Multiple Choice
Which of the following transactions best illustrates a cash outflow related to receivables?
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7. Receivables and Investments
Types of Receivables
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Which of the following would NOT be classified as a current asset?
A
Accounts Receivable
B
Trade Receivables due in 60 days
C
Notes Receivable due in 18 months
D
Interest Receivable
Verified step by step guidance1
Understand the definition of current assets: Current assets are assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.
Review each option provided in the problem and determine whether it meets the criteria for a current asset. For example, Accounts Receivable and Trade Receivables due in 60 days are expected to be converted into cash within one year, so they qualify as current assets.
Analyze Notes Receivable due in 18 months. Since this asset is expected to be converted into cash beyond one year, it does not meet the definition of a current asset and would instead be classified as a non-current asset.
Evaluate Interest Receivable. Interest Receivable is typically expected to be collected within one year, so it qualifies as a current asset.
Conclude that the correct answer is Notes Receivable due in 18 months, as it does not meet the criteria for classification as a current asset.
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