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EXERCISE 5-1 (15–20 minutes)(a)If the equity investment (preferred stock) is readily marketableand held primarily for sale in the near term to generate incomeon short-term price differences, then the account should appearas a current asset and be included with trading securities. If, onthe other hand, the preferred stock is not a trading security, itshould be classified as available-for-sale. Available-for-salesecurities are classified as current or noncurrent dependingupon the circumstances.(b)If the company accounts for the treasury stock on the costbasis, the account should properly be shown as a reduction oftotal stockholders’ equity. (c)Stockholders’ equity.(d)Current liability.(e)Property, plant, and equipment (as a deduction).(f)If the warehouse in process of construction is being constructedfor another party, it is properly classified as an inventoryaccount in the current assets section. This account will beshown net of any billings on the contract. On the other hand, ifthe warehouse is being constructed for the use of this particularcompany, it should be classified as a separate item in theproperty, plant, and equipment section.(g)Current asset.(h)Current liability.(i)Retained earnings.