Midterm Question

Which of these is a fixed asset?

A) The cars on the lot of a used car dealer
B) The inventory of a dealer that sells business computers
c) The mortgage on an office building
D) None of the above

The answer would certainly not be A, since, if the car is for sale, it would be expected to be converted to cash quickly. This makes it a piece of inventory, which is a current asset. We can rule out B for the same reason. C would not be a fixed asset either, since a mortgage is a long-term liability. The correct answer should be D. An example of a fixed asset would be an item used to increase current assets, such as faster mixer at a doughnut shop.

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