Purdum Farms borrowed $10 million by signing a five year note on January 1,2010 and repayments of the principal are payable annually in $2 million installments.Purdum Farms makes the first payment December 31,2010 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 31,2010?
A)$2 million in current liabilities and $8 million in long-term liabilities.
B)$2 million in current liabilities and $6 million in long-term liabilities.
C)Zero in current liabilities and $8 million in long-term liabilities.
D)Zero in current liabilities and $10 million in long-term liabilities.

Question

Quizplus · Accepted Answer

The $2,000,000 payment due on December 31, 2011 is a current liability and the three later (2012, 2013, and 2014) payments ($2,000,000 F1F1F1S1F1F1F10 3) are reported as long-term liabilities.

Purdum Farms Borrowed $10 Million by Signing a Five Year