A classified balance sheet shows subtotals for current and noncurrent categories. Which of the following pairs correctly represents these categories?

• A. Current and noncurrent assets and liabilities
• B. Current assets and current liabilities
• C. Current assets and noncurrent liabilities
• D. Current assets and noncurrent assets

Answer: (A)

Verified step by step guidance

1. Understand the structure of a classified balance sheet: A classified balance sheet organizes assets and liabilities into current and noncurrent categories to provide a clearer financial picture.
2. Define current assets: These are assets expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer. Examples include cash, accounts receivable, and inventory.
3. Define noncurrent assets: These are assets that are not expected to be converted into cash or used up within one year. Examples include property, plant, and equipment (PPE), and intangible assets.
4. Define current liabilities: These are obligations expected to be settled within one year or the operating cycle, such as accounts payable and short-term loans.
5. Define noncurrent liabilities: These are obligations not due within one year, such as long-term loans and bonds payable. The correct classification pairs are 'current and noncurrent assets' and 'current and noncurrent liabilities.'