Which of the following items is classified as a current asset on a balance sheet?

Current assets are assets that a company expects to convert into cash, sell, or consume within one year or within its normal operating cycle. Among the items listed, prepaid expenses are indeed classified as current assets because they represent payments made for goods or services that will be received in the future, typically within the year.

When a company pays for services or goods in advance, such as insurance premiums or rent, these amounts are recorded as prepaid expenses. They are considered assets because they will provide future economic benefits once the service is consumed or the time period for which they were paid expires.

Inventory, on the other hand, is also a current asset, but the answer provided does not reflect that. Accounts payable is a liability, representing what the company owes to suppliers, and long-term investments are classified as non-current assets due to their long-term nature. Thus, in this context, the identification of prepaid expenses highlights their status as current assets effectively.