Now that we have completed Chapters 1 through 6 and have developed an understanding of assets, both short-term and long-term, apply your understanding of what you have learned to the following questions.

Part 1 Current and long-term assets

From the perspective of a potential long-term investor, describe what you might look for when examining the assets of a corporation. Include in your answer an understanding of how short-term assets and long-term operating assets are different and what role they each play in a companys performance. What might the different asset balances indicate to you as they change from year-to-year? What relationships would you look for between current assets and long-term assets? If its helpful, apply your answer to a particular company or industry (but be sure to indicate what company or industry you are using.) Be sure to include at least two different current assets in your answer and at least two different long-term assets.

Part 2 Contra-assets

What is a contra-asset? Give two examples of contra-assets. Why are contra-assets used?

What kind of transaction causes and increase to contra-asset accounts? Give an example of a transaction that would decrease a contra-asset account.

What might it indicate to the readers of the financial statements if a contra-asset account has a negative balance?