Hoover Company has a long-term note payable for $300,000 on January 1, 2012. Each month the company is required to pay $75,000 on the note. How will this note be reported on January 31, 2012?
A) Long-term liability, $300,000
B) Long-term liability, $225,000
C) Current liability, $75,000; long-term liability, $225,000
D) Current liability, $225,000; long-term liability, $75,000

Question

Quizplus · Accepted Answer

On January 31, 2012, the balance on the note payable would be $225,000 ($300,000 - $75,000). Since the next payment is due within the next 12 months, $75,000 would be classified as a current liability, and the remainder ($225,000) would be classified as a long-term liability. Therefore, the note payable would be reported as a current liability of $75,000 and a long-term liability of $225,000 on the balance sheet. Choice C accurately reflects this classification.

Hoover Company Has a Long-Term Note Payable for $300,000 on January