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26 March, 14:16

Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2018, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $200,000, plus accrued interest, on June 30 of every year until the note is paid in full (on June 30, 2023). Show how the results of this transaction would be reported in a classified balance sheet prepared as of December 31, 2018

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  1. 26 March, 15:48
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    Balance sheet extract:

    Non-current liabilities

    Notes payable ($1,000,000-$200,000) $800,000

    Current liabilities

    Notes payable $230,000

    Explanation:

    In the classified balance sheet of Barton Chocolates for the year ended December 31 2018. the repayment due (principal and interest elements) is to be shown under the current liabilities since the repayment is due in June next year, six months from now, while the initial principal less the principal repayment is shown under non-current liabilities as below:

    Principal repayment $200,000

    Interest accrued ($1,000,000*6%*6/12) $30,000

    repayment due in six months $230,000
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