Financial Reporting Problem 2
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Week 5 Financial Reporting Problem 2
Companys assets classified
A companys current assets are important to the business because these funds are used to finance the companys day-to-day operations and pay expenses. According to Abbott Laboratories (2012), the 2011 Annual Report shows their current assets or assets that can convert into cash within a year consist of cash, cash equivalents, investments, restricted funds, trade receivables, and inventories.
Cash on hand or in the bank
Cash equivalents
Primarily time deposits and certificates of deposits with a maturity rate of three months or less
Investments
Marketable equity securities classified as available for sale at fair market value. Investments that are not traded in the stock exchange are recorded at cost.
Restricted fund
Primarily U.S. Treasury bills
Trades Receivable
Account Receivable at net realized value.
Accounts Receivable is charged off after all resources have been used, such as collections and litigation.
Inventories- FIFO or market value
Finished Products
Work in progress
Material
Deferred Income Taxes
Income already earned, but not taxed
Other Prepaid Expenses and Receivables
Table 1.1 shows the total amount of Abbot Laboratories current assets ending December 31, 2011.
Assets
Totals
Cash and cash equivalents
$6,812,820
Investments
$1,284,539
Restricted Funds
Trade Receivables
$7,683,920
Total Inventory
$3,284,249
Deferred Income
$2,700,540
Other Prepaid Expenses and Receivables
$2,002,706
Total Current Assets
$23,768,774
Table 1.1 provided by Abbott Laboratories 2011 Annual Report
Cash Equivalents
Cash equivalents can be U.S. government Treasury bills, bank certificates, and money market funds, which are safe investments that can be