State the generally accepted accounting principle applicable to 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.
(a)
Trade accounts receivable should be stated at their estimated amount collectible, often referred to as net realizable value. The method most generally followed is to deduct from the total accounts receivable the amount of the allowance for doubtful accounts.
(b)
Land is generally stated in the balance sheet at cost.
(c)
Inventories are generally stated at the lower of cost or market.
(d)
Trading securities (consisting of common stock of other companies) are stated at fair value.
(e)
Prepaid expenses should be stated at cost less the amount apportioned to and written off over the previous accounting periods
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