The Basis for Classifying Assets as Current or Noncurrent Is

question 120

Multiple Choice

The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in

• A) inventory back into cash, or 12 months, whichever is shorter.
• B) receivables back into cash, or 12 months, whichever is longer.
• C) tangible fixed assets back into cash, or 12 months, whichever is longer.
• D) inventory back into cash, or 12 months, whichever is longer.

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Definitions:

Work Centers

Specific locations within a manufacturing operation where specific tasks or groups of tasks are carried out.

Conversion Cost

The total cost of direct labor and manufacturing overhead to convert raw materials into finished goods.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and constitute a significant portion of the production costs.

Equivalent Units

A concept used in cost accounting to express the amount of work done on partially completed goods in terms of fully completed units.