Question

Purdum farms borrowed $15 million by signing a five-year note on december 31, 2015. repayments of the principal are payable annually in installments of $3 million each. purdum farms makes the first payment on december 31, 2016 and then prepares its balance sheet. what amount will be reported as current and long-term liabilities, respectively, in connection with the note at december 31, 2016, after the first payment is made?

Answer 1

After paying for the year 2016, at the end of the year, notes payable's balance is now $12M. Since the note is a 5-year accountability, this is part of the long term liability. Therefore, $12M should be reflected in long-term liabilities in the Balance Sheet.