Question

Cone Corporation is in the process of preparing its December 31, 2024, balance sheet. There are some questions as to the proper classification of the following items. What is the proper classification of the following items?

Answer 1

The classification of items on a balance sheet is determined by their liquidity and intended use. Cash and accounts receivable are typically current assets, while bonds payable and long-term investments are considered non-current. Property and equipment are also non-current assets providing long-term benefits.

Step-by-step explanation:

The proper classification of items on Cone Corporation's balance sheet as of December 31, 2024, depends on the liquidity, maturity, and use of the items in question. Current assets and liabilities are generally those expected to be realized, sold, or consumed within a year.

For example, cash and cash equivalents are always considered current assets. Accounts receivable are also current assets unless their payment terms extend beyond the normal operating cycle. Inventory is a current asset as it is expected to be sold within the company's operating cycle.

Long-term liabilities such as bonds payable that have a maturity of more than one year after the balance sheet date are classified as non-current liabilities. Similarly, investments such as stocks and bonds held for more than one year would be non-current assets. The plant, property, and equipment are also non-current assets as they provide long-term economic benefits to the company.