Final answer:
A bond is a long-term liability representing money a firm must pay back to the investor, different from notes payable, mortgages, and accounts payable. The correct multiple-choice option is (A).
Step-by-step explanation:
The type of long-term liability that represents money lent to the firm that must be paid back is called a bond. A bond is essentially a loan made by an investor to a borrower, typically corporate or governmental. Bonds are different from other debt instruments like notes payable, which are written promises to pay a certain amount at a future date, or mortgages, which are loans secured by property, or accounts payable, which represent short-term debts to suppliers or vendors for goods and services received.
When a company issues a bond, it is committing to paying back the principal amount of the bond (also known as the face value) along with interest to the bondholders at specific intervals. From a business's standpoint, these bonds are recorded as liabilities because they are obligations that the company must fulfill.
Just like individuals, firms can take out loans and must adhere to the agreed terms to repay, including interest. If a firm is unable to make its loan payments, it may face legal action and might have to sell assets to fulfill its obligations. The correct multiple-choice option is (A).