Just want to seek some clarity on a few item: Purchasing agreement for raw material: Current asset or long-term, current liab or LT liab? Purchasing agreement for PPE: I guess LT asset and LT liabilities? I am asking becasue they ask about current ratio before and after, and I am just not sure to put it as ST or LT. Thanks!
for the long term PPE - yes, LT Asset and LT Liab. However for the Raw material - it is a little more subjective - depends on the “near term” vs. “long term” usage of the raw material. I would think the treatment would be like that for a Capital Lease. A LT Asset would be created - but on the liability side - you would have a Current Portion and a Long Term Portion.
But raw materials, if purchased, would be inventories. Wouldn’t that make it a CA rather than LTA? BTW: for capital lease, if we see it, we must do the PV calculation and separate LT and ST portion? Really hate that! cpk123 Wrote: ------------------------------------------------------- > for the long term PPE - yes, LT Asset and LT Liab. > > > However for the Raw material - it is a little more > subjective - depends on the “near term” vs. “long > term” usage of the raw material. I would think the > treatment would be like that for a Capital Lease. > A LT Asset would be created - but on the liability > side - you would have a Current Portion and a Long > Term Portion.