On 1 July 2016,Avery Services issued a long-term note payable for $10 000.It is payable over a five year term in $2 000 instalments on 1 July of each succeeding year.When the note was issued,the principal amount was recorded in long-term notes payable and a second entry was made to reclassify the current portion.How will this information be shown on the balance sheet dated 31 December 2016?
A)$2 000 shown as current liability;$8 000 shown as non-current liability
B)$2 000 shown as current liability;$10 000 shown as non-current liability
C)The entire $10 000 shown as non-current liability
D)$10 000 shown as current liability only

Question

Quizplus · Accepted Answer

Since the first $2,000 payment is due within a year, it will be reported as the current portion of the long-term note payable. The remaining $8,000 will be reported as the non-current portion. Therefore, the balance sheet will reflect a current liability of $2,000 and a non-current liability of $8,000 for the long-term note payable.

On 1 July 2016,Avery Services Issued a Long-Term Note Payable