Multiple Choice
Which of the following is an example of a current liability?
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9. Current Liabilities
Types of Liabilities
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Which of the following most likely would be classified as a current liability?
A
Accounts payable due in 60 days
B
Mortgage payable due in 10 years
C
Deferred tax liability for future periods
D
Bonds payable maturing in 5 years
Verified step by step guidance1
Understand the definition of a current liability: A current liability is an obligation that is expected to be settled within one year or the operating cycle, whichever is longer.
Analyze each option provided in the problem to determine whether it meets the criteria for a current liability.
Option 1: 'Accounts payable due in 60 days' - Accounts payable is typically classified as a current liability because it is due within a short period, usually less than one year.
Option 2: 'Mortgage payable due in 10 years' - A mortgage payable due in 10 years is a long-term liability because it is not expected to be settled within one year.
Option 3: 'Deferred tax liability for future periods' and Option 4: 'Bonds payable maturing in 5 years' - Both are long-term liabilities as they are obligations that will be settled beyond one year. Therefore, the correct classification for a current liability is 'Accounts payable due in 60 days.'
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