Question

Select from the option list provided the appropriate balance sheet classification for each asset below. Each choice may be used once, more than once, or not at all.

Asset	Classification
1. Land
2. Debt sinking fund
3. Capital lease
4. Inventory
5. Goodwill

Answer 1

1) Fixed asset

since land is a fixed asset and carried out in the business for more than one accounting year , land is classified has fixed asset.

2) long- term investment

Debt sinking fund is a fund kept by company to retire the existing debt issued by company , so it is a long-term asset which can be classified under investments.

3)Fixed asset

In case of capital lease the lessee recieve the right to use the asset , so the lease asset can be classified has an fixed asset.

4 ) current asset

Inventory is a current asset since it is only carried below an accounting year , we classify the asset which is carried in businness for less than one year is classified has current asset.

5) Intangible asset.

Goodwill is considered as an intangible asset because it didnot has an physical existance like land , building .Goodwill cannot be seened by us but it exists in the company