Question

Which of the following statements is true?

a. If any portion of a non-current liability is to be paid in the next year, the entire debt should be classified as a current liability.
b. "Current maturities of non-current debt" refers to the amount of interest on notes payable that must be paid in the current year.
c. Even though current and non-current debt must be shown separately on the statement of financial position, it is not necessary to prepare a journal entry to recognize this.
d. A non- current liability is an obligation that is expected to be paid within one year.

Answer 1

Statement (d) is true. A non-current liability is an obligation that is expected to be paid beyond one year.

Step-by-step explanation:

Statement (d) is the true statement. A non-current liability refers to an obligation that is expected to be paid beyond one year. It is not expected to be paid within one year. Non-current liabilities are reported separately from current liabilities in the statement of financial position. Current liabilities are obligations that are expected to be paid within one year or within the normal operating cycle of a company, whichever is longer.