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27 January, 13:10

During year five, estimated tax payments of$225,000 were paid and debited to prepaidtaxes. There were no differences betweenfinancial statement and taxable income for yearfive. Included in accounts receivable is $400,000due from a loyal customer. Special terms weregranted to this customer to make payments of$100,000 semi-annually every March 1 andSeptember 1. In JB Company's December 31, year fiveBalance Sheet, what amount should bereported as current assets?

a. 710,000

b. 910,000

c. 935,0001,

d. 135,000

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  1. 27 January, 13:20
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    a. 710,000

    Explanation:

    Current assets are calculated as follows:

    Cash: $185,000

    Accounts receivable, net $725,000

    Recall that a loyal customer is to make semi-annually payments of $100000 into to the tune of $400,000 accounts receivable. For the year five balance sheet, the reclassification of o/s receivable will therefore be $200000

    Therefore Total current assets = $185,000 + $725,000 - $200000 = $710,000

    In JB Company's December 31, year five Balance Sheet $710,000 should be reported as current assets.
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