Question

Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, “I’ve always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place.” On November 1, 2022, Great Adventures purchased the land by issuing a $500,000, 6%, 10-year installment note to the seller. Payments of $5,551 are required at the end of each month over the life of the 10-year loan. Each monthly payment of $5,551 includes both interest expense and principal payments (i.e., reduction of the loan amount).

Late that night Tony exclaimed, “We now have land for our new camp; this has to be the best news ever!” Suzie said, “There’s something else I need to tell you. I’m expecting!” They decided right then, if it was a boy, they would name him Venture.

4. The 12 monthly payments in 2023 (following year) will reduce the note’s balance by an additional $38,014. How would the remaining balance of the note payable be reported in the balance sheet as of December 31, 2022?

Answer 1

On 1 Novemer 2022, Great Adventues issued $500,000, 6%, 10-year installment note

EMI-: $5,551 at the end of every month for 10 year

Principal payment made in the year 2023 = $38,014

Remaining balance = $(500,000 - 38,014) = $461,986

This remaining balance of the note payable will be disclosed under Notes Payable Grouped Under Non-Current liabilities in Balance Sheet as at 31 December 2022. Current maturities of Notes Payable will be shown under Current Liabilities.