The distinction between a current asset and other assets is based on:

• A. the asset's expected conversion to cash or use within one year or the operating cycle, whichever is longer
• B. the asset's depreciation method
• C. the asset's physical form
• D. the asset's original purchase price

Answer: (A)

Verified step by step guidance

1. Understand the concept of current assets: Current assets are assets expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.
2. Review the operating cycle: The operating cycle is the time it takes for a company to purchase inventory, sell it, and collect cash from customers. This cycle can vary depending on the industry.
3. Eliminate irrelevant options: The asset's depreciation method, physical form, and original purchase price are not criteria for distinguishing current assets from other assets.
4. Focus on the correct criterion: The distinction is based on the expected conversion to cash or use within one year or the operating cycle, whichever is longer.
5. Apply this understanding to classify assets: When categorizing assets, always consider their expected liquidity or usage timeframe to determine if they are current or non-current.