On a classified balance sheet, the Merchandise Inventory account is reported in the:

• A. Current Liabilities section
• B. Noncurrent Assets section
• C. Current Assets section
• D. Owner's Equity section

Answer: (C)

Verified step by step guidance

1. Understand the concept of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into specific categories to provide a clearer financial picture.
2. Review the definition of Merchandise Inventory: Merchandise Inventory represents goods a company holds for sale during its normal business operations. It is considered a short-term asset because it is expected to be sold within a year or the operating cycle.
3. Identify the appropriate section for Merchandise Inventory: Merchandise Inventory is reported under the Current Assets section because it is a resource that will be converted into cash or used up within one year or the operating cycle.
4. Distinguish Merchandise Inventory from other sections: Merchandise Inventory is not part of Current Liabilities (obligations due within a year), Noncurrent Assets (long-term resources), or Owner's Equity (the residual interest in assets after liabilities are deducted).
5. Conclude that Merchandise Inventory is classified under Current Assets on a classified balance sheet, as it aligns with the definition and purpose of this section.