On January 5, 2014, Garrett Company, a calendar-year company, issued $1,000,000 of notes payable, of which $200,000 is due on January 1 for each of the next five years. The proper balance sheet presentation on December 31, 2014, is
A) Current Liabilities, $1,000,000.
B) Current Liabilities, $200,000; Long-term Debt, $800,000.
C) Long-term Debt, $1,000,000
D) Current Liabilities, $800,000; Long-term Debt, $200,000.

Question

Quizplus · Accepted Answer

The portion of the notes payable that is due within one year should be classified as current liabilities, which is $200,000. The remaining $800,000 should be classified as long-term debt. Therefore, the proper balance sheet presentation on December 31, 2014, is Current Liabilities, $200,000; Long-term Debt, $800,000.

On January 5, 2014, Garrett Company, a Calendar-Year Company, Issued