Which of the following items is a current asset?

• A. Inventory
• B. Land
• C. Long-term investments
• D. Accounts payable

Answer: (A)

Current assets are resources expected to be converted into cash or used up within one year or the operating cycle. Inventory fits this because it consists of goods a business plans to sell in the ordinary course, and as those sales occur, the inventory is converted into cash or receivables. Land is a long-term asset used over many years and not expected to be sold within a year. Long-term investments are also noncurrent assets, held beyond the year. Accounts payable is a liability, not an asset. On the balance sheet, current assets are the most liquid assets, and inventory is included among them due to its role in the near-term operating cycle.