Muffin Company issued a five-year, interest-bearing note payable for $50,000 on January 1, 2014. Each January the company is required to pay $10,000 on the note. How will this note be reported on the December 31, 2015 balance sheet?

Question

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The note will be reported as $30,000 in long-term debt and $10,000 as the portion due within one year. By December 31, 2015, two payments of $10,000 each would have been made, reducing the original amount to $30,000. The next payment due within a year is classified separately.

Muffin Company Issued a Five-Year, Interest-Bearing Note Payable for $50,000