Wolfe Company has a 5-year mortgage for $120,000 which requires 4 equal payments of principal plus interest. In the first year of the mortgage, Wolfe will report this liability as a:

Question

Quizplus · Accepted Answer

The mortgage requires 4 equal payments of principal, meaning each year Wolfe will pay off 1/4 of the principal amount, which is $30,000 ($120,000 divided by 4). Therefore, the portion of the mortgage due within the next year ($30,000) is classified as a current liability, and the remaining balance ($90,000) is classified as a long-term liability.

Wolfe Company Has a 5-Year Mortgage for $120,000 Which Requires