Janson Corporation Company's trial balance included the following account balances on December 31, 2027:

Accounts receivable $ 12,000
Inventory 40,000
Patent 12,000
Investments 30,000
Prepaid insurance 6,000
Notes receivable, due 2030 50,000

Investments consist of treasury bills that were purchased in November, 2027, and mature in January, 2028. Prepaid insurance is for the next 24 months. What amount should be included in the current assets section of Janson's December 31, 2027, balance sheet?

Question

Janson Corporation Company's trial balance included the following account balances on December 31, 2027:

Accounts receivable	$ 12,000
Inventory	40,000
Patent	12,000
Investments	30,000
Prepaid insurance	6,000
Notes receivable, due 2030	50,000

Investments consist of treasury bills that were purchased in November, 2027, and mature in January, 2028. Prepaid insurance is for the next 24 months. What amount should be included in the current assets section of Janson's December 31, 2027, balance sheet?

BlackTom AI · Accepted Answer

To determine the current assets on the balance sheet, we must classify each balance as either current or noncurrent based on usual accounting definitions.
Option 1: $55,000. This would require only 55,000 as current assets, which would be too low given the large current components such as accounts receivable and inventory. The accounts receivable alone are 12,000 and inventory 40,000, already totaling 52,000 before considering other current items.
Option 2: $135,000. This overstates current assets by counting items that are not current, such as long-term investments (30,000) unless they are cash equivalents, and the notes receivable due 2030 (50,000) which is not due within one year. Also the patent (12,000) would not be current.
Option 3: $85,000. This amount matches the sum of all items currently classified as current assets: accounts receivable (12,000), inventory (40,000), the current portion of prepaid insurance (6,000 for 24 months is split into 3,000 current and 3,000 noncurrent, so 3,000 is the current portion), and treasury bills (30,000) treated as cash equivalents since they mature in January 2028, well within a short time frame. The long-term items (notes receivable due 2030, 50,000; patent, 12,000; investments, 30,000 if not treated as cash equivalents) are not included in current assets. When you isolate the items that will be converted to cash or consumed within one year, the total is 12,000 + 40,000 + 3,000 + 30,000 = 85,000.
Option 4: $88,000. This would require including an extra 3,000 in current assets, possibly by misclassifying part of the prepaid insurance or miscounting another item as current. The current portion of prepaid insurance is indeed 3,000, but the 30,000 for treasury bills is already included as cash equivalents, and there are no other current items to reach 88,000 unless a misclassification occurs.
In summary, the correct composition of current assets here includes accounts receivable, inventory, the current portion of prepaid insurance, and the treasury bills as cash equivalents, totaling 85,000. The other options arise from misclassifying long-term items as current or miscounting current portions.

View Explanation

Log in for full answers

Similar Questions

Referring to the Balance Sheet printed in Step 22 of the Practical Exam, what is the amount shown for Total current assets?

Calculate the current assets. Cash 789 Property, plant & equipment 128,859 Bank loan, 5 years 13,482 Inventory 440 Notes payable, 10 years 10,052 Accounts receivable 1,143 Accounts payable 5,766 Unearned revenue 1,929 Prepaid insurance 8,197 Salary payable 1,110 Patents 141,164

Cash itself or items that could be quickly turned into cash or will be used within 1 year are called ________.

Calculate current assets. Cash 932 Property, plant & equipment 133,221 Bank loan, 5 years 16,821 Inventory 635 Notes payable, 10 years 11,405 Accounts receivable 1,767 Accounts payable 5,016 Unearned revenue 1,548 Prepaid insurance 6,341 Salary payable 1,618 Patents 188,385

Which of the following are current assets? (Check all that apply.)

Accounts Receivable is classified on the Blank ______.

Which of the following is included within current assets on a balance sheet?

What are current assets? BlackTom题目解析

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler