Which of the following items would be classified as a current asset?
Answer and explanation
Correct answer: D. Insurance paid in advance
- Step 1: Current assets are realised or used within the normal operating cycle or 12 months.
- Step 2: A prepayment is used up in the next period, so it is current.
Answer
Insurance paid in advance.
Why not the others: A factory is held for continuing use over many years, so it is non-current. A patent is an intangible non-current asset. A loan repayable in five years is a non-current asset.
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