On January 1 a company determines it will need a new computer system costing $60

Question

On January 1 a company determines it will need a new computer system costing $60,000 three years from now. It desires to make a single deposit into its bank today, January 1, that will grow to $60,000 three years from now. The bank is paying 5% interest compounded annually on such deposits.

With respect to the amount which is on deposit at the bank at the end of year 1, where would it be reported?

A. "other revenues and expenses"
B. stockholders' equity section of the balance sheet
C. non-current asset
D. current asset

Explanation / Answer

With respect to the amount which is on deposit at the bank at the end of year 1, where would it be reported? C. non-current asset (As this will be for 3 years - it is non current assest)

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