Chapter 6, Problem 6.16EX

To determine

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity), over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Current assets: Current assets refer to the assets of a business, which are kept in reserve for the purpose of converting them into cash, in a short time period, or within twelve months.

Example: Some of the examples of current assets are as follows:

• Cash
• Short Term Investment
• Accounts Receivable
• Prepaid Expenses
• Inventory

To show: the presentation of merchandise inventory in the balance sheet.