chapter 14 Accounting and Financial Statements

Using the content from Chapter 14 of your assigned book, create your own example of the Debt Utilization Ratio of debt to total assets ratio as demonstrated on page 456 of your text book. You answer should result in a percentage. Also, distinguish for your classmates the difference between Revenue and net income and give the four steps of the Accounting Cycle.

PLEASE HELP!!!!!

Facial tage est ad Chapter Page 456 TABLE 14.6 Microsoft Corporation Consolidated Balance Sheets (in millions, except per share data) (In millions) June 30, 2015 2017 Assets Current assets: 11.946 87.663 Cash and cash equivaleat: Short-term investments 121,822 125,318 133,765 Total cash, cash equivalents, and short-term investmeat: Accounts receivable, net of allons ce for doubtful accounts of $377 and 8345 132,981 22,431 26,451 Inventories 2,161 Other 6,751 5,103 Total current assets 169,562 162,695 29,460 23,734 Property and equipment, aet of accumulated depreciation of $29,223 and $24,179 Operating lease right-of-use assets Equity and other investments 6,686 6,555 1,862 35,683 6,023 35,122 Goodwill Iatangible assets, et 5,053 10,106 Other long-term Assets 6,076 Total assets 8258,845 $250,312 Liabilities and stockholders' equity Current liabilities: $ 8,617 8 7,390 Accounts payable Short-term debt 9,072 3,995 1,049 Carreat portion of long-term debt Accrued compensation 6,103 5,819 Short-term income taxes 2.121 715 Short-term unearned revenue 28.905 24.013 Other 8.744 58,485 55,745 Total curreat Habilities Long-term debt Leag-term income taxes 72,242 76,073 30,265 13,485 Leag-term ceared revenue 3.815 2,643 Deferred income taxes 541 5,734 5,568 5,372 Operating lease liabilities Other long-term. liabilities Total liabilities 5,211 3,549 176189 176.130 162.601 Commitments and coatiagencies Stockholders' equity Common stock and paideia capital - chases authorised 24.000 outstanding 7,577 and 7.708 Retained earning 71,223 69,315 13,692 17,769 Stockholders' equity Common stock and paid-ia capital - shares authorised 24.000 outstanding 7,577 and 7,708 69,315 Retained earnings 13,692 17,769 627 Accumulated other comprehensive income (los) Total stockholders' equity Total liabilities and stockholders' equity (2,157) 2718 87,711 $255,845 8250,312 Going Green Stranded Assets Pose a Financial and Environmental Risk The term stranded assets is becoming more popular in financial reporting, especially for the oil and gas Page 453 industry. Stranded assets are assets that are not recoverable. These assets come with a high environmental price and have the potential to be left unused if tougher environmental regulations are passed. For the oil and gas industry, this may mean more untapped oil and gas reserves. Stranded assets create significant risk for companies and their shareholders. According to the CDP-a group that gathers environmental data for shareholders-deforestation alone could result in $1 trillion of stranded assets for public companies, particularly those in the oil, lumber, and cattle industries. As a result, more companies have begun to report environmental risks in their financial reports. One survey found that 27 percent of the risks identified in company sustainability reports were being reported in financial reports as well. Attracting (or appeasing) investors is one of the largest drivers of this trend. Additionally, if climate risk could potentially impact a firm's bottom line or the value of its assets, failing to report this information could be seen as misleading. For instance, the Securities and Exchange Commission investigated whether ExcxonMobil had valued some of its assets correctly to account for increasing environmental regulations. This shift toward greener accountability has implications for the possible development of generally accepted accounting principles for sustainability concerns.? Critical Thinking Questions 1. Should companies include environmental costs, or "stranded assets. " into its accounting statements? 2. How might climate change and other environmental risks negatively impact a firm's assets or bottom line? 3. What might be some advantages to reporting and monitoring environmental costs? Assets. All asset accounts are listed in descending order of guidity--that is, how quickly each could be turned into cash Current asset 3, also called short-term assets, are those that are used or converted into cash within the course of a calendar year. Cash is followed by temporary investments, accounts receivable and inventory, in that order. Accounts receivable refers to money owed the company by its clients or customers who have promised to pay for the products at a later date. Accounts receivable usually includes an allowance for bad debts that management does not expect to collect. The bad-debts adjustment is normally based on historical collections experience and is deducted from the accounts receivable balance to present a more realistic view of the payments likely to be received in the future. called net receivables. Inventory may be held in the form of raw materials, work-in-progress, or inished goods ready for delivery. Long-term or fixed assets represent a commitment of organizational funds of at least one year. Items classified as fled include long term investments, such as plants and equipment, and intangible assets, such as corporate goodwill," or reputation, as well as patents and trademarks. Liabilities. As seen in the accounting equation, total assets must be financed either through borrowing (Liabilities) or through owner investments (owners' equity). Current liabilities include a firm's financial obligations to short-term creditors, which must be repaid within one year, while longterm liabilities have longer repayment terms. Accounts payable represents amounts owed to suppliers for poods and services purchased with credit. For example, if you buy gas with a BP credit card, the purchase represents an account payable for you and an account receivable for BP). Other liabilities include vages earned by employees but not yet paid and taxes owed to the government. Occasionally, these accomts are consolidated into an accrued expenses account, representing all paid financial obligations incurred by the organization. Owners' Equity. Owners' equity includes the owners' contributions to the organization along with income earned by the Page 457 cognization and retained to focentioned romth and development The girations to sell fall its assets Facial tage est ad Chapter Page 456 TABLE 14.6 Microsoft Corporation Consolidated Balance Sheets (in millions, except per share data) (In millions) June 30, 2015 2017 Assets Current assets: 11.946 87.663 Cash and cash equivaleat: Short-term investments 121,822 125,318 133,765 Total cash, cash equivalents, and short-term investmeat: Accounts receivable, net of allons ce for doubtful accounts of $377 and 8345 132,981 22,431 26,451 Inventories 2,161 Other 6,751 5,103 Total current assets 169,562 162,695 29,460 23,734 Property and equipment, aet of accumulated depreciation of $29,223 and $24,179 Operating lease right-of-use assets Equity and other investments 6,686 6,555 1,862 35,683 6,023 35,122 Goodwill Iatangible assets, et 5,053 10,106 Other long-term Assets 6,076 Total assets 8258,845 $250,312 Liabilities and stockholders' equity Current liabilities: $ 8,617 8 7,390 Accounts payable Short-term debt 9,072 3,995 1,049 Carreat portion of long-term debt Accrued compensation 6,103 5,819 Short-term income taxes 2.121 715 Short-term unearned revenue 28.905 24.013 Other 8.744 58,485 55,745 Total curreat Habilities Long-term debt Leag-term income taxes 72,242 76,073 30,265 13,485 Leag-term ceared revenue 3.815 2,643 Deferred income taxes 541 5,734 5,568 5,372 Operating lease liabilities Other long-term. liabilities Total liabilities 5,211 3,549 176189 176.130 162.601 Commitments and coatiagencies Stockholders' equity Common stock and paideia capital - chases authorised 24.000 outstanding 7,577 and 7.708 Retained earning 71,223 69,315 13,692 17,769 Stockholders' equity Common stock and paid-ia capital - shares authorised 24.000 outstanding 7,577 and 7,708 69,315 Retained earnings 13,692 17,769 627 Accumulated other comprehensive income (los) Total stockholders' equity Total liabilities and stockholders' equity (2,157) 2718 87,711 $255,845 8250,312 Going Green Stranded Assets Pose a Financial and Environmental Risk The term stranded assets is becoming more popular in financial reporting, especially for the oil and gas Page 453 industry. Stranded assets are assets that are not recoverable. These assets come with a high environmental price and have the potential to be left unused if tougher environmental regulations are passed. For the oil and gas industry, this may mean more untapped oil and gas reserves. Stranded assets create significant risk for companies and their shareholders. According to the CDP-a group that gathers environmental data for shareholders-deforestation alone could result in $1 trillion of stranded assets for public companies, particularly those in the oil, lumber, and cattle industries. As a result, more companies have begun to report environmental risks in their financial reports. One survey found that 27 percent of the risks identified in company sustainability reports were being reported in financial reports as well. Attracting (or appeasing) investors is one of the largest drivers of this trend. Additionally, if climate risk could potentially impact a firm's bottom line or the value of its assets, failing to report this information could be seen as misleading. For instance, the Securities and Exchange Commission investigated whether ExcxonMobil had valued some of its assets correctly to account for increasing environmental regulations. This shift toward greener accountability has implications for the possible development of generally accepted accounting principles for sustainability concerns.? Critical Thinking Questions 1. Should companies include environmental costs, or "stranded assets. " into its accounting statements? 2. How might climate change and other environmental risks negatively impact a firm's assets or bottom line? 3. What might be some advantages to reporting and monitoring environmental costs? Assets. All asset accounts are listed in descending order of guidity--that is, how quickly each could be turned into cash Current asset 3, also called short-term assets, are those that are used or converted into cash within the course of a calendar year. Cash is followed by temporary investments, accounts receivable and inventory, in that order. Accounts receivable refers to money owed the company by its clients or customers who have promised to pay for the products at a later date. Accounts receivable usually includes an allowance for bad debts that management does not expect to collect. The bad-debts adjustment is normally based on historical collections experience and is deducted from the accounts receivable balance to present a more realistic view of the payments likely to be received in the future. called net receivables. Inventory may be held in the form of raw materials, work-in-progress, or inished goods ready for delivery. Long-term or fixed assets represent a commitment of organizational funds of at least one year. Items classified as fled include long term investments, such as plants and equipment, and intangible assets, such as corporate goodwill," or reputation, as well as patents and trademarks. Liabilities. As seen in the accounting equation, total assets must be financed either through borrowing (Liabilities) or through owner investments (owners' equity). Current liabilities include a firm's financial obligations to short-term creditors, which must be repaid within one year, while longterm liabilities have longer repayment terms. Accounts payable represents amounts owed to suppliers for poods and services purchased with credit. For example, if you buy gas with a BP credit card, the purchase represents an account payable for you and an account receivable for BP). Other liabilities include vages earned by employees but not yet paid and taxes owed to the government. Occasionally, these accomts are consolidated into an accrued expenses account, representing all paid financial obligations incurred by the organization. Owners' Equity. Owners' equity includes the owners' contributions to the organization along with income earned by the Page 457 cognization and retained to focentioned romth and development The girations to sell fall its assets