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UA - AC 310 - Class Notes - Week 4

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UA - AC 310 - Class Notes - Week 4

School: University of Alabama - Tuscaloosa
Department: Accounting
Course: Intermediate Accounting
Professor: Jill Datema
Term: Spring 2019
Tags:
Name: chapter 3 notes
Description: these are the chapter 3 notes from in class
Uploaded: 02/10/2019
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background image AC 310 Chapter 3 
 
Balance Sheet:
​ Reports a company's financial position at a point in time, organized array of  assets, liabilities, and shareholder’s equity-grouped in common characteristics.  
 
Liquidity: A company’s availability to pay its current obligations 
 
Long term solvency: Riskiness of a company with regard to the amount of liabilities in its capital 
structure 
Financial flexibility 
 
Limitations: does not portray the market value of the entity-relies on estimates 
 
Assets-Current Assets 2. Long term assets-Investments, PPE, Intangible and other 
Liabilities-current and long term 
SE-Paid-in capital, Retained earnings, and accumulated other comprehensive income 
 
Current assets: assets expected to be converted to cash within the coming year or within the 
normal operating cycle of the business if that’s longer than one year 
-cash, short-term investments, receivables, merchandise inventories, deferred income taxes, 
prepaid expenses 
 
Short term investments: invest. In stocks and debt securities of other corporations-the company 
has the intent to sell within the next 12 months or operating cycle-whichever is longer 
 
Accounts receivable: result from sale of goods or services on credit 
 
Notes receivable: supported by a formal agreement or note that specifies payment terms 
 
Inventories: Finished goods, work in progress, raw materials 
 
Prepaid expenses: represent assets recorded when expenses are paid in advance creating 
benefits beyond the current period current or noncurrent depends on when its benefits will be 
realized. -prepaid rent and prepaid insurance 
 
NONCURRENT ASSETS: Assets expected to provide economic benefits beyond the next year, 
or operating cycle 
-investments:not used directly in operations (equity and debt securities of other corporations, 
land held for spec, noncurrent receiv, and cash set aside for special purposes)--sinking fund, 
pensions fund, cash surrender value of life insurance 
-ppe: tangible, long-lived assets used in the operations of the business, reported as a single 
amount in the balance sheet, at original cost less accumulated depreciation-land, buildings 
background image -intangible:generally represent exclusive rights, valuable in generating future revenues, reported 
on balance sheet net of accumulated amortization, much of value not reported on balance sheet 
(copyrights) 
-other 
 
Current liabilities: obligations expected to be satisfied through the use of current assets or the 
creation of other current liabilities, 1 yr or op cycle 
-accounts payable:30 to 60 days 
-deferred revenues: represent cash received from a customer for goods or services to be 
provided in a future period (purchase of a gift card) 
-accrued liabilities: obligations created when expenses have been incurred but will not be paid 
until a subsequent reporting period-accrued salaries payable, accrued interest payable, and 
accrued taxes payable 
-current maturities of long-term debt:long term notes, loans, mortgages, bonds payable 
 
Long term liabilities: Obligations that will not be satisfied in the next year or operating cycle. Do 
not require use of current assets or the creation of current liabilities for payment, 
-long term notes 
-bonds 
-pension obligations 
-lease obligations 
 
Shareholder’s equity: 
1.Paid-in capital, retained earnings, accumulated comprehensive income 
Assets-liabilities=shareholders equity 
-Includes other equity components such as accumulated other comprehensive income 
 
Financial disclosures: Convey additional information about account balances in basic financial 
statements : allowance for uncollectible accounts and information about common stock 
 
 
-Operating cycle of a typical manufacturing company 
1.Use cash to acquire raw materials 
2. Convert raw materials to finished product 
3. Deliver product to customer 
4. Collect cash from customer 
 
Ratio analysis: Most common way of comparing accounting numbers to evaluate the 
performance and risk of a firm 
-allows analyst to control for size differences over time and among firms 
 
Default risk: concerned about a company’s ability to pay its obligations when they come due 
 

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Join more than 18,000+ college students at University of Alabama - Tuscaloosa who use StudySoup to get ahead
School: University of Alabama - Tuscaloosa
Department: Accounting
Course: Intermediate Accounting
Professor: Jill Datema
Term: Spring 2019
Tags:
Name: chapter 3 notes
Description: these are the chapter 3 notes from in class
Uploaded: 02/10/2019
3 Pages 28 Views 22 Unlocks
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  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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