On December 31, 2016, L Inc. had a $1,600,000 note payable outstanding, due July
ID: 2470012 • Letter: O
Question
On December 31, 2016, L Inc. had a $1,600,000 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 $510,000 of the note on January 23, 2017. In February 2017, L completed a $3,100,000 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 current liabilities section of its December 31, 2016, balance sheet?
Explanation / Answer
The amount included in the current liabilities section of its December 31, 2016 balance sheet should be $1,600,000. The same would be acompanied by a footnote stating following:
Balance Sheet (partial section) Current Liabilities: Note Payable $1,600,000 (Note: Outstanding amount to the extent of $510,000 have been paid on January 23, 2017 in Financial year 2016-17 and the balance outstanding towards the note payable will be paid on due date ie. July 31,2017.)Related Questions
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