Question

Venus Ltd.secured a $750,000, five year, 8% note payable on January 1. The loan will be...

Venus Ltd.secured a $750,000, five year, 8% note payable on January 1. The loan will be repaid using blended monthly payments with a fixed monthly principal payment of $12,500. Which of the following represents how the loan will be reflected on the balance sheet at the end of the first year?

A) Long term liabilities -- note payable: $750,000

B) Current portion of long term debt: $ 150,000, Long term liabilities -- note payable: $450,000

C) Current portion of long term debt: $300,000, Long term liabilities -- note payable: $ 450,000

D) Current portion of long term debt: $600,000

(plz give a detailed response on the calculation of the note payable, thank you!)

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Answer #1

The correct answer is

B) Current Portion of long term debt $ 150000 Long term liabilities note payable $ 450000

Explaination

Total balance of note payable at the end of year 1

= beginning balance - amount paid in first year

= 750000 - ( 12500*12)

= $ 600000

Current Portion of Note Payable that is payable in 1 years

= 12500*12

= $ 150000

Non current potion = total payable at the end of year 1 - current portion

= 600000 - 150000

= $ 450000

So the correct answer is

B) Current Portion of long term debt $ 150000 Long term liabilities note payable $ 450000

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