Sterling Inc. has two long-term notes outstanding. One is a five-year note for $50,000. An equal amount of principal must be repaid each year of the loan. The other is a seven-year note for $210,000. In the next calendar year, the company will pay $21,000 of the principal. What is total amount of the notes that will be reported as current liabilities on its balance sheet?
A) $229,000
B) $71,000
C) $40,000
D) $31,000

Question

Quizplus · Accepted Answer

For the five-year note, $50,000 divided by 5 years equals $10,000 of principal to be repaid each year. For the seven-year note, $21,000 of principal will be paid in the next year. Therefore, the total current liabilities for these notes are $10,000 + $21,000 = $31,000.