1.) Briefly explain the purpose of the disclosure note on significant accounting
ID: 2502498 • Letter: 1
Question
1.) Briefly explain the purpose of the disclosure note on significant accounting policies. Provide two examples of what might be found in this note.
2.) Briefly explain what is meant by a subsequent event. Give two examples of subsequent events.
3.) Explain how management's discussion and analysis of its operations and liquidity may be helpful to investors.
4.) List the circumstances under which land would be classified under the following balance sheet classifications:
1. Current assets.
2. Investments (noncurrent).
3. Property, plant, and equipment.
4. Other noncurrent assets.
5.) You are reviewing the December 31, 2013, financial statements of Ellie's Antiques. Ellie's management is considering an initial public offering of their shares. The following items come to your attention:
a. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2014. The bonds were purchased November 20, 2013.
b. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount.
c. The accounts receivable account includes $20,000 due in three years from officers and employees and a two-year, 8% note for $25,000 due from a customer. The loan enabled the customer to buy equipment needed to process materials purchased from Ellie's Antiques.
Required:
Determine the proper balance sheet presentation and amounts for the above items.
Explanation / Answer
Disclosure notes typically span several pages and either explain or elaborate upon the data presented in the financial statements themselves, or provide information not directly related to any specific item in the statements. Throughout this text you will encounter examples of items that usually are disclosed this way. For instance, the fair values of financial instruments and
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