Tazo Inc. signed a $12,000 10% 15-year installment note on December 1, 2016. The note requires quarterly payments of $200 plus interest on March 1, June 1, September 1, and December 1 of each year. How will Tazo classify this loan on its December 31, 2016 Balance Sheet?
A)Current Portion of Long-term debt, $400; Long-term debt, $11,600
B)Current Portion of Long-term debt, $800; Long-term debt, $11,200
C)Current Portion of Long-term debt, $200; Long-term debt, $11,800
D)Current Portion of Long-term debt, $600; Long-term debt, $11,400

Question

Quizplus · Accepted Answer

The current portion of long-term debt refers to the amount of the loan that is due within 12 months from the balance sheet date. In this case, since Tazo signed the note on December 1, 2016, the first payment of $200 plus interest is due on March 1, 2017, which is within the next 12 months. Therefore, $800 ($200 x 4) should be classified as the current portion of long-term debt on the December 31, 2016 balance sheet. The remaining balance of the loan ($11,200) should be classified as long-term debt.

Tazo Inc Signed a $12,000 10% 15-Year Installment Note on December