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Many contingent liabilities do not appear in the balance sheet and instead are just disclosed in the footnotes to the financial statements. Research one public company’s current financial statement and locate the footnotes on contingent liabilities. Provide an explanation of the types of contingent liabilities included in the footnotes. What is the GAAP accounting rule in order for a liability to be actually recorded and included in the balance sheet section? Why aren’t the liabilities you researched from the footnotes included in the liability section of the balance sheet? Why is it important for users of financial statements to read the footnotes and pay attention to the contingent liability section?

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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In addition to presenting the computed answers, please also discuss how you arrived at each answers the accounting problem asks. The accounting problem presents a company’s balance sheet and income statement. The Diamond Gem Cleaning and Maintenance Service Company is in the business of contracting its cleaning and maintenance services to office buildings. The balance sheet and income statement have blank lines. Determine the values that would be appropriate for each blank line. Provide a narrative of how you arrived at each value. In doing so, explain the account being valued and its relationship to the other financial data. For example, if the accounts payable line was missing, explain that you can derive its value based on knowing all the other values of the current liabilities section. Then explain what an account liability is, as well as why it would belong in the current liabilities section of the balance sheet

Please refer to the income statement and balance sheet of the Diamond Gem Cleaning and Maintenance Service Company available down:

Superior papers will mention and explain the following elements when responding to the assignment question:

Provide correct balances for the blank financial account lines.

Provide a narrative about how the values were determined.

Provide a definition and explanation of each account line that was completed

Balance sheet
ASSETS
CURRENT ASSETS
Cash 225,971
Contracts receivables [__A____]
Other assets 162,847
Total current assets 893,868
LONG TERM ASSETS
Equipment [___B____]
TOTAL ASSETS 1,180,660
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable [__C____]
Line of credit 85,000
Accrued expenses 72,495
Income tax payable 46,660
Current portion of notes payable 31,747
Deferred income taxes 78,460
Total current liabilities 571,697
LONG TERM LIABILITIES
Notes payable (long term) 172,467
TOTAL LIABILITIES 744,164
STOCKHOLDERS' EQUITY
Common stock 62,000
Additional paid-in capital 63,862
Retained Earnings [___D___]
Total stockholders' equity 436,496
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY [___E___]
Income sheet
Contract Revenues 5,146,862
Contract Costs [___F____]
Gross Profit 614,343
General and Administrative Expenses 322,356
Operating Income 291,987
Other Expense 25,770
Income Before Provision for Income Taxes 266,217
Provision for Income Taxes [__G____]
Net Income 150,767
Retained Earnings, Beginning Balance [__H____]
Net Income 150,767
Retained Earnings, Ending Balance 310,634

Case 2.1 Intel Case The 2013 Intel Form 10-K can be found at the following Web site: www.pearsonhighered.com/fraser. Using the Form 10-K, answer the following questions: Prepare a common-size balance sheet for Intel for all years presented. Describe the types of assets Intel owns. Which assets are the most significant to the company? Using the notes to the financial statements, discuss the accounting methods used to value assets. What other information can be learned about the asset accounts from the notes? Have there been significant changes to the asset structure from 2012 to 2013? Analyze the accounts receivable and allowance for doubtful accounts. Describe the types of liabilities Intel has incurred. Which liabilities are the most significant to the company? Have there been significant changes to the liability and equity structure from 2012 to 2013? Describe the commitments and contingencies of Intel. Under which classification(s) are deferred taxes listed? What item is the most significant component of deferred taxes? What equity accounts are included on the balance sheet of Intel? Case 2.2 Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template Each chapter in the textbook contains a continuation of this problem. The objective is to learn how to do a comprehensive financial statement analysis in steps as the content of each chapter is learned. Using the 2013 Applied Materials Form 10-K that can be found at www.pearsonhighered.com/fraser, complete the following requirements: Open the financial statement analysis template that you saved from the Chapter 1 Applied Materials problem and input the data from the Applied Materials balance sheet. Be sure to read the notes to the financial statements to determine the correct numbers to input on the template. For example, the company has combined asset and liability accounts and property, plant and equipment has been recorded net of accumulated depreciation. See Note 7 to help you reorganize the data for the template. When you have finished inputting the data, review the balance sheet to make sure there are no red blocks indicating that your numbers do not match the cover sheet information you input from the Chapter 1 problem. Make any necessary corrections before printing out both your input and the common-size balance sheet that the template automatically creates for you. Analyze the balance sheet. Write a summary that includes important points that an analyst would use in assessing the financial condition of Applied Materials.

MATCHING

____ 1. Accelerated Depreciation

____ 2. Double Declining-Balance Method

____ 3. FIFO Method

____ 4. Internal Control System

____ 5. LIFO Method

____ 6. Periodic System

____ 7. Perpetual System

____ 8. Sarbanes-Oxley Act

____ 9. Straight-Line Method

____ 10. Time Value of Money

A. Policies and procedures necessary to ensure the safeguardingof an entity’s assets, the reliability of its accounting
records, and theaccomplishment of overall company objectives..

B. An inventory costing method that assigns the most recentcosts to ending inventory.

C. An inventory costing method that assigns the most recentcosts to cost of goods sold.

D. The system in which the Inventory account is updated at theend of the period.

E. The system in which the Inventory account is increased at thetime of each purchase of merchandise and
decreased at the time of eachsale.

F. A method by which the same dollar amount of depreciation isrecorded in each year of asset use.

G. The concept that indicates that people should prefer toreceive an immediate amount at the present time over an
equal amount in the future.
H. An act of Congress in 2002 intended to bring reform to corporateaccountability and stewardship in the wake of a

number of major corporatescandals.

I. A term that refers to several methods by which a higheramount of depreciation is recorded in the early years of

an asset’s life and a lower amount isrecorded in the later years.

J. A method by which depreciation is recorded at twice thestraight-line rate, but the depreciable balance is reduced
in each period.

SHORTANSWER

Please give a brief answer to each ofthe following questions.

1. 1.Why are shipping terms such asFOB shipping point or FOB destination point, important in decidingownership of inventory
at the end of the year?

2. 2. An effective system of internalcontrol is critical to protecting a company’s investment in threeof its major assets: cash,
accounts receivable, andinventory. For each of the three assets, describe briefly how acompany might protect that asset.

W 3. What is a cash equivalent? Whyis it included with cash on the balance sheet?

4. 4 Define the termgoodwill. Give an example of a transaction that wouldresult in the recording of goodwill on the balance

sheet.

5. 5 What is a contingent liability?Give an example of a contingent liability.

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