Question

Janson's Corporation Co's trial balance included the following account balances at December 31, 2016:

Accounts Receivable 12,000
Inventories 40,000
Patent 12,000
Investments 30,000
Prepaid Insurance 6,000
Notes Receivable, due 2019 50,000
Investments consist of treasury bills that were purchased in November and mature in January.Prepaid insurance is for the next two years. What amount should be included in the current asset section of Janson's December 31, 2016 balance sheet?

Answer 1

The total amount of current assets on Janson's December 31, 2016 balance sheet is $85,000. This includes Accounts Receivable, Inventories, Treasury bills that mature in January, and the one-year portion of Prepaid Insurance.

Step-by-step explanation:

To calculate the total amount that should be included in the current asset section of Janson's December 31, 2016 balance sheet, we must identify which assets are considered current. Current assets are those that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.

The following are the relevant account balances and their classifications:

• 
  
• 
  
• 
  
• 
  
• 
  
• 
  

Adding up the current assets:

1. 
   
3. 
   
5. 
   
7. 
   

Thus, the total current assets equal $12,000 + $40,000 + $30,000 + $3,000 = $85,000.

The Treasury bills are included as current assets because they will be converted into cash within one year from the balance sheet date. Prepaid insurance is partially considered a current asset as only the portion that will be used within the next year is recognized as such.