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Chapter 3: 7DQ (page 247)

Commercial paper may show up on corporate balance sheets as either a current asset or a current liability. Explain this statement.

Short Answer

Expert verified

The commercial paper is reported as an asset when it is purchased and as a liability when it is issued by the company.

Step by step solution

01

Commercial paper as a current asset

The company records the commercial paper as a current asset when it is purchased by the company as it is an investment made by them.

02

Commercial paper as a current liability

The commercial paper is recorded as a current liability when the company issues commercial papers for raising funds. This is an obligation under which the company has to repay the funds on the due date.

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