Series 7: 9.4.1.4 Footnotes To The Financial Statements

9.4.1.4  Footnotes to the Financial Statements

Footnotes to the balance sheet and income and cash flow statements clarify the summary reports with important financial details and other information. They include a disclosure of the accounting methods used to generate the reports, pension and retirement plan assets and costs, stock options granted to the company’s officers and employees, and contingent liabilities, such as pending legal cases. In addition, the footnotes disclose in detail the specific securities and maturities that make up a single line item, such as “long-term debt.” The footnotes contain vital information that explains and clarifies the snapshots offered in the financial statements.

Sample Question

At the beginning of the year, Ferris Scrap Iron bought a 20-ton electric arc furnace for $500,000. Most of the purchase was fi