Question

United Supply has a $25 million liability at December 31, 2018, of which $5 million is payable in each of the next five years. United Supply reports the liability on the balance sheet as:

A $5 million current liability and a $20 million long-term liability.
A $20 million current liability and a $5 million long-term liability.
A $25 million long-term liability.
A $25 million current liability.

Answer 1

Answer:

A $5 million current liability and a $20 million long-term liability.

Explanation:

The current liability is that liability which is paid for less than one year or we can say short term obligations which are to pay within one year

The current liabilities include account payable, short term obligations, etc

And, the long term liability are those liabilities which are to pay for more than one year

In the given situation, the $5 million is payable in each of the next five years whereas the $25 million reflects the long term liability