On a classified balance sheet for a merchandising company, how is Merchandise Inventory typically reported?

• A. As a long-term liability because it must be financed
• B. As an intangible asset within other assets
• C. As a long-term asset within property, plant, and equipment
• D. As a current asset within inventory

Answer: (D)

Verified step by step guidance

1. Understand the classification of assets on a classified balance sheet, which separates assets into current and long-term categories based on their liquidity and expected use within one year.
2. Recognize that Merchandise Inventory represents goods held for sale in the normal course of business, which are expected to be sold within the operating cycle or one year, whichever is longer.
3. Recall that current assets include cash, accounts receivable, inventory, and other assets expected to be converted to cash or used up within one year.
4. Identify that Merchandise Inventory is therefore reported as a current asset because it is part of inventory that will be sold and converted into cash in the short term.
5. Conclude that Merchandise Inventory is not classified as a long-term liability, intangible asset, or property, plant, and equipment, but rather as a current asset within the inventory section on the balance sheet.