Question

The coffee shop enters into a loan with Bank of New Castle with the following terms.

Date of loan 12/31/18

Principal $ 12,000

Monthly payments $ 200

Final payment - Maturity Date 12/31/23

1. Calculate current maturities of long-term debt as of 03/31/19

2. Calculate current maturities of long-term debt as of 12/31/19

Problem 5b Information

The coffee shop enters into a short-term loan with Bank of New Castle with the following terms.

Date of loan 01/01/19

Principal $ 10,000

Discount on note payable $ (400)

Final payment - Maturity Date 06/30/19

1. Indicate below the amount of cash received on 01/01/19

2. Indicate the amount of interest expense for the six months of the loan.

Answer 1

The current portion of the long term loan is the principal portion of the loan that will be repaid in the next 12 months from the balance sheet date. In the given case of coffee shop the balance sheet date is not given thus, the amount that will be repaid in the next 12 months should be reported as current portion of the long term debt.

1. Current maturities of long term debt as on 03/31/2019 = $2,400.

2. Current maturities of long term debt as on 12/31/2019 = $2,400

Short term

1. Cash received on 01/01/19- $9,600.

2. Interest expense = $400