Question

In: Finance

Which of the following represents a current liability? A. Retained earnings B. Long-term loan C. Income...

Which of the following represents a current liability?

A.

Retained earnings

B.

Long-term loan

C.

Income Tax expense

D.

Bond issue

E.

None of the given options

Solutions

Expert Solution

C) Income tax expense

Reason :

  • A tax expense is a liability owed to federal, state/provincial, and/or municipal governments within a given period, typically over the course of a year.Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by the income received or generated before taxes, after factoring in such variables as non-deductible items, tax assets, and tax liabilities.
  • Retained earnings (RE) is the amount of net income left over for the business after it has paid out dividends to its shareholders. A business generates earnings that can be positive (profits) or negative (losses). Positive profits give a lot of room to the business owner(s) or the company management to utilize the surplus money earned. Often this profit is paid out to shareholders, but it can also be re-invested back into the company for growth purposes. The money not paid to shareholders counts as retained earnings.
  • A form of debt that is paid off over an extended time frame that exceeds one year in duration. Obtaining a long term loan provides a business with working capital that it can use to purchase assets, inventory or equipment which can then be used to create additional income for the business
  • bond issue - bonds sold by a corporation or government agency at a particular time and identifiable by date of maturity. bond certificate, bond - a certificate of debt (usually interest-bearing or discounted) that is issued by a government or corporation in order to raise money; the issuer is required to pay a fixed sum annually until maturity and then a fixed sum to repay the principal

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