Question

On January 1, 2022, Discipline Company, a calendar-year company, issued $800,000 of notes payable, of which $200,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2022, is

a. Current liabilities, $800,000.

b. Long-term debt, $800,000.

c. Current liabilities, $200,000; Long-term debt, $600,000.

d. Current liabilities, $200,000; Long-term debt, $800,000.

Answer 1

The proper balance sheet presentation on December 31, 2022, is current liabilities, $200,000; Long-term debt, $800,000. The balance sheet should display $200,000 under Current liabilities and $600,000 under Long-term debt. The valuation of a bond is determined by discounting its future cash flows, which vary as the discount rate changes.

Step-by-step explanation:

The proper balance sheet presentation on December 31, 2022, is d. Current liabilities, $200,000; Long-term debt, $800,000. The reason for this is that the notes payable have two components.

The $200,000 due on January 1, 2023, is considered current liabilities because it needs to be paid within one year. The remaining $600,000 is considered long-term debt because it is not due within one year. . The balance sheet should display $200,000 under Current liabilities and $600,000 under Long-term debt. The valuation of a bond is determined by discounting its future cash flows, which vary as the discount rate changes.