Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Classified Balance Sheet Components

Financial Accounting

2. Transaction Analysis

Classified Balance Sheet Components

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Multiple Choice

Which of the following costs are reported as assets on the classified balance sheet of a manufacturer?

Sales commissions

Interest expense

Raw materials inventory

Advertising expenses

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Verified step by step guidance

Understand the concept of assets: Assets are resources owned by a company that are expected to provide future economic benefits. On a classified balance sheet, assets are categorized into current and non-current assets.

Identify the nature of raw materials inventory: Raw materials inventory represents the cost of materials that are yet to be used in production. Since these materials will be used to create goods that can generate revenue, they are considered an asset.

Differentiate between expenses and assets: Sales commissions, interest expense, and advertising expenses are costs incurred during operations and are reported as expenses on the income statement, not as assets on the balance sheet.

Classify raw materials inventory: Raw materials inventory is reported as a current asset under the 'Inventory' section of the classified balance sheet because it is expected to be used or converted into finished goods within the operating cycle.

Conclude why raw materials inventory is the correct answer: Unlike the other costs listed, raw materials inventory provides future economic benefits and meets the definition of an asset, making it appropriate for inclusion on the classified balance sheet.