AFM101 Chapter Notes - Chapter 9: Intangible Asset, Capital Asset, Book Value

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blueraccoon878

5 Jan 2017

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Donna Psutka

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AFM101 Full Course Notes

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Chapter 9: reporting and interpreting property, plant, and equipment; natural resources; Acquisition and maintenance of property, plant, and equipment. Long-lived assets (or long-term assets or capital assets: tangible. Fixed asset turnover ratio: how effective management uses its ppe to generate revenue; the number of dollars from sales generated by using fixed assets. High ratio = effective management; low ratio = inefficient management. Increasing ratio = more efficient use of fixed assets. Caution: firm is cutting back on capital expenditure (expect downturn in business) Decreasing ratio = less efficient use of fixed assets. Caution: firm is increasing capital expenditure indicates expansion (expect future higher sales) Costs are capitalized when they are recorded a part of assets instead of expenses (added to purchase price of capital asset) ie. sales taxes, legal fees, transportation costs, and installation costs. Acquisition cost: the net cash-equivalent amount paid to be paid for the asset. Various acquisition methods: for cash, for debt:

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Your answer is partially correct. Try again.

Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.

SARGENT CORPORATION BALANCE SHEET DECEMBER 31, 2014
Current assets	$ 487,300	Current liabilities	$ 382,300
Investments	642,300	Long-term liabilities	1,002,300
Property, plant, and equipment	1,722,300	Stockholdersâ equity	1,772,300
Intangible assets	305,000		$3,156,900
	$3,156,900

The following information is presented.

1.		The current assets section includes cash $152,300, accountsreceivable $172,300 less $12,300 for allowance for doubtfulaccounts, inventories $182,300, and unearned rent revenue $7,300.Inventory is stated on the lower-of-FIFO-cost-or-market.
2.		The investments section includes the cash surrender value of alife insurance contract $42,300; investments in common stock,short-term (trading) $82,300 and long-term (available-for-sale)$272,300; and bond sinking fund $245,400. The cost and fair valueof investments in common stock are the same.
3.		Property, plant, and equipment includes buildings $1,042,300less accumulated depreciation $362,300; equipment $452,300 lessaccumulated depreciation $182,300; land $502,300; and land held forfuture use $270,000.
4.		Intangible assets include a franchise $167,300; goodwill$102,300; and discount on bonds payable $35,400.
5.		Current liabilities include accounts payable $142,300; notespayable-short-term $82,300 and long-term $122,300; and income taxespayable $35,400.
6.		Long-term liabilities are composed solely of 8% bonds payabledue 2022.
7.		Stockholdersâ equity has preferred stock, no par value,authorized 200,000 shares, issued 72,300 shares for $433,800; andcommon stock, $1.00 par value, authorized 400,000 shares, issued102,300 shares at an average price of $10. In addition, thecorporation has retained earnings of $315,500.

Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)

lemonhound836

Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.

SARGENT CORPORATION BALANCE SHEET DECEMBER 31, 2014
Current assets	$ 488,120	Current liabilities	$ 383,120
Investments	643,120	Long-term liabilities	1,003,120
Property, plant, and equipment	1,723,120	Stockholdersâ equity	1,773,120
Intangible assets	305,000		$3,159,360
	$3,159,360

The following information is presented.

1.		The current assets section includes cash $153,120, accountsreceivable $173,120 less $13,120 for allowance for doubtfulaccounts, inventories $183,120, and unearned rent revenue $8,120.Inventory is stated on the lower-of-FIFO-cost-or-market.
2.		The investments section includes the cash surrender value of alife insurance contract $43,120; investments in common stock,short-term (trading) $83,120 and long-term (available-for-sale)$273,120; and bond sinking fund $243,760. The cost and fair valueof investments in common stock are the same.
3.		Property, plant, and equipment includes buildings $1,043,120less accumulated depreciation $363,120; equipment $453,120 lessaccumulated depreciation $183,120; land $503,120; and land held forfuture use $270,000.
4.		Intangible assets include a franchise $168,120; goodwill$103,120; and discount on bonds payable $33,760.
5.		Current liabilities include accounts payable $143,120; notespayable-short-term $83,120 and long-term $123,120; and income taxespayable $33,760.
6.		Long-term liabilities are composed solely of 8% bonds payabledue 2022.
7.		Stockholdersâ equity has preferred stock, no par value,authorized 200,000 shares, issued 73,120 shares for $438,720; andcommon stock, $1.00 par value, authorized 400,000 shares, issued103,120 shares at an average price of $10. In addition, thecorporation has retained earnings of $303,200.

mauvehedgehog773

Below you will find selected information (in millions) fromCoca-Cola Co.âs 2012 Annual Report.

Income Taxes Payable	$471
Short-term Investments and Marketable Securities	8,109
Cash	8,442
Other non-current Liabilities	10,449
Common Stock	1,760
Receivables	4,812
Other Current Assets	2,973
Long-term Investments	10,448
Other Non-current Assets	3,585
Property, Plant and Equipment	23,486
Trademarks	6,527
Other Intangible Assets	20,810
Allowance for Doubtful Accounts	53
Accumulated Depreciation	9,010
Accounts Payable	8,680
Short Term Notes Payable	17,874
Prepaid Expenses	2,781
Other Current Liabilities	796
Long-Term Liabilities	14,736
Paid-in-Capital in Excess of Par Value	11,379
Retained Earnings	55,038
Inventories	3,264
Treasury Stock	35,009

Other information taken from the Annual Report.

Sales Revenue for 2012	$48,017
Cost of Goods Sold for 2012	19,053
Net Income for 2012	9,019
Inventory Balance on 12/31/11	3,092
Net Accounts Receivable Balance on 12/31/11	4,920
Total Assets on 12/31/11	79,974
Equity Balance on 12/31/11	31,921

Required: 1: Using the information provided prepare a BalanceSheet. Separate the current assets from non-current assets andprovide a total for each. Also, separate the current liabilitiesfrom the non-current liabilities and provide a total foreach.
2: Using the Balance Sheet from your answer above, calculate theCurrent Ratio and Return on common stockholdersâ equity.

scarlettermite353

AFM101 Chapter Notes - Chapter 9: Intangible Asset, Capital Asset, Book Value

AFM101 Full Course Notes

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