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Ch 5 & 6 - Chapter 5 Solutions 1(a If the investment in...

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Chapter 5 Solutions 1. (a) If the investment in preferred stock is readily marketable and help primarily for sale in the near term to generate income on short-term price differences, then the account should appear as a CA and be included with trading securities. If, on the other hand, the preferred stock is not a trading security, it should be classified as available for sale. Available for sale securities are classified as current or noncurrent depending upon the circumstances (b) If the company accounts for the treasury stock on the cost basis, the account should property be shown as a reduction of total stockholder’s equity (c) S/E (d) CL (e) PPE (f) If the warehouse in process of construction is being constructed for another party, it is property classified as an inventory account in the CA section. This account will be shown net of any billings on the contract. On the other hand, if the warehouse is being constructed for the use of this particular company, it should be classified as a separate item in the PPE section.
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