The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts
A) Inventory back to cash or 12 months, whichever is shorter
B) Receivables back into cash or 12 months, whichever is longer
C) Tangible fixed assets back into cash or 12 months, whichever is longer
D) Inventory back to cash or 12 months, whichever is longer

Question

Quizplus · Accepted Answer

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts inventory back to cash or 12 months, whichever is longer. This means that if it takes more than 12 months for the inventory to be converted back to cash, it will be classified as noncurrent asset. Choice D is the only option that reflects this principle.

The Basis for Classifying Assets as Current or Noncurrent Is