Bake Co.'s trial balance included the following at December 31, Year 1:
Accounts payable $80,000
Bonds payable, due Year 2 300,000
Discount on bonds payable 15,000
Deferred income tax liability 25,000

The deferred income tax liability is not related to an asset for financial accounting purposes and is expected to reverse in Year 2. What amount should be included in the current liability section of Bake's December 31, Year 1 balance sheet?

a) $365,000
b) $390,000
c) $395,000
d) $420,000

B. $390,000

Explanation:

On December 31, 20X6, Bake's current liabilities equal $390,000. Accounts payable are current; the bonds payable, due in 20X7, will mature in the next 12 months are current (minus the discount on the bonds payable); and the deferred tax liability will reverse in the next 12 months and is also current. ($80,000 + $300,000 - 15,000 + $25,000 = $390,000).

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