Question

A balance sheet at the end of period 4 shows I have liabilities of about $3,000...

A balance sheet at the end of period 4 shows I have liabilities of about $3,000 to pay back a loan I took out during period 1. However, according to the CEO simulation I'm participating in, the debt for the loan has been retired and has a balance of $0 at the end of period 4. Why does my balance sheet show I have liabilities of $3,000 at the end of period 4? (the sole reason I have had any liabilities throughout the simulation is to pay back the loan). There is no more pertinent information I can add. Just trying to figure out if my total liabilities of about $3,000 at the end of period 4 (even though the simulation says it's retired with a $0 balance) should be considered debt when I calculate debt utilization ratios.

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Answer #1

As per the simulation of the CEO the debt has been retired at the end of Year 4 & there is no need to pay any amount to anyone as it was retired and the balance should become Zero.

So, the Balance in the liability account has to be reversed and to be shown as retired in Notes to accounts

If the Loan was retired as a waive off situation then the same waive off to be treated as income

If the loan was retired by way of periodic payments then the periodic payment should reduce the balance of the loan accordingly.

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