Sofia bought a couch that required a $60 down payment and $60 per month for the next eight months. Which type of liability does this describe?

Question

a long-term liability

a non-liquid liability

a consumer liability

a current liability

Answer 1

The situation described involves a couch purchase with a down payment and subsequent monthly payments. Since Sofia will be making monthly payments for the next eight months, this means the liability is expected to be settled within one year. Therefore, the type of liability that best fits this scenario is:

a current liability.

Current liabilities are obligations that are expected to be settled within one year or within the operating cycle of the business, whichever is longer.