Question

A company that produces drugs is preparing a balance sheet. Which of the following would be most likely to be considered a long-term asset on this balance sheet?

1) A patent for a drug held by the company
2) the inventory of chemicals used to produce the drugs made by the company
3) the cash reserves of the company
4) commercial paper held by the company

Answer 1

A patent for a drug held by the company would most likely be considered a long-term asset on the company's balance sheet due to its longevity and potential to generate income over time. hence option 1) is the correct answer.

Step-by-step explanation:

On a company's balance sheet that produces drugs, the item most likely to be considered a long-term asset would be a patent for a drug held by the company. This is because a patent is an intangible asset that provides exclusive rights to the company for a significant period, typically 20 years for pharmaceutical patents, and it can generate revenue over time. In contrast, items such as the inventory of chemicals, cash reserves, and commercial paper are more liquid and typically classified as current assets or short-term investments.