Question:
A first-year accounting student is confused by a statement made in a recent class. Her instructor stated
that the assets listed in the balance sheet of the IBM Corporation include computers that are classified as
current assets as well as computers that are classified as noncurrent assets. In addition, the instructor
stated that investments in marketable securities of other corporations could be classified in the balance
sheet as either current or noncurrent assets.
Required:
Explain to the student the distinction between current and noncurrent assets pertaining to the IBM
computers and the investments in marketable securities.
Answer:
IBM manufactures and sells personal and mainframe computers. The computers included as current
assets in the balance sheet for the company represent the cost of inventory available for sale. In addition,
IBM uses computers in its operations. The cost of these computers is included in the property, plant, and
equipment category in the balance sheet.
Marketable securities could be classified as either current or noncurrent assets depending on the intent of
management. If management intends to sell the securities in the next year or operating cycle, they are
classified as current assets. If management intends to hold the securities beyond the coming year or
operating cycle, they are classified as noncurrent assets.
A first-year accounting student is confused by a statement made in a recent class. Her instructor stated
that the assets listed in the balance sheet of the IBM Corporation include computers that are classified as
current assets as well as computers that are classified as noncurrent assets. In addition, the instructor
stated that investments in marketable securities of other corporations could be classified in the balance
sheet as either current or noncurrent assets.
Required:
Explain to the student the distinction between current and noncurrent assets pertaining to the IBM
computers and the investments in marketable securities.
Answer:
IBM manufactures and sells personal and mainframe computers. The computers included as current
assets in the balance sheet for the company represent the cost of inventory available for sale. In addition,
IBM uses computers in its operations. The cost of these computers is included in the property, plant, and
equipment category in the balance sheet.
Marketable securities could be classified as either current or noncurrent assets depending on the intent of
management. If management intends to sell the securities in the next year or operating cycle, they are
classified as current assets. If management intends to hold the securities beyond the coming year or
operating cycle, they are classified as noncurrent assets.
