A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt:
A) Is callable by the creditor.
B) Is secured by adequate collateral.
C) Will be refinanced with stock.
D) Will be refinanced with debt.

Question

Quizplus · Accepted Answer

A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt is callable by the creditor. This means that the creditor has the right to demand repayment of the debt within one year. If the debt is callable, it creates a current obligation for the company to repay the debt within the next year, regardless of the original maturity date of the debt. Therefore, the long-term liability should be reclassified as a current liability on the balance sheet.

A Long-Term Liability Should Be Reported as a Current Liability