KISV SM - CH05COMPLETE - National Tsing Hua University

CHAPTER 5

Examining the Balance Sheet and Statement of Cash Flows

ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)

Topics

Questions

Brief

Concepts

Exercises Exercises Problems for Analysis

1. Disclosure principles, 1, 2, 3, 4, 5, 2

uses of the balance 6, 7, 10, 18,

sheet, financial

22, 23, 25

flexibility.

2. Classification of items 11, 12, 13, 1, 2, 3, 4, 5, 1, 2, 3, 4, 5

in the balance sheet 14, 15, 16, 6, 7, 8, 9, 6, 8, 12

and other financial

18, 19

10, 11

statements.

4, 5 1, 2, 3

3. Preparation of balance 4, 7, 8, 9,

sheet; issues of

16, 17, 20,

format, terminology, 21, 24

and valuation.

3, 5, 7, 8, 9, 1, 2, 3, 4, 10, 11, 12 5, 6, 7

3, 4, 5

4. Statement of cash

25, 26, 27, 12, 13, 14, 13, 14, 15, 6, 7

6

flows.

28, 29, 30, 15, 16

16, 17, 18

31, 32

Copyright ? 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only)

5-1

ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)

Learning Objectives

Brief Exercises

Exercises

Problems

1. Explain the uses and limitations of a

7

balance sheet.

2. Identify the major classifications of the balance sheet.

1, 2, 3, 4, 5 6, 8, 9

3. Prepare a classified balance sheet using the report and account formats.

1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11

1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14

1, 2, 3, 4, 5, 6, 7

4. Determine which balance sheet information requires supplemental disclosure.

12

4

5. Describe the major disclosure techniques for the balance sheet.

6. Indicate the purpose of the statement of cash flows.

7. Identify the content of the statement

13

of cash flows.

8. Prepare a basic statement of cash flows.

12, 13, 14, 15 14, 15, 16,

6, 7

17, 18

9. Understand the usefulness of the statement

16

of cash flows.

16, 17, 18

6, 7

5-2

Copyright ? 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only)

ASSIGNMENT CHARACTERISTICS TABLE

Item

E5-1 E5-2 E5-3 E5-4 E5-5 E5-6 E5-7 E5-8 E5-9 E5-10 E5-11 E5-12 E5-13 E5-14

E5-15 E5-16 E5-17 E5-18

P5-1 P5-2 P5-3 P5-4 P5-5 P5-6

P5-7

CA5-1 CA5-2 CA5-3 CA5-4 CA5-5 CA5-6

Description

Level of Difficulty

Classification of balance sheet accounts. Classification of balance sheet accounts. Preparation of a classified balance sheet. Balance sheet classifications. Corrections of a balance sheet. Current assets and current liabilities. Current vs. long-term liabilities. Current assets section of the balance sheet. Preparation of a corrected balance sheet. Balance sheet preparation. Preparation of a balance sheet. Current liabilities. Statement of cash flows--classifications. Preparation of a statement of cash flows and a balance sheet. Preparation of a statement of cash flows. Preparation of a statement of cash flows. Preparation of a statement of cash flows, analysis. Preparation of a statement of cash flows.

Simple Simple Simple Simple Complex Complex Moderate Moderate Simple Moderate Moderate Moderate Moderate Moderate

Moderate Moderate Moderate Moderate

Preparation of a classified balance sheet, periodic inventory. Moderate

Balance sheet preparation.

Moderate

Balance sheet adjustment and preparation

Moderate

Preparation of a corrected balance sheet.

Complex

Balance sheet adjustment and preparation.

Complex

Preparation of a statement of cash flows and

a balance sheet.

Complex

Preparation of a statement of cash flows and

a balance sheet.

Complex

Reporting for financial effects of varied transactions. Current asset and liability classification. Identifying balance sheet deficiencies. Critique of balance sheet format and content. Presentation of property, plant, and equipment. Cash flow analysis.

Moderate Moderate Moderate

Simple Simple Complex

Time (minutes)

15?20 15?20 30?35 15?20 30?35 30?35 10?15 15?20 30?35 25?30 30?35 15?20 15?20 30?35

25?35 25?35 25?35 25?35

35?40 40?45 30?35 40?50 40?45

40?50

35?45

25?30 30?35 20?25 25?30 20?25 40?50

5-3

SOLUTIONS TO CODIFICATION EXERCISES

CE5-1

(a) Current assets is used to designate cash and other assets or resources commonly identified as those that are reasonably expected to be realizes in cash or sold or consumed during the normal operating cycle of the business.

(b) Intangible Assets are assets (not including financial assets) that lack physical substance. (The term intangible assets is used to refer to intangible assets other than goodwill.) Clicking on the first link yields the following FASB ASC string: 350 Intangibles--Goodwill and Other > 10 Overall.

(c) Cash equivalents are short-term, highly liquid investments that have both of the following characteristics:

a. Readily convertible to known amounts of cash

b. So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month U.S. Treasury bill and a three-year Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three moths. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations).

(d) Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; receiving restricted resources that by donor stipulation must be used for long-term purposes; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.

CE5-2

See FASC ASC 210-10-45 (Other Presentation Matters)

Classification of Current Liabilities

45-5A Total of current liabilities shall be presented in classified balance sheets.

45-6

The concept of current liabilities shall include estimated or accrued amounts that are expected to be required to cover expenditures within the year for known obligations the amount of which can be determined only approximately (as in the case of provisions for accruing bonus payments) or where the specific person or persons to whom payment will be made cannot as yet be designated (as in the case of estimated costs to be incurred in connection with guaranteed servicing or repair of products already sold).

5-4

CE5-2 (Continued)

45-7

Section 470-10-45 includes guidance on various debt transactions that may result in current liability classification. These transactions are the following:

a. Due on demand loan agreements b. Callable debt agreements c. Short-term obligations expected to be refinanced.

CE5-3

The following discussion is provided at 235-10-50 Disclosure

> Accounting Policies Disclosure

50-1

Information about the accounting policies adopted by an entity is essential for financial statement users. When financial statements are issued purporting to present fairly financial position, cash flows, and results of operations in accordance with generally accepted accounting principles (GAAP), a description of all significant accounting policies of the entity shall be included as an integral part of the financial statements. In circumstances where it may be appropriate to issue one or more of the basic financial statements without the others, purporting to present fairly the information given in accordance with GAAP, statements so presented also shall include disclosure of the pertinent accounting policies.

> Accounting Policies Disclosure in Interim Periods

50-2

The provisions of the preceding paragraph are not intended to apply to unaudited financial statements issued as of a date between annual reporting dates (for example, each quarter) if the reporting entity has not changed its accounting policies since the end of its preceding fiscal year.

> What to Disclose

50-3

Disclosure of accounting policies shall identify and describe the accounting principles followed by the entity and the methods of applying those principles that materially affect the determination of financial position, cash flows, or results of operations. In general, the disclosure shall encompass important judgments as to appropriateness of principles relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following:

a. A selection from existing acceptable alternatives b. Principles and methods peculiar to the industry in which the entity operations, even if

such principles and methods are predominantly followed in that industry c. Unusual or innovative applications of GAAP.

> Examples of Disclosures

50-4

Examples of disclosures by an entity commonly required with respect to accounting policies would include, among others, those relating to the following:

a. Basis of consolidation b. Depreciation methods

5-5

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