Included in Sauder Corp.'s liability account balances at December 31, 2006, were the following:

Sauder 's December 31, 2006 financial statements were issued on March 31, 2007.On January 15, 2007, the entire $600,000 balance of the 8% note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition, on March 10, 2007, Sauder consummated a noncancelable agreement with the lender to refinance the 7%, $250,000 note on a long-term basis, on readily determinable terms that have not yet been implemented.On the December 31, 2006 balance sheet, the amount of the notes payable that Sauder should classify as short-term obligations is
A)$175,000.
B)$125,000.
C)$50,000.
D)$0.

Question

Included in Sauder Corp.'s liability account balances at December 31, 2006, were the following:

Sauder 's December 31, 2006 financial statements were issued on March 31, 2007.On January 15, 2007, the entire $600,000 balance of the 8% note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition, on March 10, 2007, Sauder consummated a noncancelable agreement with the lender to refinance the 7%, $250,000 note on a long-term basis, on readily determinable terms that have not yet been implemented.On the December 31, 2006 balance sheet, the amount of the notes payable that Sauder should classify as short-term obligations is
A)$175,000. 
B)$125,000. 
C)$50,000. 
D)$0.

Quizplus · Accepted Answer

The 8% note payable is classified as long-term because it is refinanced on January 15, 2007, before the December 31, 2006 financial statements are issued on March 31, 2007. The 7% note payable is classified as short-term because it is not refinanced until after the December 31, 2006 financial statements are issued.