Question

Among the short-term obligations of Larsen Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Dennison National Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on the balance sheet of Larsen Company as:__________
a. current liabilities.
b. deferred charges.
c. long-term liabilities.
d. intermediate debt.

Answer 1

Answer:

a. current liabilities.

Explanation:

Current liabilities describe debts or a company's obligations that are due for payment within the current financial year or operating cycle.  A company uses current assets to settle current liabilities.  Examples of current liabilities include declared dividends, accounts payables, interest payables, short term loans, and current maturing long term debts.

A sizeable amount of current liabilities calls for attention as a proportionate size of current assets is required to offset them. Sometimes companies may be required to take up debts to pay current liabilities.