Question

Busch Company has these obligations at December 31. For each obligation, indicate whether it should be classified as a current liability, long-term liability, or both. (a) A note payable for $100,000 due in 2 years. select a balance sheet section (b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. select a balance sheet section (c) Interest payable of $15,000 on the mortgage. select a balance sheet section (d) Accounts payable of $60,000. select a balance sheet section

Answer 1

Busch Company

Indication of whether the obligation be classified as a current liability, long-term liability, or both:

(a) A note payable for $100,000 due in 2 years. Long-term Liability

(b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. Both.

Every year, $20,000 would be classified as Current Liability while the remaining balance is long-term liabilities.

(c) Interest payable of $15,000 on the mortgage. Both

If the interest payable is to be settled at the end of the mortgage, then it is classified as only long-term.

(d) Accounts payable of $60,000. Current Liability

Step-by-step explanation:

Busch's current liabilities are financial obligations that are due for settlement within the next accounting period of 12 months or less.

The long-term liabilities of Busch Company are those financial obligations that are not due for settlement within the next accounting period.

For some long-term liabilities, Busch may settle some part within 12 months. That part that can be settled within the accounting period are classified as current while the other parts are non-current.