Question

On January 1, 2020, Sandhill Co., a calendar-year company, issued $1840000 of notes payable, of which $460000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2020, is:
a. Long-term debt, $1840000.
b. Current liabilities, $460000; Long-term Debt, $920000.
c. Current liabilities, $460000; Long-term Debt, $1380000.
d. Current liabilities, $1840000.

Answer 1

Answer:

The correct answer is Option C.

Explanation:

Current liabilities are those liabilities that become due and payable within a year or less than a year while long-term liabilities become payable after a year.

At the instance of the question, the note payable is a liability. Since $460,000 becomes payable on January 1 for each of the next four years out of the total of $1,840,000, it means $460,000 is a current liability while the remaining balance of $1,380,000 is long-term.