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Concepts of Financial Reporting

by: Carolanne Sawayn

Concepts of Financial Reporting ACC 210

Marketplace > North Carolina State University > Accounting > ACC 210 > Concepts of Financial Reporting
Carolanne Sawayn
GPA 3.97

Ernest Carraway

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Ernest Carraway
Class Notes
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This 4 page Class Notes was uploaded by Carolanne Sawayn on Thursday October 15, 2015. The Class Notes belongs to ACC 210 at North Carolina State University taught by Ernest Carraway in Fall. Since its upload, it has received 34 views. For similar materials see /class/223986/acc-210-north-carolina-state-university in Accounting at North Carolina State University.


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Date Created: 10/15/15
ACC 210P Chapter 8 l Acceptable current ratios vary from industry to industry but a general rule of thumb is that a current ratio greater than is appropriate 2 The current ratio is computed by dividing current assets by 3 The operating cash ow ratio is computed by dividing by current liabilities 4 Crather Inc has a note payable that is due on December 31 2010 In its December 31 2009 balance sheet this note payable should be classi ed as an 5 Accounts payable represent amounts owed to outside suppliers of goods and services whereas re ect amounts owed in which a formal agreement or contract has been signed 6 An obligation that involves an existing condition for which the outcome is not known with certainty and depends upon some event that will occur in the future is called an 7 Ifno reasonable estimate of the loss can be made then a contingent liability should be recognized in the 8 is the liability created when customers pay for goods or services in advance 9 Current liabilities require a transfer of assets or performance of services within the longer of or one operating cycle 10 Hubson lVIills orders grain sacks from Soosam Burlap Supply Inc When Hubson places an order on account the corresponding journal entry includes a debit to Supplies and a credit to OWSF P39 eP NE Match each of the following current liabilities with its meaning Account payable Note payable Wages payable Interest payable Sales taxes payable FICA taxes payable Unemployment taxes payable Uneamed sales revenues Estimated warranty liability rum rm 99 57 An accrued liability for amounts owed to employees for work performed A contractual agreement to borrow and repay money Amounts owed for purchases on credit Amounts collected from customers in advance Social security and medicare taxes owed Amounts collected from customers that must be passed along to the state Amounts expected to be paid to repair or replace defective products Amounts funded by companies to proVide bene ts to red workers An accrued liability that represents the cost of borrowing Sherm an Inc Selected information from the consolidated balance sheet for Sherman Inc is provided below Assume that all of the account balances on Sherman39s balance sheet are normal balances Sherman Inc Selected Information from the Consolidated Balance Sheet in millions Assets gin alphabetical order Dec 31 2011 Dec 31 2010 Accounts receivable 2142 1249 Cash and cash equivalents 1000 995 Inventories 72 1 75 6 Marketable securities 447 403 Other current assets 108 120 Property plant and equipment 50066 50012 Liabilities gin alphabetical order Accounts payable and accrued expenses 144 154 Current portion of longterm debt 446 315 Income taxes payable 308 353 Longterm debt 3500 2468 Longterm income taxes payable 299 317 Notes payable due in 8 months 1010 1054 Other longterm liabilities 125 169 Assume that Sherman39s statement of cash ows presented cash ows from operating activities of 2046 million and 2011 million for the years ended December 31 2011 and 2012 respectively 1 Refer to the partial balance sheet presented above for Sherman Inc Compute the total current liabilities for December 31 2011 and December 31 2010 2 Refer to the partial balance sheet presented above for Sherman Inc Compute the following liquidity ratios for 2011 and 2010 Current Ratio Operating Cash Flow Ratio 4 Every month Pomroy Distributors orders shipping supplies from Gregory Enterprises On February 13 2010 Pomroy orders 21000 from Gregory on account which is due on March 15 2010 Due to an unexpected decline in business Pomroy is unable to pay Gregory on March 15th so Pomroy approached Gregory about a payment extension Gregory grants the extension but requires Pomroy to sign a note that speci es 75 interest beginning March 15 2010 with a due date of July 15 2010 Pomroy pays the amount in full on July 15th Prepare the necessary journal entries for Pomroy on February 13th March 15th and July 15th


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