C is corrent. Determine the amount to be included in the current liability section of the balance sheet. Although the mortgage note payable is a long-term liability, the amount due within the next 12 months, $16,000, should be reclassified to the current liability section of the balance sheet. The short-term debt that the company is refinancing with long-term debt is reclassified as a long-term liability if the company has both the intent and the ability to consummate the refinancing. Deferred tax assets and liabilities are classified as current or noncurrent based upon the related asset or liability account. For depreciation, the related asset account is a noncurrent asset, and the deferred tax liability is included in the noncurrent liability section of the balance sheet. Therefore, the only item which should be included in the current liability section of the balance sheet is the $16,000 of long-term debt that is due within the next 12 months.
A is incorrect because the current portion of the mortgage note payable should be included as a current liability.
B is incorrect because the short-term debt that the company is refinancing with long-term debt is reclassified as a long-term liability if the company has both the intent and the ability to consummate the refinancing.
D is incorrect because deferred tax assets and liabilities are classified as current or noncurrent based upon the related asset or liability account. For depreciation, the related asset account is a noncurrent asset, and the deferred tax liability is included in the noncurrent liability section of the balance sheet.
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