A mortgage of $420,000 has principal payments totaling $120,000 that are due within the next year. The remaining $300,000 is not due until after one year. How is the mortgage shown on the balance sheet?
A. As a current liability of $420,000
B. As a long-term liability of $420,000
C. As another liability of $420,000 with a footnote breaking out current and long-term portions
D. As a current liability of $120,000 and a long-term liability of $300,000
E. As a disclosure item only
It is not fixed in concrete! It all depends on the current accounting practices of the firm. to me "A" makes the most sense.
+2511 This answer looks like it’s from the forum’s resident guest banker from Killarney, who’s usually full of blarney, which means his answer is most likely wrong. Honestly, you’d be better off randomly selecting one of the other answers.
See this:
http://web2.0calc.com/questions/a-farmer-s-dilemma
It not the only one but it's a doozy.
My answer would be D. As a current liability of $120,000 and a long-term liability of $300,000.
While these rules may not be “fixed in concrete,” usually, current liabilities are obligations due in the current fiscal year, and long-term liabilities are after the current fiscal year.
