A current liability is a debt that is reasonably expected to be paid:

• A. only when the company has sufficient cash
• B. within one year or the operating cycle, whichever is longer
• C. within five years
• D. after more than one year

Answer: (B)

Verified step by step guidance

1. Understand the definition of a current liability: A current liability is a debt or obligation that a company expects to settle within a short period, typically within one year or the operating cycle, whichever is longer.
2. Review the concept of the operating cycle: The operating cycle refers to the time it takes for a company to purchase inventory, sell it, and collect cash from customers. If the operating cycle is longer than one year, the current liability timeframe extends to match the operating cycle.
3. Analyze the options provided in the problem: Evaluate each option to determine which aligns with the definition of a current liability. For example, 'within one year or the operating cycle, whichever is longer' matches the definition.
4. Eliminate incorrect options: Discard options that do not align with the definition of current liabilities, such as 'only when the company has sufficient cash,' 'within five years,' or 'after more than one year.'
5. Select the correct answer: Based on the analysis, choose the option that correctly defines a current liability, which is 'within one year or the operating cycle, whichever is longer.'