Reading 33: Understanding the Balance Sheet LOS a习题精选 2010, interpret, balance, discuss

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Session 8: Financial Reporting and Analysis: The Income Statement, Balance Sheet, and Cash Flow Statement
Reading 33: Understanding the Balance Sheet

LOS a: Illustrate and interpret the components of the balance sheet and discuss the uses of the balance sheet in financial analysis.

Duster Company reported the following financial information at the end of 2007:

	in millions
Unearned revenue	$240
Common stock at par	30
Capital in excess of par	440
Accounts payable	1,150
Treasury stock	2,000
Retained earnings	5,160
Accrued expenses	830
Accumulated other comprehensive loss	210
Long-term debt	1,570

Calculate Duster’s liabilities and stockholders’ equity as of December 31, 2007.

Liabilities

Stockholders' equity

A) $3,790 million $3,420 million

B) $3,790 million $7,420 million

C) $3,550 million $7,840 million

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Liabilities are equal to $3,790 million ($240 million unearned revenue + $1,570 long-term debt + $1,150 accounts payable + $830 accrued expenses). Stockholders’ equity is equal to $3,420 million ($30 common stock at par + $440 capital in excess of par – $2,000 treasury stock + $5,160 retained earnings – $210 accumulated other comprehensive loss).

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Are the following essential characteristics of an asset?

Characteristic #1:	The asset provides future economic benefits as a result of past transactions.
Characteristic #2:	The asset is tangible and is obtained at a cost.

Characteristic #1

Characteristic #2

A) Yes Yes

B) No No

C) Yes No

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An asset provides future economic benefits as a result of past transactions. Assets can be tangible or intangible. In some cases, assets are acquired without cost, but will be reported to the extent that they will provide future economic benefit, and thus have value.