Question

On December 31, 2018, L Inc. had a $2,400,000 note payable outstanding, due July 31, 2019. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. Because L temporarily had excess cash, it prepaid $590,000 of the note on January 23, 2019. In February 2019, L completed a $3,900,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2019. On March 13, 2019, L issued its 2018 financial statements. What amount of the note payable should L include in the current liabilities section of its December 31, 2018, balance sheet?

Answer 1

Answer:

The amount of the note payable which should L include in the current liabilities section of its December 31, 2018, balance sheet is $1,810,000

Explanation:

The computation of notes payable amount is shown below:

Notes payable = Outstanding amount of notes payable - prepaid amount of the note

where,

Outstanding amount of notes payable is $2,400,000

And, the prepaid amount of the note is $590,000

Now, put these values to the above formula

So, the value would be equal to

= $2,400,000 - $590,000

= $1,810,000

The $3,900,000 amount is not considered in the computation part. Thus, it is ignored

Hence, the amount of the note payable which should L include in the current liabilities section of its December 31, 2018, balance sheet is $1,810,000