Question

on November 1, 2014, EZ Products bird $48,000 on a 5%, 10 year note with annual installment payments of $4800 plus interest do you want November 1 of each succeeding year. How will they know if you shown on the balance sheet dated December 31, 2014?

a.) $40,000 shown as a current liability only

b.) $4800 shown as a current liability and $48,000 shown as a long-term liability

c.) $40,000 Shawn as a current liability and $43,200 shown as a long-term liability

d.) The entire $48,000 shown as a long-term liability

how do you know this?

Answer 1

Bond Value 48000

Interest -5% p.a.

Installment - 48000/10=4800

The most suitable answer from the above option provided is option d) i.e. The entire $48,000 shown as a long-term liability

Long Term Liability -48000

(Current Maturity of Long Term Debt - 4800)

Further Analysis for reference

-Further analysis of other options provided, option b and c seems like partially correct. But amount shown are not correct. Option a is completely incorrect. Thus the most suitable answer is choosen.

-Further Interest Payable will also form part of Current Liability.