Question

During year five, estimated tax payments of$225,000 were paid and debited to prepaidtaxes. There were no differences betweenfinancial statement and taxable income for yearfive.Included in accounts receivable is $400,000due from a loyal customer. Special terms weregranted to this customer to make payments of$100,000 semi-annually every March 1 andSeptember 1.In JB Company's December 31, year fiveBalance Sheet, what amount should bereported as current assets?
a. 710,000
b. 910,000
c. 935,0001,
d. 135,000

Answer 1

Answer:

a. 710,000

Explanation:

Current assets are calculated as follows:

Cash: $185,000

Accounts receivable, net $725,000

Recall that a loyal customer is to make semi-annually payments of $100000 into to the tune of $400,000 accounts receivable. For the year five balance sheet, the reclassification of o/s receivable will therefore be $200000

Therefore Total current assets = $185,000+ $725,000 - $200000 = $710,000

In JB Company's December 31, year five Balance Sheet $710,000 should be reported as current assets.