Question

At December 31, 2020, Pharoah Company has outstanding three long-term debt issues. The first is a $2,370,000 note payable which matures June 30, 2023. The second is a $5,580,000 bond issue which matures September 30, 2024. The third is a $12,850,000 sinking fund debenture with annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.Prepare the required note disclosure for the long-term debt at December 31, 2020.

Answer 1

Answer:

The first is a $2,370,000 note payable which matures June 30, 2023.

The second is a $5,580,000 bond issue which matures September 30, 2024.

annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.

Year       Amount of long term debt       Working      

2021                   $0

2022              $2,570,000

2023              $4,940,000                       = $2,570,000 + $2,370,000

2024              $8,150,000                        = $,2,570,000 + $5,580,000

2025              $2,570,000

2026              $2,570,000

Long term debt is debt that must be paid in a period of time longer than one year. Debts that are due in less than one year are classified as current debts or liabilities. That is why there is no long term debt for 2021 (current year).