Nonfinancial Asset Disclosures You are considering investing in Solid Corporation. The company was established 3 years ago
Question:
Nonfinancial Asset Disclosures You are considering investing in Solid Corporation. The company was established 3 years ago and its sales and net income have expanded very rapidly. Solid Corporation reports current assets of
$350,000 and current liabilities of $290,000 at December 31, 2001. Its noncurrent assets consist of $80,000 invested in equipment and patent rights of $220,000. A review of the notes to the financial statements reveals the following:
a. Solid Corporation borrowed $300,000 from the bank on December 29, 2001, and used the cash to purchase the equipment and patent rights from Tamlet Company.
b. Solid Corporation rents its primary production facility and equipment from Friendly Corporation. Rent is paid annually on March 1.
What additional information about Solid Corporation’s nonfinancial assets would you look for in the notes to Solid’s financial statements before making a judgment on the risk associated with investing in the company?
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith