alleryStart learning →A bakery has a six-month, $15,000 loan from its bank. How is that loan classified on its balance sheet?
AAs a long-term liability
BAs a current liability
CAs part of owners' equity
DAs an intangible asset
Answer & Solution
Correct answer: B. As a current liability
1. Current liabilities are those due within a year of the balance sheet date.
2. A six-month bank loan falls due well inside that year.
3. It is recorded as a note payable, one of the listed current liabilities.
4. Only claims coming due more than one year out would be long-term, so the six-month term settles the classification.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.4 The Balance Sheet_
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