Chapter 12

Question 1

what is statement of financial position?

Answer 1

used to be called the balance sheet. It shows the the company owns and what is owing. Assets and liabilities

Question 2

what is the book value of a company?

Answer 2

Equity of a company. represents the total value of a companies assets that share holders would receive if company was liquidated

Question 3

what are the 4 items of non-current assets?

Answer 3

1. Plant, property and equipment

2. depreciation, amortization and depletion

Question 4

what are the two main methods of recording depreciation?

Answer 4

1. straight-line method - equal amount in charged to each period.
2. The declining-balance method - a percent is deducted from the value of the asset each period.
3. Intangible assets
4. Investments in associates

Question 5

what is depletion?

Answer 5

Used by mining, natural gas and timber companies its the decrease in value of a company as the resource is extracted.

Question 6

what is capitalizing?

Answer 6

when are expenditure is recorded as an asset rather than an expense. so it can put recorded over a longer period of time.

the asset is then depreciated over time on the statement of financial position.

Question 7

what is an intangible asset?

Answer 7

a non-monetary asset that does not have physical substance.

examples: copyrights, patients, franchises and trademarks.

Question 8

what is investments in associates?

Answer 8

When are company owns a stake in other companies. As a general rule 20% stake in a company is when a company has significant influence

Question 9

What are the 4 items of currents assets?

Answer 9

1. inventories
2. prepaid expenses
3. trade receivables
4. cash and cash equivalents

Question 10

what are the two ways inventories are valued?

Answer 10

1. Weighted average of all items in inventory

2. First in First out

Question 11

what are the three equity items?

Answer 11

1. Share capital - money that has been paid in by investors.
2. Retained earnings - profits that have not been payed out to investors. if a company suffers losses in a year it is deducted from the companies retained earnings.
3. non-controlling interest - all assets and liabilities and subsidiary companies financial statements combined into one.

Question 12

what are the two non-current liability items?

Answer 12

1. long term debt

2. deferred tax liability

Question 13

what are the three current liability items?

Answer 13

1.

Question 14

what are the three current liability items?

Answer 14

1. current position of long term debt due in one year
2. taxes payable to the government in the near term
3. trade payables for unpaid bills for materials and supplies
4. short term borrowing from institutions