Question

Jam Company had P5,000,000 note payable that is due on March 1, 2014. The entity borrowed P3,500,000 on February 1, 2014 which has a five-year term and used the proceeds to pay down the note and used other cash to pay the balance. The 2013 financial statements were issued on March 31, 2013. What amount of the note payable should be classified as noncurrent on December 31, 2013?​

Answer 1

The amount of Jam's Note Payable that should be classified as non-current on December 31, 2013 is P0.

• The non-current liability is the payable that is not due within the next 12 months.

• Since the P5,000,000 note is due within 2014 (precisely on March 1, 2014), on Jam Company's Balance Sheet as of December 31, 2013, the total amount will be classified as a current liability and not non-current.

Thus, the amount of Jam's note payable classified as non-current on December 31, 2013 is equal to zero.

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