The current portion of long-term debt should:

• A. Be reported as a current liability on the balance sheet
• B. Be included in shareholders' equity
• C. Be disclosed only in the notes to the financial statements
• D. Remain classified as a noncurrent liability until paid

Answer: (A)

Verified step by step guidance

1. Understand the concept of 'current portion of long-term debt': This refers to the portion of a company's long-term debt that is due within the next 12 months. It is important to classify this correctly on the balance sheet.
2. Review the classification of liabilities: Liabilities are divided into current liabilities (due within one year) and noncurrent liabilities (due after one year). The current portion of long-term debt falls under current liabilities because it is payable within the next year.
3. Analyze the options provided: The correct classification of the current portion of long-term debt is as a current liability on the balance sheet. It is not part of shareholders' equity, nor is it disclosed only in the notes, and it cannot remain classified as a noncurrent liability since it is due within one year.
4. Consider the accounting standards: According to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), the current portion of long-term debt must be reported as a current liability to provide accurate financial information to stakeholders.
5. Conclude the reasoning: Based on the definitions and accounting standards, the current portion of long-term debt should be reported as a current liability on the balance sheet, ensuring proper classification and transparency in financial reporting.