Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q31Q. (page 238)

What types of contractual obligations must be disclosed in great detail in the notes to the balance sheet? Why do you think these detailed provisions should be disclosed?

Short Answer

Expert verified

Four items for which disclosure is mandatory on the financial statement are:

  1. General debt obligation
  2. Stock option
  3. Pension arrangements
  4. Lease contracts

Step by step solution

01

Definition of Pension Plan

A plan in which the employee and employer both contribute a specific amount when the employee is working, and theemployee will benefit from this account after retirementis known as a pension plan.

02

Items mandatory to be disclosed on the financial statements

  1. General debt obligations include the debt securities issued by the business entity with a specified maturity period.
  2. Stock Option: A benefit is given to the team member under which they are allowed to buy shares at a pre-specified or discounted price.
  3. Pension arrangements: It includes the payment made to employees on their retirement.
  4. Lease contract: Any lease agreement with another company.

All these disclosures are necessary because these contracts are long-term, and the company’s well-being depends on this.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

1. Which of the following statements about IFRS and GAAP accounting and reporting requirements for the balance sheet is not correct?

(a) Both IFRS and GAAP distinguish between current and non-current assets and liabilities.

(b) The presentation formats required by IFRS and GAAP for the balance sheet are similar.

(c) Both IFRS and GAAP require that comparative information be reported.

(d) One difference between the reporting requirements under IFRS and those of the GAAP balance sheet is that an IFRS balance sheet may list long-term assets first.

A comparative balance sheet for Shabbona Corporation is presented below.

Particular

December 31

2017

2016

Assets

Cash

\(73,000

\)22,000

Accounts receivable

82,000

66,000

Inventory

180,000

189,000

Land

71,000

110,000

Equipment

260,000

200,000

Accumulated depreciation – Equipment

(69,000)

(42,000)

Total

\(597,000

\)545,000

Liabilities and stockholder’s equity

Account payable

\(34,000

\)47,000

Bonds payable

150,000

200,000

Common stock (\(1 par)

214,000

164,000

Retained earnings

199,000

134,000

Total

\)597,000

\(545,000

Additional information:

1. Net income for 2017 was \)125,000. No gains or losses were recorded in 2017.

2. Cash dividends of \(60,000 were declared and paid.

3. Bonds payable amounting to \)50,000 were retired through issuance of common stock.

Instructions

(a) Prepare a statement of cash flows for 2017 for Shabbona Corporation.

(b) Determine Shabbona Corporation’s current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and financial flexibility.

2. Current assets under IFRS are listed generally:

(a) by importance.

(b) in the reverse order of their expected conversion to cash.

(c) by longevity.

(d) alphabetically.

Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building $191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Net income for the year for Tanizaki, Inc. was \(750,000, but the statement of cash flows reports that net cash provided by operating activities was \)860,000. Tanizaki also reported capital expenditures of \(75,000 and paid dividends in the amount of \)30,000. Compute Tanizaki’s free cash flow
See all solutions

Recommended explanations on Business Studies Textbooks

Operational Management

Read Explanation

Corporate Finance

Read Explanation

Change Management

Read Explanation

Intermediate Accounting

Read Explanation

Organizational Behavior

Read Explanation

Strategic Direction

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free