Multiple Choice
Which of the following is a type of liability?
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9. Current Liabilities
Types of Liabilities
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Which of the following items should be classified as a long-term liability?
A
Bonds payable due in 10 years
B
Unearned revenue (to be earned within 6 months)
C
Salaries payable
D
Accounts payable
Verified step by step guidance1
Understand the definition of a long-term liability: A long-term liability is an obligation that a company expects to settle after more than one year or beyond the operating cycle, whichever is longer.
Analyze each option provided in the problem to determine whether it meets the criteria for a long-term liability.
Option 1: 'Bonds payable due in 10 years' - Bonds payable are typically issued as long-term debt, and since they are due in 10 years, they meet the definition of a long-term liability.
Option 2: 'Unearned revenue (to be earned within 6 months)' - Unearned revenue is a liability, but since it will be earned within 6 months, it is classified as a current liability, not a long-term liability.
Option 3: 'Salaries payable' and Option 4: 'Accounts payable' - Both are short-term obligations expected to be settled within the operating cycle, so they are classified as current liabilities, not long-term liabilities.
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