ABC Corporation intends to set up a new business unit; they are in the process o

Question

ABC Corporation intends to set up a new business unit; they are in the process of

identifying their current assets and liabilities. Classify the following items into the one of

these categories: current assets, non-current assets, current liabilities, non-current

liabilities, equity, and profit and loss statement. In addition, state the rationale for your

selection.

Finished goods inventory

Raw materials

Bank loan with a repayment date three years from today

Bank loan with a repayment date six months from today

Outstanding receivables from products sold

Depreciation expense

Salary expense for employees

Interest expense (payable to bank for loans)

Money owed to a supplier for raw materials purchased

Dividends to be paid to shareholders two months from today

Retained earnings

Shareholder%u2019s paid-in capital

Machinery and equipment

Accrued salaries and related expenses such as payroll taxes

Income tax to be paid to the US government one month from today

Cash and cash equivalents

Building

Goodwill

Bonds payable to be paid in 15 months

Can some one help me with these all please?

Explanation / Answer

finished good=current asset because inventory can be readily converted into cash.

Raw material=profit and loss statement bcoz it is expense

Bank loan=non -current. bcoz it is long term liability

Bank loan repayment 6 mnths=current liability bcoz it is short term liability

outstanding receivable=current asset bcoz accrued income are converted into cash within shorter period.

Depreciation expense-Profit and loss statement bcoz P/L statement shows all income and expense and it is an expense

salary expense=profit and loss statement.bcoz P/L statement shows all income and expense and it is an expense

int. expense =Profit ande loss statement.bcoz P/L statement shows all income and expense and it is an expense

money owed=current liability.. bcoz creditors are repaid within shorter period..

dividends=current liability.bcoz dividend payables come under current liability as these are for shorter period

Retained earnings=Equity. bcoz these are shareholders portion.

shareholder pai in capital=Equity bcoz company and owners are two separate entity company is liable to pay to shareholders...

machinery and equipment=non current. bcoz these are fixed asstes.

accrued salary=current liablity bcoz all outstanding expenses are current liability

incmoe tax=current liability bcoz these will be converted into cash within 1 mnth

cash and cash equivalent= current asset

Building=non current bcoz it is a fixed asset

Goodwill= non current asset bcoz it is an intangible asset

bonds payable =non current liability . bcoz any payment beyond 12 months are non current liability

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.