In a classified balance sheet, how is merchandise inventory typically classified?

• A. Current asset
• B. Long-term investment
• C. Current liability
• D. Property, plant, and equipment

Answer: (A)

Verified step by step guidance

1. Understand that a classified balance sheet organizes assets and liabilities into specific categories based on their nature and liquidity.
2. Recall that current assets are assets expected to be converted into cash or used up within one year or the operating cycle, whichever is longer.
3. Recognize that merchandise inventory consists of goods held for sale in the normal course of business, which are expected to be sold within the operating cycle.
4. Identify that because merchandise inventory is intended to be sold within the normal operating cycle, it is classified as a current asset on the balance sheet.
5. Note that other options like long-term investments, current liabilities, and property, plant, and equipment represent different categories that do not fit the nature of merchandise inventory.