3. You are the independent accountant assigned to the audit of Katherine Company. The companys accountant, a

fellow graduate of the accounting program you attended has prepared financial statements, which contained the

following items:

a)

The balance sheet reports land in total of $250,000. Included in this amount is a piece of property

purchased for a future warehouse site at a cost of $130,000 and a speculative land investment at a

cost of $50,000.

b)

Current liabilities include $950,000 for long term debt that comes due in three months. The

company has received a suitable firm commitment to refinance the debt for five years and intends

to do so.

c)

Investments in marketable securities include $520,000 in short-term high-grade commercial paper

which the company states is cash.

Discuss the appropriate classification of the above items and how they should be disclosed in a financial statement.