Classification of Current Liabilities
ABC Automotive Corporation purchased a new car lift for its repair center. Payment for the equipment is due within ten months of the purchase date. How should this obligation be classified, and why?
A
A noncurrent liability, because the obligation is due within twenty-four months.
B
A current liability, because any obligation requiring payment within five years is considered a current liability.
C
A current liability, because the obligation is due within twelve months.
D
Owner's equity, because the equipment is owned by the company's management.
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