Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 4-7

ILLUSTRATION 4-1 BALANCE SHEET CLASSIFICATIONS (L.O. 6)

Current assets—includes cash and items which are expected to be converted to cash or sold or consumed within the next year or operating cycle, whichever is longer.

Long-term investments—includes assets such as investments in stocks and bonds of other companies which can be realized in cash, but conversion into cash is not expected within the next year or operating cycle, whichever is longer.

Property, plant, and equipment—includes long-lived tangible assets (land, building, equipment, and machinery) that are currently being used in operations (used to produce goods and services for customers). Assets in this category are often referred to as plant assets or fixed assets. They are not held for resale.

Intangible assets—includes assets that lack physical substance, such as patent, copyright, trademark, or trade names that give the holder exclusive right of use for a specified period of time. Their value to a company is generally derived from the rights or privileges granted by governmental authority.

Current liabilities—includes obligations that are due within a year and are expected to require the use ...