Question

Bonnie’s Family is a non-profit organization which assists families with low-income, special needs children, or are victims of domestic violence. They have a 30 year mortgage with a 5% interest rate which requires a payment of $3,000 per month. In preparing the financial statements for the board, you list the mortgage balance of $287,000 as a current liability based on the board hoping to pay it off within the next year. If Bonnie’s pays according to the mortgage agreement, only $20,000 will be paid in the next year. The board asks an independent CPA to advise how to report the mortgage on the balance sheet.

1. Explain how to account for the mortgage payment based on U.S. GAAP, assuming the board feels they will pay the entire balance in the next year.

2. Provide supporting information to the accounting for the mortgage on the balance sheet for your response to requirement 1.

Answer 1

Wenn Page.. From the given data :: As per US GAAP and IFRS ve quisemerits the principle on a lone due to repaid I with in next 12 months as on the balance sheed. Date will be soon as I I current liability and the balance principle on a ban as soon as long term liability in the balance sheet.. The Interest that will be burned on a loan in the future does not recorded in the accorinting record. ' . It Is Ovily recorded iwith the passage Bo the time as and when the entrest owened terms into acutal liability. Most In case for bonniese family, the mortgage aggrement is for 30 years and the mort ouage balance that is due to be good in the next 12 months.

Pie: 1 year is $ 20,000 only needs to be recorded as current liabi pty in the balance sheet and rest on mortgage balance Pie: $ 2,87,000 – $20,000 T 5$2,67,000 Is need to be recorded as long team liability. In the balance sheet, irrespective I on the fact per experied to be repaid. Pn the next year...!! Note 5 $ 2,87,000 61 $20,000 has been assumed os principle cumount. only. U.S. GAAP on recording on mortguage !" balance as current liability and lory term Hability H otels ALEN