On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loan is a 7-year note payable that requires annual payments of $24,500 every December 31, beginning December 31, 2019. Assume the loan has an interest rate of 10% compounded annually. Calculate the amount of the note payable at December 31, 2020 that would be classified as a current liability.
The interest would be accrued every year and would get added up to the notes payable account. The total notes payables as at 31 December 2020 would be as follows :
$ | Principal | Interst | Annual payment | Closing |
Dec19 | 1,20,000 | 12,000 | 24,500 | 1,07,500 |
Dec20 | 1,07,500 | 10,750 | 24,500 | 93,750 |
Of the above, only $ 24,500 would be classified as currently liability as that would be the amount that would be paid in the next 1 year.
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