ACTIVITY 12 CROSSWORD PUZZLE FOR CHAPTER 2

6e Balance Sheet Page 45 Chapter 2

ACTIVITY 12 CROSSWORD PUZZLE FOR CHAPTER 2

Across

• Lends money
• Extra value recorded when buying another company
• Reports assets, liabilities, and stockholders’ equity

(2 words)

• Investments available for quick liquidation (2 words)
• Patents, copyrights, and brand names
• Accounts payable is a _____ account
• Buildings, equipment, and land (abbreviation)
• Cost allocation
• Acquisition Cost less Accumulated Depreciation

(2 words)

• Owners of a corporation
• Income tax amounts to be paid later
• Money in the bank
• Ratio that measures the ability to pay current liabilities

with current assets

• Total liabilities divided by total assets (2 words)

Down

• Amounts owed to suppliers (2 words)
• Distribution of earnings
• Merchandise held for sale
• Borrows money
• Ratios that measure the ability to pay liabilities as they

come due

• Lawsuits and other events that could create new

liabilities for the company

• Inventory is an _____ account
• Total amount of depreciation expensed since the assets'

date of purchase

• Monies to be received from customers
• Equipment is a _____ asset account, which is used for

more than one year

• Ratios that measure the ability to pay liabilities for many

years

• Balance Sheet reporting all amounts as a percentage of

total assets (2 words)

• Liabilities due within 12 months

Interpreting and Analyzing Financial Statements 6th Edition Schoenebeck Solutions Manual Visit TestBankDeal.com to get complete for all chapters

6e Balance Sheet Page 46 Chapter 2

ACTIVITY 13 THE CLASSIFIED BALANCE SHEET

Purpose: • Identify account classifications typically used on the balance sheet.STARBUCKS (SBUX) 10/02/2011 BALANCE SHEET ($ in millions)

ASSETS LIABILITIES

Cash and cash equivalents $ 1,148.1 Accounts payable $ 540.0 Short-term investments 902.6 Short-term debt 0.0 Accounts receivable 385.6 Other current liabilities 1,535.8 Inventories 965.8 Long-term debt 549.5 Other current assets 392.8 Other noncurrent liabilities 350.2 PPE, net 2,355.0 STOCKHOLDERS’ EQUITY Goodwill and intangibles 433.5 Contributed capital 41.2 Long-term investments 479.3 Retained earnings 4,297.4 Other noncurrent assets 297.7 Other stockholders’ equity 46.3 TOTAL ASSETS $7,360.4 TOTAL L & SE $7,360.4 A classified balance sheet breaks the three major account types (assets, liabilities, and stockholders’ equity) into smaller classifications to help decision makers better understand the information presented.Typical classifications and a brief description follow. Current assets (CA) are those assets expected to be converted into cash, sold, or consumed within 12 months. Property, plant, and equipment (PPE) summarize amounts for equipment, buildings, and land.These are long-term assets that are expected to benefit more than one accounting period.Depreciation expense is the cost allocated to each year of an asset’s long-term useful life.Accumulated depreciation is the total amount of depreciation expensed since the asset’s date of purchase. Acquisition cost – accumulated depreciation = the book value of PPE, which is the amount added to compute total assets on the balance sheet. Land is not depreciated. Goodwill is created when acquiring a company for an amount greater than its net assets; amounts paid for the value of its management team, customer base, and overall reputation. Other intangible assets include amounts paid for patents, copyrights, and brand names. Other assets are noncurrent asset (NCA) accounts such as long-term investments, which are not included in any other asset classification. Current liabilities (CL) are amounts owed to creditors that are expected to be repaid within 12 months. Examples include accounts payable and short-term debt. Noncurrent liabilities (NCL) are amounts owed to creditors that are expected to be repaid in more than 12 months. Examples include bonds payable and long-term debt. Contributed capital (CC) are amounts paid-in (contributed) by stockholders to purchase common stock and preferred stock. Accounts include capital stock and additional-paid-in capital (APIC). Retained earnings (RE) is net income earned by the company since its incorporation and not yet distributed as dividends. Other stockholders’ equity includes treasury stock and adjustments to stockholders’ equity such as the change in value of long-term investments.To answer the following questions refer to the balance sheet presented above.Q1 How many accounts listed are Current Assets? (1 / 3 / 5) Property, Plant, and Equipment? (1 / 3 / 5) Goodwill and Intangibles? (1 / 3 / 5) Other Assets? (1 / 2 / 5) Q2 What is the total amount reported for Current Liabilities? $2,075.8 million Noncurrent Liabilities? $899.7 million Total Stockholders’ Equity? $4,384.9 million

6e Balance Sheet Page 47 Chapter 2

ACTIVITY 14 UNDERSTANDING THE BALANCE SHEET

Purpose: • Identify the value at which amounts are reported on the balance sheet.Use Starbucks’ balance sheet dated 10/02/2011 (on the opposite page) to answer the following questions.

• How much do customers owe this company? $385.6 million
• For inventories, $965.8 million is the (acquisition cost / current market value / can’t tell).
• For property, plant, and equipment, net, $2,355.0 million is the (acquisition cost / current market

value / book value / can’t tell).

• What amount of investments does this company intend to hold for more than a year?

$479.3 million

• (PPE / Goodwill / Long-term investments) is created when a company is acquired.
• How much does this company owe to suppliers? $540.0 million
• Current assets total $3,794.9 million and current liabilities total $2,075.8 million. Current assets are

used to pay off (current / noncurrent) liabilities. This company has (sufficient / insufficient) current assets to pay off its current liabilities.

• Noncurrent assets total $3,565.5 million and noncurrent liabilities total $899.7 million. Noncurrent

liabilities are used to finance (current / noncurrent) assets.

• Contributed capital represents (amounts borrowed / amounts paid-in by shareholders / net

income earned by the company).

• This company is relying primarily on (long-term debt / contributed capital / retained earnings) to

finance assets, which is an (external / internal) source of financing.

• The balance sheet reports a company’s financial position (as of a certain date / over a period of

time).

• Assets and liabilities are recorded on the balance sheet in order of (magnitude / alphabetically /

liquidity), which means that (PPE / cash) will always be reported before (PPE / cash).

• U.S. GAAP and IFRS treat (cash / PPE) essentially the same. However, for (cash / PPE), IFRS allows

valuation at fair value, whereas U.S. GAAP requires (historical cost / fair value).

6e Balance Sheet Page 48 Chapter 2

ACTIVITY 15 UNDERSTANDING THE BALANCE SHEET

Purpose: • Identify the value at which amounts are reported on the balance sheet.• Understand what an increase or a decrease in an account indicates.• Develop strategies for analyzing the balance sheet.STARBUCKS (SBUX) BALANCE SHEET ($ in millions)

ASSETS 10/02/2011 10/03/2010 9/27/2009 9/28/2008

Cash and cash equivalents $ 1,148.1 $ 1,164.0 $ 599.8 $ 269.8 Short-term investments 902.6 285.7 66.3 52.5 Accounts receivable 385.6 302.7 271.0 329.5 Inventories 965.8 543.3 664.9 692.8 Other current assets 392.8 460.7 433.8 403.4 Property, plant, and equipment 6,163.1 5,888.7 5,700.9 5,717.3 Accumulated depreciation (3,808.1) (3,472.2) (3,164.5) (2,760.9) PPE, net 2,355.0 2,416.5 2,536.4 2,956.4 Goodwill and other intangibles 433.5 333.2 327.3 333.1 Long-term investments 479.3 533.3 423.5 374.0 Other noncurrent assets 297.7 346.5 253.8 (L)

TOTAL ASSETS $ 7,360.4 $ 6,385.9 $ 5,576.8 $ 5,672.6

LIABILITIES

Accounts payable $ 540.0 $ 282.6 $ 267.1 $ 324.9 Short-term debt 0.0 0.0 0.0 713.0 Other current liabilities 1,535.8 1,496.5 1,313.9 1,151.8 Long-term debt 549.5 549.4 549.3 549.6 Other noncurrent liabilities 350.2 382.7 400.8 442.4

STOCKHOLDERS’ EQUITY

Contributed capital 41.2 146.3 187.1 40.1 Retained earnings 4,297.4 3,471.2 2,793.2 2,402.4 Other stockholders’ equity 46.3 57.2 65.4 48.4 TOTAL L & SE $ 7,360.4 $ 6,385.9 $ 5,576.8 $ (Z) Q1 Calculate the amounts that should be reported for (L) and (Z) on the 9/28/2008 balance sheet: (L) = $261.1 million (Z) = $5,672.6 million Q2 What was the beginning balance of the inventories account for the fiscal year ended on 10/02/2011? $543.3 million 10/03/2010? $664.9 million 9/27/2009? $692.8 million Q3 What amount of property, plant, and equipment was purchased (assuming no PPE was sold) during fiscal year ended 10/02/2011? $274.4 million 10/03/2010? $187.8 million Q4 From 9/28/2008 to 10/02/2011 accounts payable (increased / decreased), indicating (more / less) financial risk. This company paid off accounts payable during fiscal years ended in (2011 / 2010 / 2009). As of 10/02/2011 this company owes $540.0 million to its suppliers.