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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

O’Neil Office Supplies has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Collins Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be reported in the balance sheet of (a) O’Neil Office Supplies and (b) Collins Auto Sales Co.?

(a)

To determine

Fixed Assets: It refers to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue. Examples of fixed assets are Plant, Property, Equipment, Land, and Buildings.

To name: the account head for automobiles and trucks to be reported in the balance sheet by Company O Office and Supplies.

Answer

Company O Office and Supplies should report its automobiles and trucks under the account head Property, Plant, and Equipment or Fixed Assets.

Explanation

Company O uses the automobiles and trucks for delivering its goods such as office supplies and equipment to its customers. Thus, it is used in the business activity of the company to generate revenue.

(b)

To determine

To name: the account head for automobiles and trucks to be reported in the balance sheet by Company C Auto Sales.

Answer

Company C Auto Sales should report its automobiles and trucks under the account head Current Assets as Inventory.

Explanation

Company C sells the automobiles and trucks as goods to its customers. Thus, it is a business activity of the company to generate revenue.

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