United Supply has a $5 million liability at December 31, 2012, of which $1 million is payable in each of the next five years. United Supply reports the liability on the balance sheet as:

Question

Quizplus · Accepted Answer

Of the $5 million liability, $1 million is payable within the next year, making it a current liability. The remaining $4 million is payable in the following years, making it a long-term liability. Therefore, the liability should be reported as a $1 million current liability and a $4 million long-term liability.

United Supply Has a $5 Million Liability at December 31