On March 1, 2016, Baker Services issued a 5% long-term notes payable for $21,000

Question

On March 1, 2016, Baker Services issued a 5% long-term notes payable for $21,000. It is payable over a 3-year term in $7,000 annual principal payments on March 1 of each year plus interest, beginning March 1, 2017. How will the notes payable be shown on the balance sheet dated December 31, 2016?

A) 7,000 shown as current liability and $14,000 shown as long-term liability
B) the entire $21,000 shown as long-term liability
C)$21,000 shown as current liability only
D)$7,000 shown as current liability and $21,000 shown as long-term liability

Explanation / Answer

Answer is A.

Amount payable within 1 year is classified as current liability and beyond 1 year payable is classified as long-term liability.

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