Asked by Heidi Clark on Jul 21, 2024
Verified
Which of the following is not a current liability?
A) A liability due within one year for a business with a fifteen-month operating cycle.
B) A liability due within three months for a business with a two-month operating cycle.
C) A liability due within one year for a business with a nine-month operating cycle.
D) A liability due within fifteen months for a business with a one-year operating cycle.
Operating Cycle
The period it takes for a business to buy inventory, sell products or services, and collect cash from sales.
Current Liability
Financial obligations that are due to be paid within one year or within the normal operating cycle of a business.
- Understand the essence of current liabilities and their presentation in the balance sheet.
Verified Answer
RO
Rachel OlivaJul 25, 2024
Final Answer :
D
Explanation :
A current liability is a liability that is due within one year or one operating cycle, whichever is longer. Option D states a liability due within fifteen months for a business with a one-year operating cycle, which means it is not due within one year or the operating cycle, making it a long-term liability instead of a current liability.
Learning Objectives
- Understand the essence of current liabilities and their presentation in the balance sheet.