Question

Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet? The long-term debt matures within the upcoming year. The company intended to refinance the debt and did so prior to issuance of the financial statements. The creditor has the right to demand payment due to a contractual violation. The long-term debt is callable by the creditor.

Answer 1

Answer:

The situation that would not require the long-term liabilities to be reported as current liabilities on the balance sheet is :"The company intends to refinance the debt and did so prior to issuance of the financial statements".

Explanation:

Analyzing all the options given above:

• The long-term debt matures within the upcoming year- which means that the liability payable is less than one year, therefore, it is a current liability.

• The creditor has the right to demand payment due to a contractual violation- which means that the money is immediately payable. Therefore, it refers to the current liability.

• The long term debt is callable by the creditor - which means it is also to be recorded as a current liability.

The above three statements clearly explain that they are recorded as a current liability, but when the company intends to refinance the debt and did so prior to issuance of the financial statements does not record the current liability.