A long-term liability should be reported as a current liability in a classified

Question

A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt: Is callable by the creditor. Is secured by adequate collateral. Will be refinanced with stock. Will be refinanced with debt.









A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt: Is callable by the creditor. Is secured by adequate collateral. Will be refinanced with stock. Will be refinanced with debt.







Is callable by the creditor. Is secured by adequate collateral. Will be refinanced with stock. Will be refinanced with debt. Is callable by the creditor. Is secured by adequate collateral. Will be refinanced with stock. Will be refinanced with debt.

Explanation / Answer

Hi,

Option A ( Is callable by the creditor) is the correct answer.

Explanation:

A short term liability is generally required to be paid by the company within a period of 1 year. However, if the liability is callable the creditor, the the company is not obligated to pay the liability within 1 year. Hence, in this case, a current liability can be reported as a long term debt in the balance sheet.

Thanks.

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