CH 05

Intermediate
Accounting
Prepared by
Coby Harmon
5-1
University of California, Santa Barbara
Balance Sheet and
5 Statement of Cash Flows
Intermediate Accounting
14th Edition
Kieso, Weygandt, and Warfield

5-2
Learning
Learning Objectives
Objectives
1. Explain the uses and limitations of a balance sheet.
2. Identify the major classifications of the balance sheet.
3. Prepare a classified balance sheet using the report and account
formats.
4. Indicate the purpose of the statement of cash flows.
5. Identify the content of the statement of cash flows.
6. Prepare a statement of cash flows.
7. Understand the usefulness of the statement of cash flows.
8. Determine which balance sheet information requires supplemental
disclosure.
9. Describe the major disclosure techniques for the balance sheet.
5-3
Balance
Balance Sheet
Sheet and
and Statement
Statement of
of Cash
Cash Flows
Flows
Statement of Additional
Balance Sheet
Cash Flows Information
Usefulness Purpose Supplemental

disclosures
Limitations Content and format
Techniques of
Classification Preparation
disclosure
Usefulness
5-4
Balance
Balance Sheet
Sheet
Balance Sheet, also referred to as the statement of

financial position:
1. Reports assets, liabilities, and equity at a specific date.
2. Provides information about resources, obligations to

creditors, and equity in net resources.
3. Helps in predicting amounts, timing, and uncertainty of

future cash flows.
5-5 LO 1 Explain the uses and limitations of a balance sheet.

Balance
Balance Sheet
Sheet
Usefulness of the Balance Sheet

 Computing rates of return.
 Evaluating the capital structure.
 Assess risk and future cash flows.
 Analyze the company’s:
► Liquidity,
► Solvency, and
► Financial flexibility.

Balance
Balance Sheet
Sheet
Limitations of the Balance Sheet

 Most assets and liabilities are reported at historical
cost.
 Use of judgments and estimates.
 Many items of financial value are omitted.

Balance
Balance Sheet
Sheet
Classification
5-8 LO 2 Identify the major classifications of the balance sheet.

Balance
Balance Sheet
Sheet
Classification
Illustration 5-1
In practice you usually see little departure from these major subdivisions.

Classification
Classification in
in the
the Balance
Balance Sheet
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

Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Review
The correct order to present current assets is
a. Cash, accounts receivable, prepaid items, inventories.
b. Cash, accounts receivable, inventories, prepaid items.
c. Cash, inventories, accounts receivable, prepaid items.
d. Cash, inventories, prepaid items, accounts receivable.

Balance
Balance Sheet
Sheet –– “Current
“Current Assets”
Assets”
Cash
 Generally any monies available “on demand.”
 Cash equivalents - short-term highly liquid investments
that mature within three months or less.
 Restrictions or commitments must be disclosed.
Illustration 5-3
5-12 LO 2
Balance
Balance Sheet
Assets”
Cash
Illustration 5-4
Balance Sheet—Restricted Cash

Balance
Balance Sheet
Assets”
Short-Term Investments
Portfolios Type Valuation Classification
Held-to- Amortized Current or

Debt
Maturity Cost Noncurrent
Debt or
Trading Fair Value Current
Equity
Available- Debt or Current or

Fair Value
for-Sale Equity Noncurrent

Balance
Balance Sheet
Assets”
Short-Term Investments
Illustration 5-5
Balance Sheet Presentation of
Investments in Securities

Balance
Balance Sheet
Assets”
Receivables
Major categories of receivables should be shown in the
balance sheet or the related notes.
A company should clearly identify

 Anticipated loss due to uncollectibles.
 Amount and nature of any nontrade receivables.
 Receivables used as collateral.

Balance
Balance Sheet
Assets”
Receivables
Illustration 5-6
Balance Sheet Presentation
of Receivables

Balance
Balance Sheet
Assets”
Inventories
Disclose:
► Basis of valuation (e.g., lower-of-cost-or-market).
► Cost flow assumption (e.g., FIFO or average cost).
Illustration 5-6
5-18 LO 2
Balance
Balance Sheet
Assets”
Prepaid Expenses
Payment of cash, that is recorded as an asset because
service or benefit will be received in the future.
Cash Payment BEFORE Expense Recorded
Prepayments often occur in regard to:

 insurance  rent
 supplies  taxes
 advertising

Balance
Balance Sheet
Assets”
Prepaid Expenses
Illustration 5-9

Balance
Balance Sheet
Assets”
Current Assets - “Summary”

Cash and other assets Balance Sheet (in thousands)
a company expects to Current assets
 convert into cash, Cash $ 285,000
ST Investments 140,000
 sell, or Accounts receivable 777,000
Inventory 402,000
 consume
Prepaid expenses 170,000
either in one year or in Total current assets 1,774,000
Investments:
the operating cycle,
Invesment in ABC bonds 321,657
whichever is longer. Investment in UC Inc. 253,980

Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Non-Current Assets
Long-term Investments
1. Securities (bonds, common stock, or long-term notes).
2. Tangible fixed assets not currently used in operations

(land held for speculation).
3. Special funds (sinking fund, pension fund, or plant

expansion fund.
4. Non-consolidated subsidiaries or affilated companies.

Balance
Balance Sheet
Sheet –– “Noncurrent
“Noncurrent Assets”
Assets”
Long-Term Investments
Portfolios Type Valuation Classification
Held-to- Amortized Current or

Debt
Maturity Cost Noncurrent
Debt or
Trading Fair Value Current
Equity
Available- Debt or Current or

Fair Value
for-Sale Equity Noncurrent

Balance
Balance Sheet
Assets”
Balance Sheet (in thousands)
Long-Term Current assets
Investments Cash $ 285,000
Investments:
Securities Invesment in ABC bonds 321,657
Investment in UC Inc. 253,980
 bonds, Notes receivable 150,000
 stock, and Land held for speculation 550,000
Sinking fund 225,000
 long-term notes
Pension fund 653,798
Cash surrender value 84,321
For marketable securities, Investment in Uncon. Sub. 457,836
management’s intent Total investments 2,696,592
determines current or Property, Plant, and Equip.
noncurrent classification. Building 1,375,778
Land 975,000
5-24 LO 2
Balance
Balance Sheet
Assets”
Investments:
Fixed Assets Investment in UC Inc. 253,980
Notes receivable 150,000
 Land held for
Land held for speculation 550,000
speculation Sinking fund 225,000
Investment in Uncon. Sub. 457,836
Total investments 2,696,592
Property, Plant, and Equip.
Building 1,375,778
Land 975,000
5-25 LO 2
Balance
Balance Sheet
Assets”
Investments:
Special Funds Investment in UC Inc. 253,980
 Sinking fund Land held for speculation 550,000
 Pensions fund Sinking fund 225,000
 Cash surrender
value of life Investment in Uncon. Sub. 457,836
insurance Total investments 2,696,592
Building 1,375,778
Land 975,000
5-26 LO 2
Balance
Balance Sheet
Assets”
Investments:
Investment in UC Inc. 253,980
Land held for speculation 550,000
Sinking fund 225,000
Nonconsolidated Pension fund 653,798
Subsidiaries or
Investment in Uncon. Sub. 457,836
Affiliated Total investments 2,696,592
Companies Property, Plant, and Equip.
Building 1,375,778
Land 975,000
5-27 LO 2
Balance
Balance Sheet
Assets”
Illustration 5-10
Balance Sheet
Presentation of

Balance
Balance Sheet
Assets”
Property, Plant, and Equipment

Tangible long-lived assets used in the regular operations
of the business.
 Physical property such as land, buildings, machinery,
furniture, tools, and wasting resources (minerals).
 With the exception of land, a company either depreciates

(e.g., buildings) or depletes (e.g., oil reserves) these
assets.

Balance
Balance Sheet
Assets”
Property, Plant, and Current assets
Cash $ 285,000
Equipment
Total investments 2,696,592
Tangible assets used Building 1,375,778
Land 975,000
in the regular
Machinery and equipment 234,958
operations of the Capital leases 384,650
Leasehold improvements 175,000
business. Accumulated depreciation (975,000)
Total PP&E 2,170,386
Intangibles
Goodwill 3,000,000
Patents 177,000
Trademarks 40,000
Balance
Balance Sheet
Assets”
Illustration 5-11
Balance Sheet Presentation of
Property, Plant, and Equipment

Balance
Balance Sheet
Assets”
Intangibles Current assets
Cash $ 285,000
Lack physical substance
Total PP&E 2,170,386
and are not financial Intangibles
instruments. Goodwill 2,000,000
Patents 177,000
 Limited life intangibles Trademark 40,000
amortized. Franchises 125,000
Copyright 55,000
 Indefinite-life Total intangibles 2,397,000
intangibles tested for Other assets
impairment. Prepaid pension costs 133,000
Deferred income tax 40,000
Total other 173,000
Total Assets $ 9,210,978
5-32
LO 2
Balance
Balance Sheet
Assets”
Intangibles (BE5-6): Patrick Corporation adjusted trial balance

contained the following asset accounts at December 31, 2012: Prepaid
Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000;
Franchises $47,000; Patents $33,000; Trademarks $10,000. Prepare
the intangible assets section of the balance sheet.
Intangibles
Goodwill
Franchises
$ 50,000
Patents
47,000
Trademarks
33,000
Total
10,000
5-33 $140,000
LO 2 Identify the major classifications of the balance sheet.
Balance
Balance Sheet
Assets”
Intangible Assets
Illustration 5-12
Balance Sheet
Presentation of
Intangible Assets

Balance
Balance Sheet
Assets”
Other Assets
Items vary in practice. Can include:
 Long-term prepaid expenses
 Non-current receivables
 Assets in special funds
 Property held for sale
 Restricted cash or securities

Balance
Balance Sheet
Assets”
Other Assets Current assets
Cash $ 285,000
This section should Total PP&E 2,170,386

Intangibles
include only unusual items Goodwill 2,000,000
sufficiently different from Patents 177,000
Trademark 40,000
assets in the other Franchises 125,000
categories. Copyright 55,000
Total intangibles 2,397,000
Other assets
Prepaid pension costs 133,000
Deferred income tax 40,000
Total other 173,000
Total Assets $ 9,210,978
5-36
LO 2
Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Current Liabilities Balance Sheet (in thousands)

Current liabilities
Notes payable $ 233,450
“Obligations that a Accounts payable 131,800
company reasonably Accrued compensation 43,000
Unearned revenue 17,000
expects to liquidate either
Income tax payable 23,400
through the use of current Current maturities LT debt 121,000
Total current liabilities 569,650
assets or the creation of
Long-term liabilities
other current liabilities.” Long-term debt 979,500
Obligations capital lease 345,800
Deferred income taxes 77,909
Total long-term liabilities 1,403,209
Stockholders' equity

Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Current Liabilities
Illustration 5-13
of Current Liabilities

Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Long-Term Liabilities Balance Sheet (in thousands)

Current liabilities
Notes payable $ 233,450
“Obligations that a Accounts payable 131,800
company does not Accrued compensation 43,000
Unearned revenue 17,000
reasonably expect to
Income tax payable 23,400
liquidate within the normal Current maturities LT debt 121,000
operating cycle.” Total current liabilities 569,650
All covenants and Long-term debt 979,500
Obligations capital lease 345,800
restrictions must be Deferred income taxes 77,909
disclosed. Total long-term liabilities 1,403,209
Stockholders' equity

Balance
Balance Sheet
Sheet –– “Long-Term
“Long-Term Liabilities”
Liabilities”
Long-Term Liabilities (BE5-9): Included in Adams Company’s
December 31, 2012, trial balance are the following accounts: Accounts
Payable $220,000; Pension Asset/Liability $375,000; Discount on
Bonds Payable $29,000; Unearned Revenue $41,000; Bonds Payable
$400,000; Salaries and Wages Payable $27,000; Interest Payable
$12,000; Income Taxes Payable $29,000. Prepare the long-term
liabilities section of the balance sheet.
Pension Asset/liability
Bonds payable
$375,000
Discount on bonds payable
400,000
Total
(29,000)
5-40 746,000
LO 2 Identify the major classifications of the balance sheet.
Balance
Balance Sheet
Sheet –– “Long-Term
“Long-Term Liabilities”
Liabilities”
Non-Current Liabilities
Illustration 5-14
of Non-Current Liabilities

Balance
Balance Sheet
Sheet –– “Owner’s
“Owner’s Equity”
Equity”
Owners’ Equity

Balance
Balance Sheet
Sheet –– “Owner’s
“Owner’s Equity”
Equity”
Owners’ Equity
Illustration 5-15
of Stockholders’ Equity

Classification
Classification in
in the
the Balance
Balance Sheet
Sheet
Account Classification
(a) Investment in preferred stock (a) Current asset/Investment
(b) Treasury stock (b) Stockholders’ Equity
(c) Common stock (c) Stockholders’ Equity
(d) Cash dividends payable (d) Current liability
(e) Accumulated depreciation (e) Contra-asset
(f) Interest payable (f) Current liability
(g) Deficit (g) Stockholders’ Equity
(h) Trading securities (h) Current asset
(i) Unearned revenue (i) Current liability

Balance
Balance Sheet
Sheet Format
Format
Classified Balance Sheet

 Account form
 Report form
Accounting Trends and Techniques—2009 (New York:

AICPA) indicates that all of the 500 companies surveyed
use either the “report form” (438) or the “account form” (62),
sometimes collectively referred to as the “customary form.”
5-45 LO 3 Prepare a classified balance sheet using the report and account formats.
Balance
Balance Sheet
Sheet Format
Format
Account Form Illustration 5-16
5-46 LO 3 Prepare a classified balance sheet using the report and account formats.
Balance
Balance Sheet
Sheet
Format
Format
Report Form
Illustration 5-16
5-47
LO 3
Statement
Statement of
of Cash
Cash Flows
Flows
One of the three basic objectives of financial

reporting is
“assessing the amounts, timing, and

uncertainty of cash flows.”
5-48 LO 4 Indicate the purpose of the statement of cash flows.

Statement
Statement of
of Cash
Cash Flows
Flows
Purpose of the Statement of Cash Flows

To provide relevant information about the cash receipts
and cash payments of an enterprise during a period.
The statement provides answers to the following

questions:
1. Where did the cash come from?
2. What was the cash used for?
3. What was the change in the cash balance?
5-49 LO 4 Indicate the purpose of the statement of cash flows.

Statement
Statement of
of Cash
Cash Flows
Flows
Content and Format

Three different activities:
 Operating,  Investing,  Financing
Illustration 5-17
Basic Format of Cash
Flow Statement
5-50 LO 5 Identify the content of the statement of cash flows.

Statement
Statement of
of Cash
Cash Flows
Flows
Content and Format
Operating Investing Financing

Cash inflows and Cash inflows and Cash inflows and
outflows that outflows from outflows from
enter into the non-current non-current
determination of assets. liabilities and
net income. equity.
The statement’s value is that it helps users evaluate liquidity, solvency,

and financial flexibility.

Statement
Statement of
of Cash
Cash Flows
Flows
Illustration 5-18

Preparation
Preparation of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Sources of Information
Information obtained from several sources:
(1) comparative balance sheets,
(2) the current income statement, and
(3) selected transaction data.
5-53 LO 6 Prepare a basic statement of cash flows.

Statement
Statement of
of Cash
Cash Flows
Flows
Statement of Cash Flows: On January 1, 2012, in its first

year of operations, Telemarketing Inc. issued 50,000 shares of
$1 par value common stock for $50,000 cash. The company
rented its office space, furniture, and telecommunications
equipment and performed marketing services throughout the
first year. In June 2012 the company purchased land for
$15,000. Illustration 5-19 shows the company’s comparative
balance sheets at the beginning and end of 2012.

Statement
Statement of
of Cash
Cash Flows
Flows
Illustration 5-19
Illustration 5-20
5-55 LO 6
Statement
Statement of
of Cash
Cash Flows
Flows
Preparing the Statement of Cash Flows

Determine:
1. Cash provided by (or used in) operating activities.
2. Cash provided by or used in investing and financing
activities.
3. Determine the change (increase or decrease) in cash
during the period.
4. Reconcile the change in cash with the beginning and the
ending cash balances.

Statement
Statement of
of Cash
Cash Flows
Flows
Illustration 5-19
Illustration 5-20
Cash provided by operating activities Illustration 5-21

Illustration 5-19
Illustration 5-20
Statement
Statement of
of
Cash
Cash Flows
Flows
Next, the company

determines its investing
and financing activities.
Illustration 5-21
5-58
Statement
Statement of
of Cash
Cash Flows
Flows
Statement of Cash Flows (BE 5-12): Keyser Beverage

Company reported the following items in the most recent year.
Activity
Net income $40,000 Operating

Dividends paid 5,000 Financing
Increase in accounts receivable 10,000 Operating
Increase in accounts payable 7,000 Operating
Purchase of equipment 8,000 Investing
Depreciation expense 4,000 Operating
Issue of notes payable 20,000 Financing
Required: Compute net cash provided by operating activities.

Statement
Statement of
of Cash
Cash Flows
Flows
Statement of Cash Flows (BE 5-12)
Statement of Cash Flow (in thousands)
Noncash credit to
Operating activities
revenues.
Net income $ 40,000
Increase in accounts receivable (10,000)
Increase in accounts payable 5,000 Noncash charge to
Depreciation expense 40,000 expenses.
Cash flow from operations 75,000
Investing activities
Purchase of equipment (8,000)
Financing activities
Proceeds from notes payable 20,000
Dividends paid (5,000)
Cash flow from financing 15,000
Increase in cash $ 82,000
5-60
LO 6 Prepare a basic statement of cash flows.
Statement
Statement of
of Cash
Cash Flows
Flows
Review
In preparing a statement of cash flows, which of the following
transactions would be considered an investing activity?
a. Sale of equipment at book value
b. Sale of merchandise on credit

c. Declaration of a cash dividend
d. Issuance of bonds payable at a discount receivable.

Statement
Statement of
of Cash
Cash Flows
Flows
Significant Noncash Activities

Significant financing and investing activities that do not
affect cash are reported in either a separate schedule at
the bottom of the statement of cash flows or in the notes.
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.

Statement
Statement of
of Cash
Cash Flows
Flows
Illustration 5-23
Comprehensive
Statement of Cash Flows
5-63
Usefulness
Usefulness of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Without cash, a company will not survive.

Cash flow from Operations:
 High 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.
5-64 LO 7 Understand the usefulness of the statement of cash flows.

Usefulness
Usefulness of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Financial Liquidity
Net Cash Provided by

Current Cash Operating Activities
Debt Coverage =
Ratio Average Current Liabilities
Ratio indicates whether the company can pay off its current
liabilities from its operations. A ratio near 1:1 is good.

Usefulness
Usefulness of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Financial Liquidity
Net Cash Provided by

Cash Debt Operating Activities
Coverage =
Ratio Average Total Liabilities
This ratio indicates a company’s ability to repay its liabilities

from net cash provided by operating activities, without having
to liquidate the assets employed in its operations.

Usefulness
Usefulness of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Free Cash Flow

Illustration 5-28
The amount of discretionary cash flow a company has for

purchasing additional investments, retiring its debt, purchasing
treasury stock, or simply adding to its liquidity.

Usefulness
Usefulness of
of the
the Statement
Statement of
of Cash
Cash Flows
Flows
Review
The current cash debt coverage ratio is often used to assess
a. financial flexibility.
b. liquidity.
c. profitability.
d. solvency.

Supplemental
Supplemental Disclosures
Disclosures
Four types of information that are supplemental to account

titles and amounts presented in the balance sheet:
LO 8 Determine which balance sheet information

5-69 requires supplemental disclosure.
Techniques
Techniques of
of Disclosure
Disclosure
 Parenthetical Explanations
 Notes
 Cross-Reference and Contra Items
 Supporting Schedules
 Terminology
5-70 LO 9 Describe the major disclosure techniques for the balance sheet.
APPENDIX 5A Ratio Analysis—A Reference
Using Ratios to Analyze Performance

Analysts 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.
5-71 LO 10 Identify the major types of financial ratios and what they measure.
Using Ratios to Analyze Performance Illustration 5A-1

A Summary of Financial Ratios


Specimen Financial Statements:
APPENDIX 5B The Procter & Gamble Company
5-75
5-76
5-77
5-78
5-79
5-80
5-81
RELEVANT FACTS
 IFRS recommends but does not require the use of the title
“statement of financial position” rather than balance sheet.
 IFRS requires a classified statement of financial position except in
very limited situations. IFRS follows the same guidelines as this
textbook for distinguishing between current and noncurrent assets
and liabilities. However under GAAP, public companies must follow
SEC regulations, which require specific line items. In addition,
specific GAAP standards mandate certain forms of reporting this
information.
 Under IFRS, current assets are usually listed in the reverse order of
liquidity. For example, under GAAP cash is listed first, but under
IFRS it is listed last.
5-82
RELEVANT FACTS
 IFRS has many differences in terminology that you will notice in this
textbook.
 Both IFRS and GAAP require disclosures about (1) accounting
policies followed, (2) judgments that management has made in the
process of applying the entity’s accounting policies, and (3) the key
assumptions and estimation uncertainty that could result in a
material adjustment to the carrying amounts of assets and liabilities
within the next financial year. Comparative prior period information
must be presented and financial statements must be prepared
annually.
 Use of the term “reserve” is discouraged in GAAP, but there is no
such prohibition in IFRS.
5-83
IFRS SELF-TEST QUESTION
Current assets under IFRS are listed generally:
a. by importance.
b. in the reverse order of their expected conversion to cash.
c. by longevity.
d. alphabetically.
5-84
Companies that use IFRS:
a. may report all their assets on the statement of financial position
at fair value.
b. are not allowed to net assets (assets 2 liabilities) on their
statement of financial positions.
c. may report noncurrent assets before current assets on the
statement of financial position.
d. do not have any guidelines as to what should be reported on
the statement of financial position.
5-85
A company has purchased a tract of land and expects to build a
production plant on the land in approximately 5 years. During the 5
years before construction, the land will be idle. Under IFRS, the land
should be reported as:
a. land expense.
b. property, plant, and equipment.
c. an intangible asset.
d. a long-term investment.
5-86
Copyright
Copyright
Copyright © 2012 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
5-87

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Intermediate

Kieso, Weygandt, and Warfield

Usefulness Purpose Supplemental

Balance Sheet, also referred to as the statement of

1. Reports assets, liabilities, and equity at a specific date.

2. Provides information about resources, obligations to

3. Helps in predicting amounts, timing, and uncertainty of

5-5 LO 1 Explain the uses and limitations of a balance sheet.

Usefulness of the Balance Sheet

5-6 LO 1 Explain the uses and limitations of a balance sheet.

Limitations of the Balance Sheet

5-7 LO 1 Explain the uses and limitations of a balance sheet.

5-8 LO 2 Identify the major classifications of the balance sheet.

5-9 LO 2 Identify the major classifications of the balance sheet.

5-10 LO 2 Identify the major classifications of the balance sheet.

5-11 LO 2 Identify the major classifications of the balance sheet.

5-13 LO 2 Identify the major classifications of the balance sheet.

Portfolios Type Valuation Classification

Held-to- Amortized Current or

Available- Debt or Current or

5-14 LO 2 Identify the major classifications of the balance sheet.

5-15 LO 2 Identify the major classifications of the balance sheet.

A company should clearly identify

5-16 LO 2 Identify the major classifications of the balance sheet.

5-17 LO 2 Identify the major classifications of the balance sheet.

Cash Payment BEFORE Expense Recorded

Prepayments often occur in regard to:

5-19 LO 2 Identify the major classifications of the balance sheet.

5-20 LO 2 Identify the major classifications of the balance sheet.

Current Assets - “Summary”

5-21 LO 2 Identify the major classifications of the balance sheet.

2. Tangible fixed assets not currently used in operations

3. Special funds (sinking fund, pension fund, or plant

4. Non-consolidated subsidiaries or affilated companies.

5-22 LO 2 Identify the major classifications of the balance sheet.

Portfolios Type Valuation Classification

Held-to- Amortized Current or

Available- Debt or Current or

5-23 LO 2 Identify the major classifications of the balance sheet.

5-28 LO 2 Identify the major classifications of the balance sheet.

Property, Plant, and Equipment

 With the exception of land, a company either depreciates

5-29 LO 2 Identify the major classifications of the balance sheet.

5-31 LO 2 Identify the major classifications of the balance sheet.

Intangibles (BE5-6): Patrick Corporation adjusted trial balance

5-34 LO 2 Identify the major classifications of the balance sheet.

5-35 LO 2 Identify the major classifications of the balance sheet.

This section should Total PP&E 2,170,386

Current Liabilities Balance Sheet (in thousands)

5-37 LO 2 Identify the major classifications of the balance sheet.

5-38 LO 2 Identify the major classifications of the balance sheet.

Long-Term Liabilities Balance Sheet (in thousands)

5-39 LO 2 Identify the major classifications of the balance sheet.

5-41 LO 2 Identify the major classifications of the balance sheet.

5-42 LO 2 Identify the major classifications of the balance sheet.

5-43 LO 2 Identify the major classifications of the balance sheet.

5-44 LO 2 Identify the major classifications of the balance sheet.

Classified Balance Sheet