Question

Ahmad Co.'s trial balance included the following account balances at December 31, 2013: Accounts receivable $12,000...

Ahmad Co.'s trial balance included the following account balances at December 31, 2013:


Accounts receivable

$12,000

Inventories

40,000

Patent

12,000

Investments

30,000

Prepaid insurance

6,000

Note receivable, due 2016

50,000

Investments consist of treasury bills that were purchased in November and mature in January. Prepaid insurance is for the next two years. What amount should be included in the current asset section of Ahmad's December 31, 2013, statement of financial position?

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Answer #1

Current Assets as on 31st December 2013

Description Amount
Accounts Receivable 12000
Inventories 40000
Investments 30000
Prepaid Insurance 6000
Total $ 88000

Notes :

1) Patent is an intangible asset and doesn't form part of current assets.

2) Since the investments are held for a period of only two months, it is a current asset.

3) Prepaid insurance is for the next two years. As a result, no amount of prepaid insurance has expired. So it is shown at it's full value.

4) Note receivables are due only in 2016 which is beyond the period of twelve months. So it is a non current asset.

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