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Question 1

What is a classified balance sheet?

Answer 1

A classified balance sheet organizes assets and liabilities into subgroups.

Question 2

How are assets and liabilities classified?

Answer 2

Assets and liabilities are grouped into current (short-term) and noncurrent (long-term).

Question 3

What defines current items?

Answer 3

Current items are expected to come due within one year or the company’s operating cycle, whichever is longer.

Question 4

What is the operating cycle?

Answer 4

The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services.

Question 5

How are current and noncurrent items listed in a classified balance sheet?

Answer 5

A classified balance sheet lists current assets and current liabilities before noncurrent assets and noncurrent liabilities.

Question 6

What are the categories of noncurrent assets?

Answer 6

There are three noncurrent asset categories: long-term investments, plant assets, and intangible assets.

Question 7

How are liabilities classified?

Answer 7

Liabilities are classified as current or long-term.