301691

Question 1

Clear Co.’s trial balance has the following selected accounts:

Cash (includes $10,000 in bond-sinking
fund for long-term bond payable) $50,000
Accounts receivable 20,000
Allowance for doubtful accounts 5,000
Deposits received from customers 3,000
Merchandise inventory 7,000
Unearned rent 1,000
Prepaid expenses 2,000
What amount should Clear report as total current assets in its balance sheet?

$67,000

$64,000

$72,000

$74,000

Answer 1

A current asset is any asset expected to be sold, consumed, or exhausted through normal operations within one fiscal year or one operating cycle (whichever is greater). Current assets typically include cash and cash equivalents, receivables, inventory, and prepaid expenses. The allowance for doubtful accounts is a contra-current asset. Deposits received from customers and unearned rent are both liabilities; Clear should report the remaining $64,000 as total current assets.

Cash (net of $10,000 in bond-sinking
fund classified as Other Asset) $40,000
Accounts receivable 20,000
Allowance for doubtful accounts (5,000)
Merchandise inventory 7,000
Prepaid expenses 2,000
TOTAL $64,000

Question 2

Relevant Terms
Accounts Receivable
Balance Sheet
Cash Equivalents
Contra
Current Assets
Inventory
Operating Cycle

Reference
2111.01
2111.02
2111.03
2111.04

Authorities
FASB ASC 210-10-45