Question

Purdum Farms borrowed $14 million by signing a five-year note on December 31, 2017. Repayments of the principal are payable annually in installments of $2.8 million each. Purdum Farms makes the first payment on December 31, 2018 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2018, after the first payment is made

Answer 1

Answer and Explanation:

The amount that should be reported as the current liabilities and long term liabilities is shown below:

The borrowed amount is $14 million

And, the installments is of $2.8 million each

He makes the first payment and then made the balance sheet

So, the current liability amount is $2.8 million

And, the long term liability amount is ($2.8 × 3 years) $8.4 million

So the same would be considered and relevant too