Multiple Choice
Which of the following statements is true about liabilities in the context of the bankruptcy estate?
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9. Current Liabilities
Types of Liabilities
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Which of the following should be classified as current liabilities?
A
Accounts payable due within 60 days
B
Bonds payable due in 10 years
C
Mortgage payable due in 15 years
D
Preferred stock dividends declared but not yet paid (payable in 2 years)
Verified step by step guidance1
Understand the definition of current liabilities: Current liabilities are obligations that a company expects to settle within one year or the operating cycle, whichever is longer.
Analyze each item in the problem: Determine whether the obligation is due within one year or the operating cycle. If it is, it qualifies as a current liability.
Evaluate 'Accounts payable due within 60 days': Since this is due within 60 days, it falls within the one-year timeframe and should be classified as a current liability.
Evaluate 'Bonds payable due in 10 years': Bonds payable due in 10 years are long-term liabilities because they are not expected to be settled within one year.
Evaluate 'Preferred stock dividends declared but not yet paid (payable in 2 years)': Since the dividends are payable in 2 years, they do not meet the criteria for current liabilities and are considered long-term obligations.
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