Chapter 3, Problem 3.2BYP

Analysis Case 3–2

Current versus long- term classification

• LO3–2, LO3–3

The usefulness of the balance sheet is enhanced when assets and liabilities are grouped according to common characteristics. The broad distinction made in the balance sheet is the current versus long-term classification of both assets and liabilities.

Required:

1. Discuss the factors that determine whether an asset or liability should be classified as current or long-term in a balance sheet.

2. Identify six items that under different circumstances could be classified as either current or long-term. Indicate the factors that would determine the correct classification.