At December 31,201 2018. 1. 7, Calypso Corporation owes $537,900 on a note payab

Question

At December 31,201 2018. 1. 7, Calypso Corporation owes $537,900 on a note payable due March 15, A. If Calypso refinances the obligation by issuing a long term note on March 14 and uses the proceeds to pay off the note due on March 15, how much of the $537,900 should be reported as a current liability on December 31, 2017? B. If Calypso pays off the note on March 15, 2018 and then borrows $1,000,000 on a long-term basis on April 1, how much of the $537,900 should be reported as a current liability on December 31, 2017?

Explanation / Answer

1

A. The amount to be reported as current liability on December 31, 2017 will be $ 0. The amount $ 537,900 will be classified as long term liability instead.

B. The amount to be reported as current liability on December 31, 2017 will be $ 537,900. The repayment of this amount did require the use of current assets, so this liability must be reported as current liability. ( This assumes Calypso had not entered into a long term agreement prior to issuance.)

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