ACC 290 Week 5 Team Financial Reporting Problem - Part 2
Financial Reporting Problem, Part II
PepsiCo is a highly known beverage distributor. The cola started in the late 1800s in a drugstore, and its original name was “Brad’s Drink.” In 1898, cola introduced “Brad’s Drink” to the market. Then, later change the name to Pepsi. It is a large company that has numerous assets and liabilities. Many investors and creditors would be willing to work with this company because they run a good business.
Currents assets are very significant to companies like PepsiCo. In the balance sheet, “current assets are assets that a company expects to convert to cash or use up within one year or its operating cycle, whichever is longer. For most businesses, the cut off for classification as current assets is one year from the balance sheet date” (Kimmel, Weygandt, & Kieso, 2011, p. 49). The company can use these assets to support its routine operations. For example, the company can use the assets to pay their current expenses.
The common type of current assets consist of cash, marketable securities, inventory, accounts receivable, prepaid expenses and additional liquid assets that the company can quickly convert into cash. However, according to Kimmel, Weygandt, and Kieso, 2011, companies normally arrange their current assets in the order in which they anticipate to convert them into cash. Therefore, the proper order for a company to have its assets listed under the current assets is as follows: “cash, (2) short-term investments (such as short-term U.S. government securities), (3) receivables (notes receivable, accounts receivable, and interest receivable), (4) inventories, and (5) prepaid expenses (insurance and supplies)” (Kimmel, Weygandt, & Kieso, 2011, p. 50).
PepsiCo register its assets in the proper order under their current assets. First on the list are its cash and cash equivalents, which is anything that can immediately turn into cash.
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