Adobe Systems Incorporated reported the following accounts and amounts (in millions) in its financial statements for the year ended November 30, 2013.

Accounts Payable$720

Accounts Receivable 610

Accumulated Amortization 450

Accumulated Depreciation 790

Allowance for Doubtful Accounts 10

Cash and Cash Equivalents 830

Equipment 4,955

Income Taxes Payable 10

Notes Payable (long-term) 1,500

Notes Payable (short-term) 15

Notes Receivable (long-term) 210

Prepaid Rent 270

Retained Earnings 6,930

Service Revenue 450

Short-term Investments 2,340

Software 605

Unearned Revenue 780

Prepare the journal entries.

Solution:

In classified balance sheet, assets are represented first. Arrangement starts with most liquid to most long term nature of the asset. First you have to start with current assets. It includes all assets that will change its composition within a year. In this group most liquid one is cash in hand. Then will come short term investments. It can be converted into cash within a very short period. Next will be accounts receivable. It will be net figure after deducting non collectible portion. then you can consider all prepaid expenses. These expenses are related with next period and paid in advance. Finally you can consider inventory. It can be sold and converted into cash. But the process is not so easy. If it is sold then production can get disbursed. So practically it is difficult to sale.

Considering above sequencing of current assets, the group of current assets in classified balance sheet is shown below:

Accounts details Amount Amount

Current assets:

Cash and cash equivalent $830

Short term Investment $2,340

Accounts receivables $610

Less: Allowance for doubtful debts $10

Account receivables net of uncollectibles $600

Prepaid rent $270

Total current assets $4,050