Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 5 of 5
Which of the following are current liabilities?
B. Bonds (for which there is an adequate appropriation of retained earnings) due in eleven months
C. Bonds to be refunded when due in eight months, there being no doubt about the marketability of the refunding issue
A. Bonds (for which there is an adequate sinking fund properly classified as a long-term investment) due in three months
B. Bonds (for which there is an adequate appropriation of retained earnings) due in eleven months
C. Bonds to be refunded when due in eight months, there being no doubt about the marketability of the refunding issue
User Contributed Comments 12
| User | Comment |
|---|---|
| kalps | Why is the last one also not true? |
| quincy | It is not true. Short-term liabilities refinanced or paid from non-current assets are classified as Long-term liability |
| db28luke | But it doesn't mention anything about refinancing? |
| cbb1 | Since there is no doubt about the refundability, it is properly classified as LT. |
| overworked | Why not A? |
| ayep | because A is linked to the sinking fund, which is a LT liability |
| jack1jack | If a bond is due within a year but there are non-current resources allocated to repay it, the bond is not a current liability. In A there are other resources (sinking fund) to repay the bond. Under B, the appropriation of retained earnings basically mean the company has set aside some current asset to deal with the maturing bond. Therefore the maturing bond must be classified as current liability. |
| DonAnd | thanks jack1jack |
| poomie83 | Hang on jack are you saying C is current liab? |
| cslau83 | actually all is correct. Do not know why the answer is only B |
| cslau83 | meaning all are due within 12 months of the balance sheet, regardless of whether there is appropriate sinking fund or appropriation etc etc. |
| johntan1979 | A and C are definitely wrong because there are no matching current assets, just like what jack1jack said. |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
explain the financial reporting and disclosures related to non-current liabilities
CFA® 2024 Level I Curriculum, Volume 2, Module 3.