Question

Which of the following accounts could be categorized as either a current or noncurrent liability depending on date the debt is due?1. Notes payable and deferred taxes.2. Accounts payable and current portion of long-term debt. 3. Deferred taxes and mortgages due in 30 years. 4. Long-term warranties and accounts payable.

Answer 1

Answer:

1. Notes payable and deferred taxes

Explanation:

A note payable is a written document addressed to a lender promising  to pay the stated amount at a future date or on-demand. It is, therefore, a liability in which a party makes a written promise to pay. A note payable is a type of a loan agreement between two entities. It can be current or long term liability depending on the dates stated. If the drafter of the note promises to pay within the current period, then its a current liability.

Deferred tax refers to the tax that is assessed to be payable in the currents period but has not been paid.  The company underpays its tax obligations and records a tax liability to be paid in the future. The liability will be current or long term depending on how the company records it. Should the company choose to pay the tax liability in a future financial period, then it's a long term liability.