B is corrent. ASC 210-10-20 Glossary states that current liabilities are obligations whose liquidation is reasonably expected to require the use of current assets or the creation of other current liabilities. This means that generally, current liabilities are liabilities due within 1 year of the balance sheet date. Clearly, accounts payable ($19,000), dividends payable ($5,000) and income tax payable ($9,000) are current liabilities. Generally bonds payable are a long-term liability; however, since these bonds are due in year 2, they must be reported as a current liability at 12/31/Y1 ($34,000 face less $2,000 discount, or $32,000). Therefore, total current liabilities are $65,000 ($19,000 + $5,000 + $9,000 + $32,000). The deferred income tax payable ($4,000) is classified as a long-term liability because it is related to the noncurrent asset, property, plant, and equipment. Similarly, the notes payable ($6,000) are classified as long-term because they are due in year 3.
A is incorrect because it incorrectly includes the notes payable, due 1/19/Y3.
C is incorrect because it incorrectly includes the discount on bonds payable.
D is incorrect because it incorrectly includes the deferred income tax liability.
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