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    This post addresses liabilities, bonds, and depreciation.

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    1. What are the criteria for classifying an item as a current liability? What are some examples of current liabilities? Why is it important to classify a portion of long-term debt on a yearly basis as a current liability? What is the implication of misclassifying a liability as current or long-term? How can misclassification of current liabilities be used to cover fraud within an organization.

    2. What is a bond? What are some features of a bond? How do you value bonds? What factors can affect that value?

    3. In Terms of the Income Statement, What is the Effect of Using Different Depreciation Methods?

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    Solution Preview

    1. What are the criteria for classifying an item as a current liability? What are some examples of current liabilities? Why is it important to classify a portion of long-term debt on a yearly basis as a current liability? What is the implication of misclassifying a liability as current or long-term? How can misclassification of current liabilities be used to cover fraud within an organization.

    A current liability is classified as a liability that is due within the current year. The current portion of notes payable and other liabilities that are due are considered current liabilities. Current liabilities also include unearned revenue, accounts payable, accrued income taxes and accrued sales taxes, and credit card liabilities. They are all current liabilities because they will be paid within one year, as of the balance sheet date. It is important to classify a portion of long-term debt on a yearly basis as a current liability because if it is not adjusted, the current liabilities will be understated and the ...

    Solution Summary

    This solution provides a detailed discussion for each question listed, examining current liabilities, bonds, and the effect of different depreciation methods.

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