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You have been asked to review the December 31, 2021, balance sheet for Champion Cleaning. After completing your review, you list the following three items for discussion with your superior: An investment of $48,000 is included in current assets. Management has indicated that it has no intention of liquidating the investment in 2022. A $280,000 note payable is listed as a long-term liability, but you have determined that the note is due in 10, equal annual installments with the first installment due on March 31, 2022. Deferred revenue of $114,000 is included as a current liability even though only two-thirds will be recognized as revenue in 2022, and the other one-third in 2023.
Determine the appropriate classification of each of these items. (If no entry is required for classification, choose "No entry":)
Current Long-term
Items Amount Classification Amount Classification
1. Investment
2. Installment note
3. Deferred revenue

Respuesta :

jepessoa

Answer:

1. Investment

  • Long term investment: $48,000

Since this investment will not be liquidated in the current year, then it must be considered long term.

2. Installment note

  • Current portion of long term debt (under current liabilities): $28,000
  • Long term debt: $252,000

The amount that will be paid during 2022 must be included as the current portion of a long term liability.

3. Deferred revenue

  • Current liabilities: $76,000
  • Long term liabilities: $38,000

Any liabilities (including deferred revenue) that are due in more than one year must be reported as long term.

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