Investments in equity securities are disclosed as current assets on a company's balance sheet if
A) Management intends to sell them within a year and they have a ready market exists.
B) The fair market value cannot be determined.
C) Management intends to convert them into common stock within one year.
D) Management owns less than 50% of the outstanding stock.

Question

Quizplus · Accepted Answer

Equity securities will be disclosed as current assets if the management intends to sell them within a year and if a ready market exists. This is because they can be easily converted into cash within the year. Choice B is incorrect because the fair market value should be determined and disclosed, and only if it cannot be determined should investments be disclosed differently. Choice C is also incorrect as the intention to convert into common stock does not determine their classification on the balance sheet. Lastly, choice D is irrelevant as there is no minimum ownership percentage for the classification of equity securities as current assets.

Investments in Equity Securities Are Disclosed as Current Assets on a Company's