Multiple Choice
Which of the following statements about liabilities is true?
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9. Current Liabilities
Types of Liabilities
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Which one of the following is a current liability?
A
Mortgage Payable (due in 10 years)
B
Preferred Stock
C
Bonds Payable (maturing in 5 years)
D
Accounts Payable
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: Mortgage Payable (due in 10 years), Preferred Stock, Bonds Payable (maturing in 5 years), and Accounts Payable.
Evaluate Mortgage Payable: Since it is due in 10 years, it is classified as a long-term liability, not a current liability.
Evaluate Preferred Stock: Preferred Stock represents equity, not a liability, so it cannot be classified as a current liability.
Evaluate Accounts Payable: Accounts Payable is typically due within a short period (usually within one year), making it a current liability.
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