All of the following are current assets except:
A) cash.
B) accounts receivable.
C) buildings.
D) prepaid rent.
The Correct Answer and Explanation is :
The correct answer is C) buildings.
Explanation:
Current assets are assets that are expected to be converted into cash, sold, or consumed either in one year or within the company’s operating cycle, whichever is longer. These assets are considered highly liquid, meaning they can easily be converted into cash or used up in the short term.
Here’s why each option fits or does not fit as a current asset:
- A) Cash: Cash is the most liquid asset because it is already in a form that can be used for transactions or investments. It is considered a current asset since it is readily available for use by the company.
- B) Accounts receivable: Accounts receivable represents money owed to the company by customers for goods or services provided on credit. These amounts are typically expected to be received within a year, making accounts receivable a current asset.
- C) Buildings: Buildings are considered long-term or non-current assets. This is because they have a useful life extending beyond one year, and their primary purpose is to provide value over a long period (typically more than one year). They are classified as property, plant, and equipment (PP&E) on the balance sheet.
- D) Prepaid rent: Prepaid rent is an advance payment made for rent, typically for a lease that will be used within the coming year. Since this payment provides a future economic benefit in the short term, prepaid rent is classified as a current asset.
In summary, the key distinction is that current assets are those that are expected to be used or converted into cash within one year. Buildings do not meet this criterion, as they are long-term assets, thus making C) buildings the correct answer as the one that is not a current asset.
I’ll now generate an image illustrating the difference between current and non-current assets.
Here is an image comparing current assets (like cash, accounts receivable, and prepaid rent) with non-current assets (like buildings and property). It visually distinguishes the two categories to help with understanding. Let me know if you need any further explanation or have more questions!
