement of financial position, is to present the financial position of the company on a particular date. Unlike the income statement, which is a change statement that reports events occurring during a period of time, the balance sheet is a statement that presents an organized array of assets, liabilities, and shareholders’ equity at a point in time. It is a freeze frame or snapshot picture of financial position at the end of a particular day marking the end of an accounting period. Question 3-2 The balance sheet does not portray the market value of the entity (number of common stock shares outstanding multiplied by price per share) for a number of reasons. Most assets are not reported at fair value, but instead are measured according to historical cost. Also, there are certain resources, such as trained employees, an experienced management team, and a good reputation, that are not recorded as assets at all. Therefore, the assets of a company minus its liabilities, as shown in the balance sheet, will not be representative of the company’s market value. Question 3-3 Current assets include cash and other assets that are reasonably expected to be converted to cash or consumed during one year, or within the normal operating cycle of the business if the operating cycle is longer than...
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...Non-Financial and Current Liabilities → Understanding Non- Financial and Current Liabilities Objective 1: Understanding the importance of non-financial and current liabilities from a business perspective. Explanations about non financial liabilities under international standards are based on current: IAS 37 Provisions, Contingent Liabilities and Contingent Asset. It is important for businesses to properly account for their liabilities so they can keep an eye on their cash flows: * Taking advantage of supplier discounts * Controlling expenses and Accounts payable → Recognition and Measurement Objective 2: Define liabilities, distinguish financial liabilities from other liabilities and identify how they are measured. Definition in IFRS and CICA Handbook A liability is an obligation that arises from past transactions or events, which may result in a transfer of assets or provision of services. Liabilities have 3 essential characteristics: 1) They embody a duty of responsibility 2) The entity has little or no discretion to avoid the duty 3) The transaction or event that obliges the entity has occurred A liability relates to a transaction that has occurred (the goods were purchased, they have been delivered and title has passed. Therefore an economic obligation exists at the date of the statement of financial position. Judgment is needed in many circumstances, with management drawing on evidence such as the entity’s past experience, other entities’...
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...GA-3 Information Relevant to 2011 Audit Audit Action Recommended Pressure to meet sales targets GA 3-1 Increase procedures related to existence of sales and valuation of receivables, as well as cutoff Purchase of equipment GA 3-1 Verify through invoices and receiving reports if equipment purchased during the year Verify terms of refinancing for accuracy as well as interest payments. Line of credit refinanced GA 3-1 Did they pay note on Jan. 1, 2012 or refinance further? May need to disclose as subsequent event if refinanced again, or consider impact on going concern if note was not paid as required Declaration of dividends for the previous year GA 3-1Verify that only approved dividends were paid (i.e. no dividend payments made) Salary increase and stipends approved and seconded by non-independent board members GA 3-1Verify the charter by-laws, appears to conflict of interest Commercial time expense increased 10% from previous year GA 3-1Verify through invoices and payments Damages reported GA 3-2 Verify valuation of damages, as well as check for disclosure if economic loss How does this impact going concern? Prices increased to compensate decreased sales GA 3-2 What is the impact on sales since the price increase? GA 3-a R&D expense eliminated for year GA 3-2 Verify that R&D decreased accordingly Lab modified to house gym GA 3-2 Verify the...
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