On a classified balance sheet, inventory is classified as which of the following?

• A. Noncurrent asset
• B. Current liability
• C. Long-term liability
• D. Current asset

Answer: (D)

Verified step by step guidance

1. Understand the concept of a classified balance sheet: A classified balance sheet organizes assets and liabilities into categories based on their liquidity or time frame for conversion into cash or settlement.
2. Learn the definition of inventory: Inventory refers to goods available for sale or raw materials used in production, which are expected to be sold or used within a short period, typically within one year.
3. Identify the classification of inventory: Inventory is considered a 'Current Asset' because it is expected to be converted into cash or sold within the operating cycle of the business.
4. Review the other options: Noncurrent assets are long-term resources like property, plant, and equipment. Current liabilities are obligations due within one year, and long-term liabilities are obligations due after one year. Inventory does not fit into these categories.
5. Conclude that inventory is classified as a 'Current Asset' on a classified balance sheet because it meets the criteria of being liquid within the operating cycle.