Assets resources that are expected to provide a company with future economic benefits
Expenditures that are not capitalized are expensed on the income statement
Capitalized will be accounted for on the balance sheet as an asset
Expensed it is added on the income statement and subtracted from rev...
ACG 5026 EXAM 2 CH 2 REVIEW
QUESTIONS AND CORRECT ANSWERS
Assets ✅resources that are expected to provide a company with future economic
benefits
Expenditures that are not capitalized ✅are expensed on the income statement
Capitalized ✅will be accounted for on the balance sheet as an asset
Expensed ✅it is added on the income statement and subtracted from revenues to
determine profit
Characteristics required for an asset to be capitalized (placed on balance sheet)
(current assets through prepaid expenses) ✅1. Must be owned or controlled by the
company. The legal title or unrestricted right to the asset
2. Must possess expected future benefits that can be measured. Benefits can be
expected as cash receipts or s reduction of liabilities
Current assets ✅assets expected to be converted into cash or used in operations
within the next year and is listed in order of liquidity
Cash ✅currency, bank deposits, certificates of deposit and other cash equivalents
Marketable securities ✅short term investments that can be quickly sold to raise cash
Accounts receivable ✅amounts due to the company from customers arising from the
sale of products or services on credit
Inventory ✅goods purchased or produced for sale to customers
Prepaid expenses ✅costs paid in advance for rent, insurance, or other services
Noncurrent assets (longterm fin invest. Through intrangible other assets) ✅not
expected to expire or be converted into cash within one year, or the next operating
cycle. Listed after current assets. Referred to as long term assets
Long term financial investments ✅investments in debt securities or shares of other
firms that management foes not intend to sell in the near future
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