Concept explainers
Assets are listed on the
a. purchase date.
b. adjustments.
c. liquidity.
d. balance.
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Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources, on a specific date. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.
To identify: The basis of order of listing assets on the balance sheet.
Answer to Problem 1QC
Explanation of Solution
Explanation for correct answer: The assets and liabilities of the balance sheet are listed based on the order of liquidity. The order of liquidity states that list of assets and liabilities that are quickly and easily available to convert into immediate cash are listed first and so on. In order of liquidity, the assets are listed as current assets, fixed assets, and intangible assets. However, the liabilities are listed as current liabilities and long-term liabilities.
Explanation for incorrect answers:
- Option (a) is incorrect because the format of the balance sheet does not contain date column. The balance sheet only shows the items of assets, liabilities, and equity along with their amount.
- Option (b) is incorrect because the balance sheet records the accounts balances of those assets and liabilities which are already adjusted and transferred to the adjusted trial balance.
- Option (d) is incorrect because the assets and liabilities on the balance sheet are listed in order of their nature of occurrences. But, they not listed in order of their balance.
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Chapter 4 Solutions
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
- Define current assets and current liabilities. Why are current assets and current liabilities separated from noncurrent assets and long-term liabilities on the balance sheet?arrow_forwardWhich of the following describes how assets are listed onthe balance sheet?a. In alphabetical order.b. In order of magnitude, lowest value to highestvalue.c. In the order they will be used up or turned intocash.d. From least current to most currentarrow_forwardDistinguishing between current and non-current items on the balance sheet and presenting a subtotal for current assets and liabilities is referred to as: C . a liquidity-based balance sheetarrow_forward
- Identify the asset from the following list of accounts:a. Notes Payableb. Common Stockc. Retained Earningsd. Inventoryarrow_forwardlisting the assets in order of liquidity ( balance sheet)?arrow_forwardUnder which of the following categories would Accounts Receivable appear? A. long−term assets B. current assets C. long−term liabilities D. current liabilitiesarrow_forward
- In general terms, financial assets appear in the balancesheet at:a. Face value.b. Current value.c. Cost.d. Estimated future sales value.arrow_forwardAccrued revenues would appear on the balance sheet as A. assets B. liabilities C. capital D. prepaid expenssesarrow_forwardTotal Current assets value to be reported in Balance sheet?arrow_forward
- The following are the typical classifications used in a balance sheet: Current assets b. Investments c. Property, plant, and equipment d. Intangible assets e. other assets f. Current liabilities g. Long-term liabilities h. Paid-in capital i. Retained earnings a. Required: For each of the following balance sheet items, use the letters above to indicate the appropriate classification category. (If the item is a contra account, select the appropriate letter with a minus sign.) 1. C Equipment 10. ſa Inventory ces 2. t Accounts payable 11. Patent 3. lа Allowance for uncollectible accounts Land (used in operations) a 12. 4. b Land (held for investment) 13. Accrued liabilities (due in 6 months) 5. g Notes payable (due in 5 years) 14. Prepaid rent (for the next 9 months) 6. Deferred revenue (for the next 12 months) 15. h Common stock 7. f Notes payable (due in 6 months) 16. Building (used in operations) 8. i vAccumulated amount of net income less dividends 17. a Cash 9. b Investment in XYZ…arrow_forwardIt is referred to as: Distinguishing current and non-current items on the balance sheet and providing a subtotal for current assets and liabilities. B. a balance sheet that is unclassifi edarrow_forwarda.Prepare the Current Assests section of the balance sheet b. Prepare the Current Liabiloties Section of the Balance sheetarrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
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