On March 1, 2016, Baker Services issued a 9% long-term notes payable for $18,000

Question

On March 1, 2016, Baker Services issued a 9% long-term notes payable for $18,000. It is payable over a 3-year term in $6,000 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. the entire $18,000 shown as long-term liability

B. $18,000 shown as current liability only

C. $6,000 shown as current liability and $18,000 shown as long-term liability

D. $6,000 shown as current liability and $12,000 shown as long-term liabilit

Explanation / Answer

The correct answer is

D. $6,000 shown as current liability and $12,000 shown as long-term liabilit

$ 6000 i,.e. 18000/3 will be paid within one year therefore it is current liability and $ 12000 will be shown as long term liability

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