Question

On December 1, 2018, your company borrowed $15,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2019, $2,000; 2020, $3,000; 2021, $4,000; and 2022, $6,000. Show how this loan will be reported in the December 31, 2019 and 2018, balance sheets, assuming principal payments will be made when required.

Answer 1

Answer:

Explanation:

The loan will be reported in the December 31, 2019 and 2018, balance sheets, is shown below:-

                              Balance sheet(Partial)

                                                 As of December 31

                                                      2016        2015

Current liabilities

Current portion of long term debt $3,000   $2,000

Long term liabilities

Long term debt                              $10,000   $13,000

Total liabilities                                $13,000     $15,000

On December 2018 we represent the current liability of $2,000 loan because of year 31 December 2019 within of one year and the left portion of the loan represent as long term liability because it is not within one year from the balance sheet.

On December 2019 Loan remains outstanding $13,000 ($2,000 repaid on November 2019) from this amount, on November 30, $3,000 is due. So, $3,000 should be represented as current liability and the left balance $10,000 represented as long term debt.