When a classified balance sheet is prepared, merchandise inventory is:

(A) Not reported as a current asset because it is not sufficiently liquid.
(B) Usually listed after prepaid expenses according to its nearness to liquidity.
(C) Reported as a current asset.
(D) Usually reported before accounts receivable according to its nearness to liquidity.
(E) Reported as a current liability.

The correct answer is (C) Reported as a current asset.

Explanation:

The current asset, also called a current or liquid asset, is the asset of a company that can become liquid (become money) in less than twelve months. For example, bank money, stocks, and financial investments.

We can also understand the current asset as all those resources that are necessary to carry out the day-to-day activities of the company. It is known as current because it is a type of asset that is in continuous movement, can be sold, used, converted into liquid money or delivered as payment without too much difficulty.

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