Reference no: EM132635704

Question - You are the independent accountant assigned to the audit of Neophyte Company. The company's accountant, a graduate of Rival State University, has prepared financial statements that contained the following questionable items:

a. The balance sheet reports land at $100,000. Included in this amount is a property held for speculation at a cost of $30,000.

b. Current liabilities include $50,000 for long-term debt that is due in three months. The company has received a suitable firm commitment to refinance the debt for five years and intends to do so.

c. Investments include $20,000 in short-term, high-grade commercial paper, which is a cash equivalent.

Describe the appropriate balance sheet presentation for the above items.

Guiding Hints/Questions:

Review Balance Sheet Classification for Current Assets, Investments, PPE, Current and Long Term Liabilities.

How are liabilities reported when management intends (and have the ability) to refinance the debt before the financial statement issuing date?