1. For each item, state whether it should be classifed as a current liability on
ID: 2373385 • Letter: 1
Question
1. For each item, state whether it should be classifed as a current liability on the December 31, 2011, balance sheet. Assume that the operating cycle is short than one year. If the item should not be classified as a current liablilty, indicate where on the balance sheet it should be presented.
2. For each item identified as a current liability in part (1), State the account title that is normally used to report the item on the balance sheet.
3. Why would an investor or a creditor be interested in whether an item is a current or long-term liability?
The Following items represnt liablilities on a firm's balance sheets:
a. An amount of money owed to a supplier based on the terms 2/20, n/40, for which no note was executed.
b. an amount of money owed to a creditor on a note due April 30th 2011.
c. an amount of money owed to a creditor on a note due august 15th, 2012.
d. an amount of money owed to emplees for the work performed during the last week in Dec.
e. an amount of money owed to a bank for the use of borrowed funds due on march 1 2011
f. An amount of money owed to a creditor as an annual installment pauyment on a ten-year note.
g. an amount of money owed to the federal government based on the companys annual income.
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