Question

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

Answer 1

Answer:

(a) A note payable for $100,000 due in 2 years. - Non-current liability

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

(c) Interest payable of $15,000 on the mortgage - current liability

(d) Accounts payable of $60,000 - current liability

Explanation:

Current liabity is a liability that its obligations will be paid within a year. For example, accounts payable, a loan that must be repaid in 6months.

Non-current liability is a liability that its obligations will be paid more than a year. For example long term loan that has a life span of 5years.

So in the question:

(a) A note payable for $100,000 due in 2 years. - Non-current liability

(b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. - Both ( $200,000 payable in ten years is a non-current liability while the $annual payment of $20,000 is a current liability.

(c) Interest payable of $15,000 on the mortgage - current liability

(d) Accounts payable of $60,000 - current liability