Question

On January 1, 2020, Carla Vista Co., a calendar-year company, issued $1,800,000 of notes payable, of which $450,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2020, is:


a) Current liabilities, $1,800,000.

b) Long-term debt, $1,800,000.

c) Current liabilities, $450,000; Long-term Debt, $1,350,000.

d) Current liabilities, $450,000; Long-term Debt, $900,000.

Answer 1

Answer:

c) Current liabilities, $450,000; Long-term Debt, $1,350,000.

Explanation:

The presentation of the long term liabilities of the balance sheet is presented below:

Liabilities section

Current liabilities

Note payable $450,000

Long term liabilities

Remaining balance $1,350,000

Total liabilities $1,800,000

Since the note payable is due for four years for $450,000 each so it shows the current liabilities and the remaining balance is transferred to the long term liabilities