Purest owes $1 million that is due on February 28.The company borrows $800,000 on February 25 (5-year note) and uses the proceeds to pay down the $1 million note and uses other cash to pay the balance.How much of the $1 million note is classified as long-term in the December 31 financial statements?

Question

Quizplus · Accepted Answer

Since the $800,000 note was issued on February 25th, it has not yet reached its maturity date and is therefore considered a long-term liability on December 31. The $1 million note has been fully paid off and is no longer a liability. Therefore, none of the $1 million note is classified as long-term in the December 31 financial statements.

Purest Owes $1 Million That Is Due on February 28