Question

A list of financial statement items for Chin Company includes the following: accounts receivable $14,000; prepaid insurance $2,600; cash $10,400; supplies $3,800; and debt investments (short-term) $8,200. Prepare the current assets section of the balance sheet listing the items in the proper sequence. (List current assets in order of liquidity.)

Answer 1

The current assets section of the balance sheet lists the assets in order of liquidity: cash, accounts receivable, prepaid insurance, supplies, and debt investments (short-term).

Step-by-step explanation:

The current assets section of the balance sheet lists the assets in order of liquidity. Liquidity refers to the ease with which an asset can be converted into cash without significant loss in value.

The proper sequence for listing the current assets in this case would be:

1. Cash ($10,400)
2. Accounts receivable ($14,000)
3. Prepaid insurance ($2,600)
4. Supplies ($3,800)
5. Debt investments (short-term) ($8,200)

By listing the assets in this order, it shows the relative ease of converting each asset into cash.

Answer 2

Step-by-step explanation:

The computation of the current assets is shown below:

= Cash + Debt investment (short-term) + accounts receivable + supplies + prepaid insurance

= $10,400 + $8,200 + $14,000 + $3,800 + $2,600

= $39,000

The ranking is done based on the liquidity order

The preparation of the current asserts section is given in the attachment. Kindly find the attachment below.