Question

On July 31, 2020, Able Co. has a $500,000 15-year mortgage outstanding. Over the next year the company will make 12 payments of $5,000 representing $33,500 of interest and $26,500 of principal repayment. Which of the following best represents how the mortgage will be reported on the July 31, 2020 statement of financial position?

Current liabilities Non-current liabilities

a) $26,500 , $473,500

b) $26,500, $440,000

c) $60,000 , $440,000

d) $60,000, $473,500

Answer 1

Current liabilities represents the liabilities that is to be paid within next 12 month i.e. next financial year or operating cycle whichever is earlier. Whereas Non-current liabilities is the liability that is to be paid after 12 month.
Accordingly the payment of $60,000 for interest & principal repayment both are to be considered as Current Liabities.
Further, out of $5,00,000 Mortagage outstanding, $26,500 is current liability and therefore the remaining $4,73,500 is non current liability.
Current Liabilities	$    60,000.00
Non-Current Liabilities	$ 473,500.00
i.e. option (d) is correct

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