Long-term liabilities include which of the following?

Long-term liabilities include which of the following?

• A. Bonds payable and long-term notes payable
• B. Accounts payable and wages payable
• C. Accrued expenses and tax payable
• D. Short-term investments and cash

Answer: (A)

Classification by maturity is the main idea. Long-term liabilities are obligations that won’t be settled within one year (or the operating cycle, if longer). Bonds payable represent debt issued to investors with maturities typically several years away, often many years. Long-term notes payable are borrowings evidenced by promissory notes with due dates beyond one year. Because these are not due in the near term, they are reported as long-term on the balance sheet. In contrast, accounts payable and wages payable are settled within the near term; these are current liabilities. Accrued expenses and tax payable are also due within the next year, so current liabilities. Short-term investments and cash are assets, not liabilities. Therefore, bonds payable and long-term notes payable are the items that correctly classify as long-term liabilities.

Classification by maturity is the main idea. Long-term liabilities are obligations that won’t be settled within one year (or the operating cycle, if longer). Bonds payable represent debt issued to investors with maturities typically several years away, often many years. Long-term notes payable are borrowings evidenced by promissory notes with due dates beyond one year. Because these are not due in the near term, they are reported as long-term on the balance sheet. In contrast, accounts payable and wages payable are settled within the near term; these are current liabilities. Accrued expenses and tax payable are also due within the next year, so current liabilities. Short-term investments and cash are assets, not liabilities. Therefore, bonds payable and long-term notes payable are the items that correctly classify as long-term liabilities.