9. On December 31, 2016, L Inc. had a $1,500,000 note payable outstanding, due J
ID: 2339366 • Letter: 9
Question
9. On December 31, 2016, L Inc. had a $1,500,000 note payable outstanding, due July 31, 2017. 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, 2017. In February 2017, 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 2017. On March 13, 2017, L issued its 2016 financial statements. What amount of the note payable should L include in the long-term liabilities section of its December 31, 2016, balance sheet?
Explanation / Answer
In a Balance Sheet , the balances of the ledger accounts are shown as that exist on the date of the balance sheet.
In the present case, the Balance Sheet which is issued on March 13, 2017 is a Balance sheet as on December 31, 2016 i.e it presents the balances of the ledger accounts as on December 31, 2016. So the amount in note payable account that is included in the long term liabilities section of its Balance Sheet as on December 31, 2016 shall be $ 1,500,000. (Amount outstanding in note payable account on December 31, 2016)
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