Question

TER 10 Liabilities LO 10-2 M10-5 Reporting Current and Noncurrent Portions of Long-Term Debt Assume that on December 1, 2015. your company borrowed $15.000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2016, $2,000; 2017, $3,000: 2018. $4,000; and 2019, $6,000. Show how this loan will be reported in the December 31, 2016 and 2015 balance sheets, assuming that principal payments will be made when required.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer 3 Part 1) Extract of Balance Sheet 5 Particulars 2015 2016 6 Current Liabilities 7 Current Portion of Long Term Debt 2000 3000 3 Total 2000 3000 9 Non Current Liabilities 10 Long Term Debt 13000 10000 (15000-2000) |(13000-3000) 12 Total 13000 10000 15 Debt which has to be repaid in 1 year has been classified as current liability and other has been clasified as non current liability

E G H I J K L F Answer Part 2) Assets = Income Statement Accounting Equation Liabilities Interest Payable Equity Retained earnings Date Short Term Borrowings Cash + Revenue - Expenses = Net Income November 1, 2015 1000000 1000000 + December 31,2015 + 15000 - 15000 15000 - 15000 Credit Journal entry Date Particulars 2 November 1, 2015 Cash Short Term Borrowings (to record short term borrowings) Debit 1000000 1000000 15000 5 December 31, 2015 Interest Expense (1000000*9%*2/12) Interest Payable (To record interest expense) 15000

Answer Part 3) Extract of Balance Sheet Particulars 31 december 2015. Current Liabilities Current Portion of Long Term Debt 200000 Interest Payable (1000000*6%*6/12) 30000 Total 230000 Non Current Liabilities Long Term Debt (1000000-200000) 800000 Total 800000 Debt which has to be repaid in 1 year has been classified as current liability and other has been clasified as non current liability