Z corporation owed the following notes payable, which will mature during the coming year. The corporation plans to settle the notes as follows: Note payable A: Refinance by issuing a new 10-year bond.
Note payable B: Give the holder merchandise inventory.
Note payable C: Give the creditor their long-term investment in Z Corporation common shares.
Which note is properly classified as a current liability?
A) Note payable A
B) Note payable B
C) Note payable C
D) All are current liabilities.

Question

Quizplus · Accepted Answer

Note payable B is the only note that is properly classified as a current liability, since the corporation plans to settle it by giving merchandise inventory within the coming year. Note payable A and C will be refinanced or settled by issuing long-term bonds or shares, respectively, and thus are not classified as current liabilities.

Z Corporation Owed the Following Notes Payable, Which Will Mature