Question

For the budget period ending December 31, 2015, Aaron Corporation estimates its ending balances for cash as $4,000, accounts receivable as $16,000, finished goods inventory as $12,000, and raw materials inventory as $8,000. Raw materials worth $14,000 will be unpaid. Determine the amount of total current assets that will be reported on the budgeted balance sheet.

A. $40,000
B. $20,000
C. $32,000
D. $26,000

Answer 1

$40,000

Step-by-step explanation:

Current assets are liquid assets which can easily be converted into cash within a year and examples are cash, cash equivalents, debtors or account receivables, and inventory ( raw materials, work in progress and finished goods). In this question, we exclude the unpaid raw materials of $14,000 as they are not a current asset but are a current liability.

Therefore: Current assets are Cash balance plus accounts receivable plus finished goods inventory plus raw materials inventory = $4,000 + $16,000 + $12,000 + $8,000 = $40,000