A company has $5,000,000 in long-term debt outstanding.It expects to repay the loan evenly over the next four years.Which of the following represents how it will be shown on the year-end statement of financial position?
A)Accounts Payable: $1,250,000,Long-Term Debt: $3,750,000
B)Current Portion of Long-Term Debt: $1,250,000,Long-Term Debt: $3,750,000
C)Current Portion of Long-Term Debt: $2,500,000,Long-Term Debt: $2,500,000
D)Long-Term Debt: $5,000,000

Question

Quizplus · Accepted Answer

The current portion of long-term debt represents the portion of the long-term debt that is expected to be repaid within one year. Since the company expects to repay the loan evenly over the next four years, $1,250,000 of the long-term debt will be due within one year and should be shown as the current portion of long-term debt on the year-end statement of financial position. The remaining $3,750,000 will be due more than one year from the statement date and should be shown as long-term debt. Therefore, B is the best choice.

A Company Has $5,000,000 in Long-Term Debt Outstanding