Short-term obligations can be reported as long-term liabilities if:
A) The firm has a long-term line of credit.
B) The firm has tentative plans to issue long-term bonds.
C) The firm intends to and has the ability to refinance as long-term.
D) The firm has the ability to refinance on a long-term basis.

Question

Quizplus · Accepted Answer

Short-term obligations can be reported as long-term liabilities if the firm intends to and has the ability to refinance as long-term. This means that the firm has a plan and the ability to convert the short-term liabilities into long-term liabilities. This decision is based on the expectation that the firm will be able to meet its financial obligations in the long term, so it is appropriate to classify those short-term obligations as long-term liabilities.

Short-Term Obligations Can Be Reported as Long-Term Liabilities If