Included in Vernon Corp.'s liability account balances at December 31, 2014, were the following:7% note payable issued October 1, 2014, maturing September 30, 2015 $250,0008% note payable issued April 1, 2014, payable in six equal annualinstallments of $150,000 beginning April 1, 2015 600,000Vernon's December 31, 2014 financial statements were issued on March 31, 2015. On January 15, 2015, 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, 2015, Vernon 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, 2014 balance sheet, the amount of the notes payable that Vernon should classify as short-term obligations is
A) $175,000.
B) $125,000.
C) $50,000.
D) $0.

Question

Quizplus · Accepted Answer

Both notes payable have been refinanced or are subject to a noncancelable agreement to refinance on a long-term basis before the financial statements were issued. Therefore, none of the notes payable should be classified as short-term obligations on the December 31, 2014 balance sheet.