On December 31, 2009, L, Inc

On December 31, 2009, L, Inc. had a $1,500,000 note payable outstanding, due July 31, 2010. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. Because L temporarily had excess cash, it prepaid $500,000 of the note on January 23, 2010. In February 2010, L completed a $3,000,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2010. On March 13, 2010, L issued its 2009 financial statements. What amount of the note payable should L include in the current liabilities section of its December 31, 2009, balance sheet?

A) $ 0
B) $ 500,000
C) $1,000,000
D) $1,500,000 SFAS #6 states that the amount excluded from current liabilities through refinancing cannot exceed the amount actually refinanced.Therefore, L should consider the $1,000,000 paid by the refinancing to be a long-term liability and the $500,000 a current liability in the December 31, 2009 balance sheet.The refinancing was completed before the issuance of the financial statements and meets both criteria (intent & financial ability) for the classification of the $1,000,000 as a long-term liability.