Question

Reunion BBQ has $4,000,000 of notes payable due on March 11, 2017, which Reunion intends to refinance. On January 5, 2017, Reunion signed a line of credit agreement to borrow up to $3,500,000 cash on a two-year renewable basis. On the December 31, 2016, balance sheet, Reunion should classify:

Answer 1

Answer:

$500,000 of notes payable as short-term and $3,500,000 as long-term obligations.

Explanation:

SHORT-TERM debt which is also known as current liabilities can be defined as a company or an organisation financial obligations which are expected to be pay off with one year.

LONG TERM liability which is also known as non current liabilities can be defined as the type of liability which is an obligation that occured from a previous event which is not due within one year of the said date of the balance sheet

$4,000,000 of notes payable due on March 11, 2017 -$3,500,000 cash on a two-year renewable basis

=$500,000 of notes payable as short-term

Therefore On the December 31, 2016, balance sheet, Reunion should classify as :

$500,000 of notes payable as short-term and $3,500,000 as long-term obligations.