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Intermediate Accounting (Kieso)
Found in: Page 238

Short Answer

According to generally accepted accounting principles, what is the balance sheet valuation of each of the following assets?

(a) Trade accounts receivable.

(b) Land.

(c) Inventories.

(d) Trading securities (common stock of other companies).

(e) Prepaid expenses.



Trade accounts receivable

Net realizable value




Lower Cost or market value

Trading securities (common stock of other companies)

Fair value

Prepaid expenses


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Step by Step Solution

Definition of Trading Securities

The securities held by the investor, either debt or equity security, to generate a gain by selling them over a short period are known as trading securities.

Balance Sheet Valuations

  1. Trade accounts receivables are reported at their net realizable value. These are reported as their actual value less the allowance for doubtful accounts.
  2. Land is reported at its historical cost.
  3. Inventories of the business entity are either reported on their cost or market value, whichever is lower.
  4. Trading securities held are reported at fair value in the balance sheet.
  5. Prepaid expenses are reported at cost less any amount expensed for the previous period.

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