Drogan Ltd.issued a five-year interest-bearing note payable for $65,000 on January 1, 2014.Each January the company is required to pay $15,000 on the note.How will this note be reported on the December
31, 2014 balance sheet?

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Quizplus · Accepted Answer

The note payable is a long-term debt, as it will not be fully paid off until five years after the issue date. However, since the company is required to make a payment of $15,000 within one year of the balance sheet date (December 31, 2014), a portion of the debt is considered current. Therefore, the note should be reported as long-term debt of $50,000 and long-term debt due within one year of $15,000 for a total of $65,000.