Payables

Question 1

What are Liabilities

Answer 1

Probable future economic sacrifices arising from obligations.

Question 2

What characteristics makes up current liabilities

Answer 2

Obligations that enter operating cycle

Collections received in advanced

Debt from operations during operating cycle

Other Liabilities less than 1 year

Question 3

How can Long Term debt become current liabilities?

Answer 3

Obligation has a callable option in the event that the debtor violated the agreement and the agreement makes

the obligation callable or

will make it callable if violation is not cured during grace period.

Question 4

A Callable obligation must be classified as current liabilities EXCEPT

Answer 4

Creditor has waved the option

Violation has been satisfied for more than 1 year (creditor loses right to request payment)

It is probable that the violation will be cured during the grace period

Question 5

Short term obligations expected to be refinanced may be excluded from current liabilities only if

Answer 5

Company
Intends on refinancing Long Term

Demonstrates ability to

Question 6

After the Balance sheet date but before the F/S are issued A company pays current liabilities with long term debt. How should this be classified on B/S?

Answer 6

As Non-Current Liabilities with a separate disclosure .