Assets are classified as current for reporting purposes when
A)shares of common stock in a company's important supplier are acquired to ensure continued availability of raw materials.
B)shares of common stock in another company are acquired to diversify operations.
C)expenditures are made in developing new technologies or advertising products.
D)they are reasonably expected to be turned into cash or to be sold or consumed during the normal operating cycle of the business.
E)they are reasonably expected to be turned into cash or to be sold or consumed within the next three years.

Question

Quizplus · Accepted Answer

Current assets are those assets that are expected to be turned into cash, sold, or consumed within the normal operating cycle of the business, typically one year. Therefore, the only option that fits this definition is D, where the assets are expected to be turned into cash or sold within the normal operating cycle. Options A and B involve investments in other companies and are not related to the normal operating cycle of the business. Option C involves expenditures for product development and advertising, which may have long-term benefits and do not necessarily result in current assets. Option E specifies a time period of three years, which is not a universally accepted criterion for classifying assets as current.

Assets Are Classified as Current for Reporting Purposes When