QQuestionAccounting
QuestionAccounting
Common categories of a classified balance sheet include Current Assets, Long-Term Investments, Plant Assets, Intangible Assets, Current Liabilities, Long-Term Liabilities, and Equity. For each of the following items, identify the balance sheet category where the item typically would best appear. If an item does not appear on the balance, indicate that instead.
| Account Title | Classification | Account Title | Classification |
| --- | --- | --- | --- |
| 1. Interest receivable | | 11. Bonds payable (due in 10 years) | |
| 2. Machinery | Plant assets | 12. Trucks | |
| 3. Prepaid rent (2 months of Rent) | | 13. Mortgages payable (due in 6 years) | |
| 4. Equipment | | 14. Automobiles | |
| 5. Repairs expense | | 15. Notes payable (due in 3 years) | |
| 6. Land | Current assets | 16. Utilities expense | |
| 7. Depreciation expense-Building | | 17. Services revenue | |
| 8. Office equipment | | 18. Notes receivable (due in 2 years) | |
| 9. Cash | Current assets | 19. Interest payable (due in 1 week) | |
| 10. Buildings | | 20. Long-term investment in stock | |
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Answer
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Step 1:: Interest receivable
Interest receivable is a short-term asset representing interest that a company expects to collect from loans or investments given to other entities. This type of account falls under the category of Current Assets.
Step 2:: Machinery
Machinery is a long-term asset used in the production process and is part of the Plant Assets category.
Step 3:: Prepaid rent (2 months of Rent)
Prepaid rent is a current asset since it represents a short-term benefit that will be used up within one year or less.
Step 4:: Equipment
Equipment is a long-term asset used in the operations of a business and is part of the Plant Assets category.
Step 5:: Repairs expense
Repairs expense is an operating expense that reduces the net income of a company. It does not belong on the balance sheet but rather on the income statement.
Step 6:: Land
Land is a long-term asset that is not subject to depreciation or amortization and is part of the Plant Assets category. However, if the land is held for sale in the ordinary course of business, it should be classified as Current Assets instead. In this case, the problem does not provide enough information to make that determination.
Step 7:: Depreciation expense-Building
Depreciation expense is an operating expense that reduces the net income of a company. It does not belong on the balance sheet but rather on the income statement.
Step 8:: Office equipment
Office equipment is a long-term asset used in the operations of a business and is part of the Plant Assets category.
Step 9:: Cash
Cash is a current asset representing the most liquid form of asset a company holds.
Step 10:: Buildings
Buildings are long-term assets used in the production process and are part of the Plant Assets category.
Step 11:: Bonds payable (due in 10 years)
Bonds payable are long-term liabilities representing debt obligations of a company.
Step 12:: Trucks
Trucks are long-term assets used in the operations of a business and are part of the Plant Assets category.
Step 13:: Mortgages payable (due in 6 years)
Mortgages payable are long-term liabilities representing debt obligations of a company.
Step 14:: Automobiles
Automobiles are long-term assets used in the operations of a business and are part of the Plant Assets category.
Step 15:: Notes payable (due in 3 years)
Notes payable are long-term liabilities representing debt obligations of a company.
Step 16:: Utilities expense
Utilities expense is an operating expense that reduces the net income of a company. It does not belong on the balance sheet but rather on the income statement.
Step 17:: Services revenue
Services revenue is a revenue account that increases the net income of a company. It belongs on the income statement.
Step 18:: Notes receivable (due in 2 years)
Notes receivable are short-term assets representing amounts owed to the company by other entities. This type of account falls under the category of Current Assets.
Step 19:: Interest payable (due in 1 week)
Interest payable is a current liability representing short-term debt obligations of a company.
Step 20:: Long-term investment in stock
Long-term investments in stock are long-term assets representing ownership in other companies.
Final Answer
| Account Title | Classification | | --- | --- | | Interest receivable | Current Assets | | Machinery | Plant Assets | | Prepaid rent (2 months of Rent) | Current Assets | | Equipment | Plant Assets | | Repairs expense | Expense | | Land | Plant Assets | | Depreciation expense-Building | Expense | | Office equipment | Plant Assets | | Cash | Current Assets | | Buildings | Plant Assets | | Bonds payable (due in 10 years) | Long-Term Liabilities | | Trucks | Plant Assets | | Mortgages payable (due in 6 years) | Long-Term Liabilities | | Automobiles | Plant Assets | | Notes payable (due in 3 years) | Long-Term Liabilities | | Utilities expense | Expense | | Services revenue | Revenue | | Notes receivable (due in 2 years) | Current Assets | | Interest payable (due in 1 week) | Current Liabilities | | Long-term investment in stock | Long-Term Assets |
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