What is the total value of current assets for the accrual basis company described?

What is the total value of current assets for the accrual basis company described?

• A. Between $8,000 and $12,000
• B. Between $12,000 and $16,000
• C. Between $16,000 and $20,000
• D. More than $20,000

Answer: (B)

Identifying which items count as current assets on an accrual-basis balance sheet and adding them up is what determines the total. Under accrual accounting, current assets are those you expect to convert to cash or use within a year: cash, accounts receivable (net of any allowance for doubtful accounts), inventory, and prepaid expenses. Long-term assets or investments aren’t included in this total. When you add the current assets described for the company, the sum falls in the twelve-thousand to sixteen-thousand dollar range, which is why the correct choice is the interval between twelve thousand and sixteen thousand. For example, if cash is about two thousand, accounts receivable around seven thousand, inventory about three thousand, and prepaid expenses about one thousand, you’d have roughly thirteen thousand. If there’s an allowance for doubtful accounts, subtract it from accounts receivable to get the net amount.

Identifying which items count as current assets on an accrual-basis balance sheet and adding them up is what determines the total. Under accrual accounting, current assets are those you expect to convert to cash or use within a year: cash, accounts receivable (net of any allowance for doubtful accounts), inventory, and prepaid expenses. Long-term assets or investments aren’t included in this total. When you add the current assets described for the company, the sum falls in the twelve-thousand to sixteen-thousand dollar range, which is why the correct choice is the interval between twelve thousand and sixteen thousand. For example, if cash is about two thousand, accounts receivable around seven thousand, inventory about three thousand, and prepaid expenses about one thousand, you’d have roughly thirteen thousand. If there’s an allowance for doubtful accounts, subtract it from accounts receivable to get the net amount.