Is livestock considered to be inventory?

The correct choice asserts that livestock is considered inventory because it is categorized as a tangible asset. In the context of agricultural businesses, livestock are indeed tangible assets that are owned by a farmer or producer to generate revenue. As long as these animals are part of the normal operating procedures and are intended for sale—whether for meat, milk, or breeding—they are classified as inventory on a business's balance sheet.

Inventory is generally defined as items that are held for resale in the ordinary course of business. Livestock fits this definition as it is raised and maintained with the expectation of selling for profit or utilizing in a production cycle (e.g., dairy cows). The classification of livestock as inventory is crucial for accounting purposes, as it affects financial reporting and tax implications.

Understanding this classification helps clarify how businesses manage their assets and reflects the operational nature of agricultural enterprises, where living animals constitute an essential part of their inventory.