Question

Chevenne corporation's adjusted trial balance contained the following asset accounts at december 31, 2025: cash $8,350, land $46,200, patents $16,700, accounts receivable $90,240, prepaid insurance $5,870, inventory $40,800, allowance for doubtful accounts $5.300, and equity investments (to be sold in the next quarter) $14,720. prepare the current assets section of the balance sheet. (list current assets in order of liquidity.)

Answer 1

The current assets for Chevenne Corporation should be listed in the order of liquidity, consisting of Cash, Accounts Receivable (net of Allowance for Doubtful Accounts), Inventory, Prepaid Insurance, and Equity Investments.

Step-by-step explanation:

The student's question involves the preparation of the current assets section of the balance sheet for Chevenne Corporation as of December 31, 2025. Current assets are considered liquid assets that can be converted into cash within a year. The following items will be included in the section, listed in order of liquidity:

1. Cash $8,350
2. Accounts Receivable $90,240
3. Less: Allowance for Doubtful Accounts $5,300 (to obtain the net accounts receivable)
4. Inventory $40,800
5. Prepaid Insurance $5,870
6. Equity Investments $14,720

Note that Land and Patents are not typically considered current assets as they are not expected to be converted into cash, sold or consumed within one year of the balance sheet date. Also, the Allowance for Doubtful Accounts is subtracted from Accounts Receivable to reflect the estimated uncollectible portion of receivables. The ordered list above reflects the order of liquidity, which is standard practice for presenting current assets on a balance sheet. It's important to keep such assets organized from the most liquid to the least since liquidity can affect an entity's ability to meet short-term obligations.