Asked by Heidi Canaveral on Jun 23, 2024
Verified
Sterling Inc. has two long-term notes outstanding. One is a five-year note for $50,000. An equal amount of principal must be repaid each year of the loan. The other is a seven-year note for $210,000. In the next calendar year, the company will pay $21,000 of the principal. What is total amount of the notes that will be reported as current liabilities on its balance sheet?
A) $229,000
B) $71,000
C) $40,000
D) $31,000
Current Liabilities
Current Liabilities are a company's debts or obligations that are due to be paid within one year and are listed on the company’s balance sheet. They typically include accounts payable, short-term loans, and other accrued liabilities.
Principal Repaid
The amount of loan or debt's original borrowing that has been or is being paid back, excluding interest payments.
Long-Term Notes
Debt securities or loans with maturities extending beyond one year, typically used for long-term financing needs.
- Understand the classification and reporting of current liabilities on the balance sheet.
Verified Answer
BE
Brittany E HawkinsJun 24, 2024
Final Answer :
D
Explanation :
For the five-year note, $50,000 divided by 5 years equals $10,000 of principal to be repaid each year. For the seven-year note, $21,000 of the principal is to be repaid in the next year. Therefore, the total current liabilities for these notes are $10,000 + $21,000 = $31,000.
Learning Objectives
- Understand the classification and reporting of current liabilities on the balance sheet.