Financial Reporting Problem 2

Week 5 Financial Reporting Problem 2

Company's assets classified

A company's current assets are important to the business because these funds are used to finance the company's 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.

1. Cash

a. Cash on hand or in the bank

2. Cash equivalents

a. Primarily time deposits and certificates of deposits with a maturity rate of three months or less

3. Investments

a. 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.

4. Restricted fund

a. Primarily U.S. Treasury bills

5. Trades Receivable

a. Account Receivable at net realized value.

b. Accounts Receivable is charged off after all resources have been used, such as collections and litigation.

6. Inventories- FIFO or market value

a. Finished Products

b. Work in progress

c. Material

7. Deferred Income Taxes

a. Income already earned, but not taxed

8. 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