...Property, Plant and Equipment Property, Plant and Equipment I- Nature of Accounting Issues Businesses purchase and use a variety of fixed assets, such as equipment, furniture, tools, machinery, buildings, and land. These fixed assets are long-term or relatively permanent assets. Also, they are tangible assets because they exist physically. They are owned and used by the business and are not offered for sale as part of normal operations. Perhaps the most descriptive titles these assets are known under are plant assets or property, plant and equipment. Depending on the industry, the plant assets of a business can be a significant part of its total assets. That is why the accounting for these long-term assets has important implications for a company’s reported results. In this paper, we discuss the proper accounting for the acquisition, use, and disposition of property, plant, and equipment. Before going over a brief overview of the nature of accounting issues, we ought to take a deeper look at what plant assets really are. The major characteristics of property, plant, and equipment are as follows: * They are acquired for use in operations and not for resale. Only assets used in normal business operations are classified as property, plant, and equipment. For example, an idle building is more appropriately classified separately as an investment. Also, land developers or sub dividers classify land as inventory. * They are long-term in nature and usually depreciated...
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...which statement the item would appear. You will need to determine whether it would appear on the income statement (I), balance sheet (B), or statement of cash flows (CF). Then, for each group, explain the difference among the items listed. Finally, in Part II, discuss the relationship between the three financial statements. Part I Set 1: ____B_ Inventory, ending balance ___I__ Cost of goods (inventory) sold during the period __B___ Cash paid to suppliers during the period __B___ Accounts payable, ending balance Difference: Accounts payable is purchases on credit, Inventory ending balance is amount of stock at end of year, cost of goods sold is an expense, cash paid to suppliers is cash flow Set 2: ___B__ Accounts receivable, ending balance ___B__ Cash received from customers ____I_ Sales Difference: Accounts receivable is money owed to a company by its debtors, cash received is cash flow Set 3: ___I__ Wage expense for the period __B__ Wages payable, ending balance _B____ Cash paid for wages during the period Difference: Wage expense is compensation earned by employees, wages payable is money not yet earned for work already completed. Set 4: ___B__ Property, plant, and equipment, ending balance __CF__ Cash paid for property, plant, and equipment during the period ___B__ Cash received from selling property, plant, and equipment during the period ____I_ Depreciation expense during the period (expense of using property, plant, and equipment during...
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...TO: Go With the Flow Inc. FROM: Olivia Bogle, Laura Cox, J.T. Mack, and Erica Patterson RE: Statement of Cash Flows Background Go With the Flow Inc. (Go With the Flow) designs, manufactures, and sells a large variety of mobile network and communication products. The company’s communication devices include mobile, cordless, and corded telephones. Go With the Flow’s liquidity primarily comes from the company’s cash flows, debt and revolving credit facilities, and the sale of trade accounts receivables. Three of the company’s cash flow transactions are insurance settlement proceeds, sale of accounts receivable, and acquisition of property, plant, and equipment on account. This memo will analyze each transaction under Financial Account Standards Board’s (FASB) Accounting Standards Codification (ASC) 230, Statement of Cash Flows. This memo will also appropriately classify each transaction and discuss any timing issues related to the Statement of Cash Flows. Insurance Settlement Proceeds Issue What is the proper classification for the statement of cash flows related to insurance proceeds? Analysis A tornado destroyed one of the company’s manufacturing facilities, in turn; Go With the Flow received a $20 million settlement from an insurance carrier in the current year. The company decided not to rebuild the facility, instead, they will use the insurance proceeds to fund a defined-benefit pension plan. According to ASC 230-10-45-12, directly related insurance...
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...Chapter 17 Audit ing the Investing and Financing Cycle |Learning Check | 17-1. Investing activities represent the purchase and sale of land, buildings, equipment, and other assets not generally held for resale. In addition, investing activities include the purchase and sale of financial instruments not intended for trading purposes (discussed in chapter 18). Financing activities include transactions and events whereby cash is obtained from or repaid to creditors (debt financing) or owners (equity financing). Financing activities would include, for example, acquiring debt, capital leases, issuing bonds, or issuing preferred or common stock. Financing activities would also include payments to retire debt, reacquiring stock (treasury stock), and the payment of dividends. 17-2. When auditing the investing and financing cycles auditors typically address the following issues: • What assets are necessary to support the operations of the entity, and what are management’s long-range plans for growing the entity’s asset base? Answering this question assists the auditor in developing expectations of long-term assets needed to support operations. • What assets were acquired, or disposed of, during the period? Answering this question confirms the auditor’s expectations regarding assets needed to operate effectively. It also assists the auditor in developing expectations of regarding financing activities. • How were newly acquired assets...
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...Chapter 3 The Balance Sheet and Financial Disclosures Questions for Review of Key Topics Question 3-1 The purpose of the balance sheet, also known as the statement of financial position, is to present the financial position of the company on a particular date. Unlike the income statement, which is a change statement that reports events occurring during a period of time, the balance sheet is a statement that presents an organized array of assets, liabilities, and shareholders’ equity at a point in time. It is a freeze frame or snapshot picture of financial position at the end of a particular day marking the end of an accounting period. Question 3-2 The balance sheet does not portray the market value of the entity (number of common stock shares outstanding multiplied by price per share) for a number of reasons. Most assets are not reported at fair value, but instead are measured according to historical cost. Also, there are certain resources, such as trained employees, an experienced management team, and a good reputation, that are not recorded as assets at all. Therefore, the assets of a company minus its liabilities, as shown in the balance sheet, will not be representative of the company’s market value. Question 3-3 Current assets include cash and other assets that are reasonably expected to be converted to cash or consumed during one year, or within the normal operating cycle of the business if the operating cycle is longer than...
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...Chapter 3 The Balance Sheet and Financial Disclosures AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise, and problem in Intermediate Accounting, 7e with the following AACSB learning skills: |Questions |AACSB Tags |Exercises (cont.) |AACSB Tags | |3–1 |Reflective thinking |3–3 |Reflective thinking | |3–2 |Reflective thinking |3–4 |Analytic | |3–3 |Reflective thinking |3–5 |Analytic | |3–4 |Reflective thinking |3–6 |Analytic | |3–5 |Reflective thinking |3–7 |Analytic | |3–6 |Reflective thinking ...
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...Under HKAS 16, Property, Plant and Equipment (PPE) are tangible assets that are held by an entity. They are for use in the production or supply of goods or services, for rental to others, or for administrative purposes and expected to be used during more than one period. PPE includes land, land improvements, buildings, equipment, machinery and motor vehicles. In the aspect of relevance, if it is capable of making a difference in the decisions made by users, it could be defined as relevant. This quality helps users to confirm or correct their past evaluations. According to HKAS 16, if items of property, plant and equipment are stated at revalued amounts, the disclosure includes the effective date of the revaluation, the involvement of an independent valuer and the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders. Therefore, HKAS 16 enable users to evaluate past information of PPE by providing relevant information such as revaluation surplus and revaluation date. Users like auditors can examine the value and confirm company’s past evaluations by their own, so that a relevant decision can be made. Faithful representation means that the information presents the substance. It includes completeness, neutrality and no errors or omissions. Under HKAS 16, the financial statements shall disclose the measurement bases used for determining the gross carrying amount, the depreciation methods used, the useful...
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...towards building long term relationships and commitment for mutual growth. To our society - We will commit ourselves to ensure that our present and future manufacturing systems and services will be so designed to create the least environmental impact. We will always promote good governance and ethical practices in business and honour the rights of all racial, religious and gender sections in our society. LAXAPANA BATTERIES PLC / Annual Report 2010-2011 1 Contents Our Mission Notice of Meeting Chairman’s Review Company Profile Board of Directors Annual Report of the Board of Directors Audit Committee Report Independent Auditors’ Report to the Shareholders Income Statement Balance Sheet Statement of Changes In Equity Cash Flow Statement Notes to the Financial Statements Share Information Ten Year Financial Summary Notes Form of Proxy Corporate Information Inner Front Cover 2 3 4 5 6 9 10 11 12 13 14 15 31 33 34 35 Inner Back Cover 2 LAXAPANA BATTERIES PLC / Annual Report 2010-2011 Notice of Meeting Notice is hereby given that the Fifty Fifth Annual General Meeting of Laxapana Batteries PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 01, on Tuesday, 27th September 2011 at 10.00 a.m. for the following...
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...Running head: NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS Abstract The course project is an opportunity to learn how to develop notes to the financial statements and gain experience in writing business topics as well as the need to have detailed information provided in the notes to the financial statements. This includes determining which items need to be included in the notes, which items need to have additional information provided in the notes, how the notes should be written, and the use of proper grammar in writing the notes. The notes should include a “Summary of Significant Accounting Principles” as note 1. The notes will then include detailed information regarding at least 10 different items that are usually contained in the notes to the financial statements. NOTES TO THE FINANCIAL STATEMENTS The Company Notes to Consolidated Financial Statements March 31, 2012 Note 1 Summary of Significant Accounting Policies Use of Estimates Preparing financial statements in accordance with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based on management’s knowledge regarding current events as well as the potential outcome of future economic events. Actual results may differ from those estimates. Revenue Recognition Net sales are recorded when evidence of an arrangement...
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...and answering questions pertaining the financial statements of Procter & Gamble. All figures will be in millions. The descriptions used by Procter & Gamble in its balance sheet to classify its property, plant, and equipment (PP&E) are; Buildings, Machinery and Equipment, and Land. Two out of the three descriptions of PP&E would be amortized, those being Buildings, and Machinery and Equipment. Land would not be amortized because most likely the economic value of land will increase, not decrease over time. (investopedia). The method of depreciation used by Procter & Gamble to depreciate its PP&E, as indicated in note 1 of the financial statements is the straight-line method. Depreciation expense is recognized over the assets’ estimated useful life. (note 1—Property, Plant and Equipment). The straight-line method is the most simplistic form of depreciation and therefore the most used. There are other forms of depreciation that may be used such as: Activity method, which focuses on the units of production rather than the passage of time. Decreasing-charge methods, which allow for lower depreciation costs as time goes on. This method is also known as the accelerated method. Examples of such depreciation methods would be the double-declining-balance method and the sum-of-the-years’-digits method. The estimated useful life the Procter & Gamble use to depreciate its Property, Plant, and Equipment are as follows: Machinery and equipment which include office furniture and...
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...True | | | False | | | | Score: 0 of 1 | | 2. | The current ratio is a liquidity ratio that is computed as current assets divided by current liabilities. | | | True | | x | False | | | | Score: 1 of 1 | | 3. | Conservatism in accounting means that small monetary items can be ignored. | | x | | True | | | False | | | | Score: 1 of 1 | | 4. | Comparability is the qualitative characteristic of accounting information that allows a statement reader to compare a company's performance from one year to the next. | | | | | True | | x | False | | | | Score: 1 of 1 | | 5. | Consistency means that a company uses the same accounting principles and methods as the other companies in the same industry. | | | | | True | | x | False | | | | Score: 1 of 1 | | 6. | The Monetary Unit Assumption assures that all important information needed by investors, creditors and managers is contained in the financial statements. | | | | | True | | x| False | | | | Score: 1 of 1 | | 7. | The cost principle requires that if a company buys a building for $2,000,000 in 2007 and that in 2009 the building is worth $2,900,000 the company would have to report the building at $2,000,000 in the Balance Sheet for 2009. | | x | | | True | | | False | | | | Score: 1 of 1 | | 8. | Alternate means of expressing a ratio include all of the following except a: | | x | | | Dollar...
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...Topic: Capital Assets In this face-to-face we will consider the implication of information about capital assets on the financial statements. Parts 1 and 3 will use the financial statements of Nestlé Group, which are posted in the Face-to-Face tab on the Blackboard content page. The questions, in three parts, are on the next pages. Submission Requirements * You must hand in your face-to-face submissions at the beginning of the class. TAs will pick up the submissions within five to ten minutes of the start of class. If you arrive after the TA has picked up the assignment, or after 10 minutes of the start of class (whichever occurs first), you won’t be able to hand it in and you will receive a zero for that assignment. * You have to hand in your face-to-face assignment in the section you’re registered in. * Face-to-face assignments must be typed. * All parts must be completed with demonstrated effort in order to be graded “complete” Face-to-face hand-in #3 Capital Assets Due: Session 3 PART 1 For this part of the Face-to-Face you’ll use Nestlé Group’s 2012 consolidated financial statements and the 2012 Annual Report. You’ll find these documents on the Blackboard content page under the Face-to-Face tab. 1. How much depreciation expense did Nestlé record in 2012? $2,711M CHF 2. What amount of property, plant, and equipment did Nestlé report on its December 31, 2012 balance sheet? What does the amount represent? 26,903M CHF. This is the net...
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...Financial Reporting JOHNSON & JOHNSON ($ millions) (a) The cost of building and building equipment at the end of 2011 was $9,389. (b) As indicated in footnote number 1 to the financial statements, the company utilizes the straight-line method for financial statement purposes for all additions to property, plant, and equipment. Given that straight-line depreciation provides a lower charge for depreciation as compared to an accelerated method in the early years of an asset’s life, the accounting appears to be less conservative. (c) The cash flow statement reports the amount of interest paid in cash ($576). A review of the income statement indicates that Johnson & Johnson incurred interest expense of $571 million (net of capitalized interest of $84 see note 4). FINANCIAL STATEMENT ANALYSIS CASE (d) Free cash flow is defined as net cash flows provided by operating activities less capital expenditures and dividends. Free cash flow is 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. In Johnson & Johnson situation, free cash flow is computed as follows: Net cash flows from operating activities ..................... $14,298 Less: Additions to property, plant and equipment.... 2,893 Dividends........................................................... 6,156 ...
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...COVER SHEET for SUBMISSION of INDIVIDUAL/ GROUP ASSIGNMENTS Course Code | Course Name | Dept. Date Stamp | ACCT2159 | Corporate Accounting | | Assignment Title | Assignment No: | Date Due | | Corporate Accounting Assignment 2012 semester 3 | 1 | Friday, 7th December 2012 | | Academic’s Name: | | | Ms. Sue | | (For Office use only) | STUDENT(S) Family name | Given Names | Student Number | 1) Vu Ly Bao | Ngoc | s3357828 | 2) Bui Mai | Phuong | s3372823 | 3) Nguyen Thi Phuong | Mai | s3345216 | 4) Lee | So Huyn | s3357820 | Declaration and Statement of Authorship: 1. I/we hold a photocopy of this assignment which can be produced if the original is lost/damaged. 2. This assignment is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made. 3. No part of this assignment has been written for me/us by any other person except where such collaboration has been authorised by the academic/teacher concerned and as detailed in the assignment. 4. I/we have not previously submitted this work for any other course/unit. 5. I give permission for my assignment to be scanned for electronic checking of plagiarism. 6. I give permission for a copy of my/our marked work to be retained by the Department for review by external examiners. I/we understand that: Plagiarism is the presentation of the work, idea or creation of another...
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...Table of Content: Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Principles of Consolidation Description of the Company New Accounting Pronouncements Cash and Cash Equivalent Inventories Investments Property, Plant and Equipment and Depreciation Earnings per Share Revenue Recognition Research and Development Use of Estimates Income Taxes Annual Closing Date 2. Cash, Cash Equivalents and Current Marketable Securities 3. Inventories 4. Property, Plant and Equipment 5. Intangible Assets and Goodwill 6. Long-Term Liabilities 7. Income Taxes 8. Employee Related Obligations 9. Pensions and Other Benefit Plans 10. Merger and Acquisitions 11. Earnings per share 12. Rental Expense and Lease Commitments 13. Investments 14. Share-Based Compensation Plans 15. Recent Accounting Pronouncement 16. Subsequent Events 3 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 8 8 8 9 9 9 10 10 10 11 ACCT551 Class Project Page 1 ACCT551 Class Project Excerpts from 2009 Annual Report for the Procter & Gamble Company 1. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Procter & Gamble Company and its subsidiaries (the “Company”, “we” or “us”). Intercompany transactions are eliminated. Description of the Company and Business Segments The Procter & Gamble Company’s business is focused on providing branded consumer goods products of superior quality and value. Our product are sold...
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