Mixture Flashcards
What are the classifications of liabilities?
Liabilities are classified as current or long-term.
What are current liabilities?
Obligations the company expects to liquidate through the use of current assets or the creation of other current liabilities.
What are examples of current liabilities?
- Payables from acquisition of goods & services: Accts or wages payable, taxes payable.
- Collections received in advance of delivery of goods or services: Unearned rent revenue, unearned subscriptions revenue.
- Other liabilities that will be liquidated during the reporting cycle: The portion of long-term bonds to be paid in the current period, short-term obligations arising from the purchase of equipment.
What is the treatment of liabilities payable within a year?
Liabilities payable within a year are not included in current liabilities if the company intends to refinance the debt through another long-term issue or to retire it out of noncurrent assets.
Is there a prescribed order for listing current liabilities?
No prescribed order for current liabilities, but common to see notes payable, accounts payable, or short-term debt as first item. Income taxes payable, current maturities of long-term debt, or other current liabilities are commonly listed last.
What is working capital?
Excess of total current assets over total current liabilities. Not typically disclosed on balance sheet, but computed as indicator of short-run liquidity.
What are long-term (noncurrent) liabilities?
Obligations a company does not reasonably expect to liquidate within the normal operating cycle.
What are examples of long-term liabilities?
Bonds payable, notes payable, deferred income tax amounts, lease obligations, pension obligations.
What are the three types of long-term liabilities?
- Obligations from specific financing situations, such as the issuance of bonds, long-term lease obligations, and long-term notes payable.
- Obligations arising from the ordinary operations of the company, such as pension obligations and deferred income tax liabilities.
- Obligations that depend on the occurrence or non-occurrence of one or more future events to confirm the amount payable, the payee, or the date payable, such as service or product warranties, or other contingencies.
What is required for long-term liabilities?
Long-term liabilities require the most disclosure. Companies provide supplementary disclosures for long-term liabilities related to the covenants and restrictions for the protection of lenders.
What are the components of the owner’s equity section of the balance sheet?
Generally 6 sections: Capital Contribution, Additional Paid-In Capital, Retained Earnings, Accumulated Other Comprehensive Income, Treasury Stock, and Noncontrolling Interest.
What is included in Capital Contribution?
Preferred stock, common stock, and paid-in capital.
What does Additional Paid-In Capital represent?
The excess of amounts paid in over the par or stated value.
What are Retained Earnings?
The corporation’s undistributed earnings, which can be divided into unappropriated and restricted.
What is Accumulated Other Comprehensive Income?
The aggregate amount of other comprehensive income items, including unrealized gains or losses on investments and certain derivative transactions.
What is Treasury Stock?
The amount of ordinary shares repurchased, shown as a reduction of stockholders’ equity.
What is Noncontrolling Interest?
A portion of the equity of subsidiaries not wholly owned by the reporting company.
What is the classification of Investment in a Preferred Stock?
Current asset or Long Term Asset/Investment.
What is the classification of Treasury Stock?
Contra-Equity Account - Stockholders’ Equity.
What is the classification of Common Stock?
Stockholders’ Equity.
What is the classification of Cash Dividends Payable?
Current Liability.
What is the classification of Accumulated Depreciation?
Contra Asset Account to PP&E.
