• Identify proper financial statement presentation of plant assets

 

The balance sheet we learned at the beginning of the course in both the report form (assets are first and liabilities and equity are below) and the account form (side-by-side) was fairly simple and straightforward. Balance sheets produced by publicly traded companies contain a lot of information and are almost always in the report form. Like the multi-step income statement, they follow a certain format that includes subtotals. The classified balance sheet groupings and subtotals make the balance sheet easier for investors to read and analyze. The classified balance sheet still proves the accounting equation but it separates assets and liabilities into the following subgroups:

• Current Assets: Can be converted to cash within a year or within the operating cycle, whichever is longer. Current assets include cash, accounts receivable, interest receivable, supplies, inventory, and other prepaid expenses.
• Long-Term Investments: Investments that are not due for more than a year are reported in this section. Long-term investments would include notes receivable or investments in bonds or stocks.
• Plant Assets: Plant assets (also called PP&E or fixed assets) refer to property that is tangible (can be seen and touched) and is used in the business to generate revenue. Plant assets include depreciable assets and land used in the business. The plant asset is recorded with its accumulated depreciation (if any) subtracted below it to get the asset’s book value.
• Intangible Assets: Intangible assets are items that have a financial value but do not have a physical form. These would be things like trademarks, patents, and copyrights.
• Current Liabilities: Like current assets, these are liabilities whose payment are due within a year or within the operating cycle, whichever is longer. Current liabilities include accounts payable, salaries payable, taxes payable, unearned revenue, etc.
• Long-Term Liabilities: Liabilities due more than a year from now would be reported here, including notes payable, mortgage payable, bonds payable, etc.

As an example, here is the classified balance sheet for Home Depot, Inc. Look through it and identify the various subgroups we just discussed for the assets and liabilities on a classified balance sheet.

Other current assets1,040890     Sales taxes payable605656     Deferred revenue2,1161,782     Income taxes payable5511     Current installments of long-term debt1,8391,056     Current operating lease liabilities828—     Other accrued expenses2,6772,611

THE HOME DEPOT INC.
CONSOLIDATED BALANCE SHEET

in millions, except per share data	February 2, 2020	February 3, 2019
Category, Assets
Subcategory, Current Assets:
Cash and cash equivalents	$     2,133	$     1,778
Receivables, net	2,106	1,936
Merchandise inventories	14,531	13,925
Total current assets	Single line 19,810Double line	Single line 18,529Double line
Net property and equipment	22,770	22,375
Operating lease right-of-use assets	5,595	—
Goodwill	2,254	2,252
Other Assets	807	847
Total assets	Single line $     51,236 Double line	Single line $     44,003 Double line
Category, Liabilities and Stockholders’ Equity
Subcategory, Current liabilities:
Short term debt	$     974	$     1,339
Accounts payable	7,787	7,755
Accured salaries and related expenses	1,494	1,506
Total current liabilities	Single line 18,375	Single line 16,716
Long-term debt, excluding current installments	Single line28,670	Single line26,807
Long-term operating lease liabilities	5,066	—
Deferred income taxes	706	491
Other long-term liabilities	1,535	1,867
Total liabilities	Single line 54,352	Single line 45,881
	Single line	Single line
Common stock, par value $0.05; authorized 10,000 shares; issued: 1,786 shares at February 2, 2020 and 1,782 shares at February 3, 2019; Outstanding: 1,077 shares at February 2, 2020 and 1,105 shares at February 3, 2019	89	89
Paid-in capital	11,001	10,578
Retained earnings	51,729	46,423
Accumulated other comprehensive loss	(739)	(772)
Treasury stock, at cost, 709 shares at February 2, 2020 and 677 shares at February 3,2019	(65,196)	(58,196)
Total stockholders’ (deficit) equity	Single line (3,116)	Single line (1,878)
Total liabilities and stockholders’ equity	Single line $     51,236 Double line	Single line $     44,003 Double line
Note See accompanying notes to consolidated financial statements

Now, try out what you learned: