Question

Classify each of the following items as either :

A. Current liability B. Long-term liability C. Not a liability
1. 60-day promissory note.
2. Payment of a 4-year term loan due this year.
3. Salaries payable.
4. FICA taxes payable.
5. Income taxes payable.
6. Payment of a 30-year term loan due this year.
7. Accounts payable.
8. Note payable due in full in two years.

Answer 1

A. Current liability

1. 60-day promissory note.

2. Salaries payable.

3. FICA taxes payable.

4. Income taxes payable.

5. Accounts payable.

B. Long-term liability

1. Note payable due in full in two years.

C. Not a liability

1. Payment of a 4-year term loan due this year.

2. Payment of a 30-year term loan due this year.

Step-by-step explanation:

Current liability refers to a short-term liability that is that is due for a payment within a year.

Long-term liability refers to a liability that is that is due for a payment more than one year in the future.

Not a liability - This implies that a liability is no longer a liability the moment a payment is made for it or the moment it is paid.

Based on the above, we therefore have:

A. Current liability

1. 60-day promissory note.

2. Salaries payable.

3. FICA taxes payable.

4. Income taxes payable.

5. Accounts payable.

B. Long-term liability

1. Note payable due in full in two years.

C. Not a liability

1. Payment of a 4-year term loan due this year.

2. Payment of a 30-year term loan due this year.