EX 4-11 Balance sheet classification

At the balance sheet date, a business owes a mortgage note payable of $375,000, the terms of which provide for monthly payments of $1,250.

Explain how the liability should be classified on the balance sheet.


Answers:
Because current liabilities are usually due within one year, $15,000 ($1,250 × 12 months) would be reported as a current liability on the balance sheet. The remainder of $360,000 ($375,000 – $15,000) would be reported as a long-term liability on the balance sheet.