When Classifying Assets on the Balance Sheet

question 153

Multiple Choice

When classifying assets on the balance sheet:

• A) accounts receivable are reported at their net amount.
• B) accounts receivable are amounts a company expects to collect from a party who has signed a promissory note to the company.
• C) prepaid expenses are considered long-term assets.
• D) money-market accounts are prepaid expenses.

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Definitions:

Opportunity for Inspection

A provision allowing a buyer to examine goods before purchase to ensure they meet the agreed standards and specifications.

Substantial-Impairment Requirement

This refers to a legal standard requiring a significant or meaningful reduction in the ability to perform or enjoy a right, service, or facility.

Trivial Defects

Minor imperfections or flaws that do not significantly affect the usability or function of an item or property.

Perfect Tender Rule

A principle under the Uniform Commercial Code permitting a buyer to reject goods if they or their delivery fail to conform exactly to the contract, with certain exceptions.