Chapter 3, Problem 3.1BYP

Communication Case 3–1

Current versus long-term classification

• LO3–2

Apply your critical-thinking ability to the knowledge you’ve gained. These cases will provide you an opportunity to develop your research, analysis, judgment, and communication skills. You also will work with other students, integrate what you’ve learned, apply it in real-world situations, and consider its global and ethical ramifications. This practice will broaden your knowledge and further develop your decision-making abilities.

A first-year accounting student is confused by a statement made in a recent class. Her instructor stated that the assets listed in the balance sheet of the IBM Corporation include computers that are classified as current assets as well as computers that are classified as long-term (noncurrent) assets. In addition, the instructor stated that investments in marketable securities of other corporations could be classified in the balance sheet as either current or long-term assets.

Required:

Explain to the student the distinction between current and long-term assets pertaining to the IBM computers and the investments in marketable securities.