Hoover Company signs a four month promissory note for $270,000 on January 31, 20

Question

Hoover Company signs a four month promissory note for $270,000 on January 31, 2016. The $67,500 on the note each month. The first payment is on February 1, 2016 will this note be reported on the balance sheet at January 31. 2016? company is required to pay , and the final payment is on May 1, 2016. Hovw O A. current liability, $270,000 O B. long-term liability, $202,500 ° C. long-term liability, $270,000 O D. current liability, $67,500; long-term liability, $202,500 Click to select your answer. ejia e c 7:25 PM ENG 725 PM

Explanation / Answer

Data:

Hoover company sign a four-month promissory note for $ 270,000 on 31 January 2016, the company need to pay $ 67,500 per each for four months from February 1, 2016, to May 1 2016.How this note is reported on the balance sheet at January 31 2016.

Answer: Current Liability $270,000

Any note which is due in a short period normally with-in the financial year is recorded as a Current Liability in the Balance sheet. If Due is more than one financial year, the obligation is considered as Long-term Liability.

In the Given problem, the Promissory note is only for four months & paid within the same financial year. It will be Recorded as a Current Liability in the Balance sheet.

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