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Chester Corp. purchases and develops land to sell in its normal business operations. Its operating cycle is less than one year. In November of this year, it purchased land to develop and sell. The land was not sold as of December 31. How should this land be classified on Chester Corp.’s financial statements? It should be reported in an “Inventory” account in the PP&E section of the balance sheet. It should be reported in a “Land” account in the long-term (or PP&E) section of the balance sheet. It should be reported as part of the “Cost of Goods Sold” account on the income statement. It should be reported in an “Inventory” account in the current asset section of the balance sheet.

Chester Corp. purchases and develops land to sell in its normal business operations. Its operating cycle is less than one year. In November of this year, it purchased land to develop and sell. The land was not sold as of December 31. How should this land be classified on Chester Corp.’s financial statements? It should be reported in an “Inventory” account in the PP&E section of the balance sheet. It should be reported in a “Land” account in the long-term (or PP&E) section of the balance sheet. It should be reported as part of the “Cost of Goods Sold” account on the income statement. It should be reported in an “Inventory” account in the current asset section of the balance sheet.

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter11: Long-term Assets
Section: Chapter Questions
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Chester Corp. purchases and develops land to sell in its normal business operations. Its operating cycle is less than one year. In November of this year, it purchased land to develop and sell. The land was not sold as of December 31. How should this land be classified on Chester Corp.’s financial statements?

  1. It should be reported in an “Inventory” account in the PP&E section of the balance sheet.
  2. It should be reported in a “Land” account in the long-term (or PP&E) section of the balance sheet.
  3. It should be reported as part of the “Cost of Goods Sold” account on the income statement.
  4. It should be reported in an “Inventory” account in the current asset section of the balance sheet.
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