You are the independent accountant assigned to the audit of Neophyte Company. The company’s accountant, a graduate

of Rival State University, has prepared financial statements that contained the following questionable items:

(a) The balance sheet reports land at $100,000. Included in this amount is a piece of property held for speculation at a cost of $30,000.

(b) Current liabilities include $50,000 for long-term debt that comes due in 3 months. The company has received a suitable firm commitment to refinance the debt for 5 years and intends to do so.

(c) Investments in marketable securities include $20,000 in short-term, high-grade commercial paper which is a cash equivalent.

(d) Please discuss how the above items should be classified and accounted for.

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