Q2BE - Intermediate Accounting (Kieso)

Question

BE5-2 (L03) Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2017: Cash \(7,000, Land \)40,000, Patents \(12,500, Accounts Receivable \)90,000, Prepaid Insurance \(5,200, Inventory \)30,000, Allowance for Doubtful Accounts \(4,000, and Equity Investments (trading) \)11,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.

Step-by-Step Solution

Answer

The current assets of the company total $128,200.

Step 1: Definition of Prepaid Insurance

Prepaid insurance is considered a current asset that reflects the amount paid in advance for insurance whose benefits will be availed in the future. Amount reported in this account is expensed with the passage of time.

Step 2: Current asset section of the balance sheet

Particular	Amount $	Amount $
Cash		$7,000
Accounts receivables	$90,000
Less: Allowance for doubtful accounts	(4,000)	86,000
Inventory		30,000
Prepaid insurance		5,200
Total current assets		$128,200