Question

UUTUULLULO On January 1, Kelly Company purchased equipment of $240,000 with a long-term note payable. The debt is payable in annual installments of $48,000 due on December 31 of each year. At the date of purchase, how will Kelly Company report the note payable? On the date of purchase, Kelly will report the following: O A. $48,000 as current portion of notes payable in the current liability section. The remaining $ 192,000 will show as a notes payable in the long-term liability section. O B. $240,000 will show as notes payable in the long-term liability section, with no current portion. O C. $96,000 as current portion of notes payable in the current liability section. The remaining $144,000 will show as a notes payable in the long-term liability section. OD. None of the above.

Answer 1

Solution:

Current portion of Note payable = Due within 1 year = $48,000

Long term liability for Note payable = $240000 - $48000 = $192,000

Hence on the date of purchase "Kelly will report $48000 as current portion in Current liabilities section and $192000 in the long term liabilities section".

Hence option "A" is correct.