Operating Cycle Toni Company manufactures sophisticated power-generation control systems, each taking approximately two years to complete. Because the sales price of these systems is quite high, purchasers are extended credit for 180 days from delivery. Over the years, Toni has accumulated a sizable retained earnings balance.

All of Toni’s other account balances are as follows (in thousands):

a. Prepare a classified balance sheet for Toni Company in good form.

b. Inot Company is a manufacturing company selling small replacement parts to power companies. The parts take about three days to manufacture, and they are sold to customers with payments due in 30 days. Which items in Toni’s balance sheet would you expect to be classified differently if they were in Inot’s balance sheet?
Why?

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Cash Notes receivable from customers (92-day aver- $ 28 age maturity) 1,200 Note receivable from Oregon Power Company (due in 2 years) 410 Note receivable from Toni's president (due in 5 100 years Parts inventory (expected to be used on systems that will be sold in approximately 2.5 years) Inventory in process (1.5-year average expected delivery date) Completed inventory (awaiting delivery) Prepaid insurance (covering next 2 years) Accounts payable (58-day average due date) Salaries payable Bank loan payable (due in 18 months) First mortgage note payable ($400 due in 16 months; remainder due in 5-year intervals thereafter) Common stock 299 3,400 2,100 88 650 41 250 2,400 1,000