Exercise 9-2 Current Liabilities

The following items represent liabilities on a firm's balance sheet:

An amount of money owed to a supplier based on the terms 2/20, n/40, fo which no note was executed.

An amount of money owed to a creditor on a note due April 30, 2013.

An amount of money owed to a creditor on a note due August 15, 2014.

An amount of money owed to a to employees for work performed during the last week in December.

An amount of money owed to a bank for the use of borrowed funds due on March 1, 2013.

An amount of money owed to a creditor as an annual installment payment on a ten-year note.

An amount of money owed to the federal government based on the company?s annual income.

Required

For each item, state whether it should be classified as a current liability on the December 31, 2012, balance sheet. Assume that the operating cycle is shorter than one year. If the item should not be classified as a current liability, indicate where on the balance sheet it should be presented.

For each item identified as a current liability in part (1), state the account title that is normally used to report the item on the balance sheet.

Why would an investor or a creditor be interested in whether an item is a current or a long-term liability?