At December 31, 2007, Fifa Corporation owes $500,000 on a note payable due Febru

Question

At December 31, 2007, Fifa Corporation owes $500,000 on a note payable due February 15, 2008. (a) If Fifa refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much of the $500,000 should be reported as a current liability at December 31, 2007? (b) If Fifa pays off the note on February 15, 2008, and then borrows $1,000 on a long-term basis on March 1, how much of the $500,000 should be reported as a current liability at December 31, 2007?

Explanation / Answer

In both the cases , Note Payable should be classified as Current Liability . However , in the first case the current portion of Long term Note Payable which was issued to refinance the original liability would be classified as Current Liability. In case 2 , the current portion of $1000 would be classified as Current Liability.

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