Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 1DQ
To determine

Introduction:

  • Short-term investments:

    Investments which are made for a period of less than 12 months are called short-term investments.

  • Current assets:

    Current assets are assets which are either cash or realizable in cash in short-term period. Current assets include cash, cash equivalents, short-term investments, accounts receivables.

Two conditions under which an investment should be classified as current assets.

Expert Solution & Answer
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Answer to Problem 1DQ

Solution:

To classify an investment as a current asset, it should be a short-term investment and should be easily convertible into cash.

Explanation of Solution

An investment can be classified as a current asset if it satisfies the following two conditions:

  1. It should be a short-term investment (investment for a period of 12 months or less)
  2. It should be easily convertible into cash.
Conclusion

Hence, it can be concluded that a short-term investment which is easily convertible into cash, can be classified as Current assets

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Chapter 15 Solutions

Fundamental Accounting Principles

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