Question

If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?

a) $12,500
b) $25,000
c) $50,000
d) $100,000

Answer 1

Each year, $12,500 of Bergen Air Systems' $100,000 loan will be considered as the current portion of a noncurrent note payable.

Step-by-step explanation:

If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, the amount of principal that would be considered as the current portion of a noncurrent note payable each year would be the total loan amount divided by the number of payments. Since the loan is for $100,000 and there are eight payments, dividing $100,000 by 8 gives us $12,500. Therefore, $12,500 of the note payable will be categorized as current each year until the loan is paid off.