Question

Give detailed answers Part 1 You must label each answer with the number of question. Each question must have at least three sentence answers. There is no maximum sentence, use as many as you wish to thoroughly answer the question. All answers must be complete sentences using proper grammar and spelling.

Sherrie, Inc. has a 30 year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000.

The bookkeeper is preparing a financial statement for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board plans on paying off the mortgage in full next year.

The board members call you, their trusted CPA, to advise them on financial statements

Requirements

1. What advise would you give the board regarding the recording on the mortgage as a current liability.

2. Discuss in detail the reason for your recommendation.

Answer 1

If mortgage becomes payable within one year from the balance sheet date, it will be shown as a current liability in the balance sheet.otherwise         
Mortgage amount must be shown under Long term liability( if due more that one year)                                                  
Sherrie, Inc. has a 30 year, 5% mortgage on the existing building. Board plans on paying off the mortgage in full next year.                                                  
Since the board plans on paying off the mortgage in full next year, Mortgage and any interest accrued thereon must be shown under current liability                                                  
It is appropriate to show the mortgage principal amount as a current liability as it is due within one year from the balance sheet date                                                   
and interest accrued is also shown under current liability in the balance sheet.