Long-term obligations (i.e.,debts)that is callable for early payment:
A) Must continue to be classified as a long-term liability by the debtor, if a provision of the debt covenant has been violated.
B) Must continue to be classified as a long-term liability in all situations.
C) Must be reported as current liabilities by the debtor if callable on demand.
D) Can be reported as current liabilities by the debtor only if callable because a provision of the debt covenant has been violated.

Question

Quizplus · Accepted Answer

Long-term obligations that are callable for early payment must be reported as current liabilities by the debtor if they are callable on demand. This is because they have the potential to be called and require payment in the near future. Even if there are no current violations of the debt covenant, if the liability is callable on demand it must still be reported as a current liability on the balance sheet.

Long-Term Obligations (I.e.,debts)that Is Callable for Early Payment