Question

Assume that Warnaco Group Inc. borrowed $100,000 from the bank to be repaid over the next five years, with principal payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today (the date of borrowing)?

a. $100,000 in the long-term liability section.
b. $100,000 plus the interest to be paid over the five-year period in the long-term liability section.
c. A portion of the $100,000 in the current liability section and the remainder of the principal in the long-term liability section.
d. A portion of the $100,000 plus interest in the current liability section and the remainder of the principal plus interest in the long-term liability section.

Answer 1

C

Step-by-step explanation:

The short term amount due (within the next fiscal year) is classified in the current liability section while the amounts due in years 2-5 would be reported in the long term section. Interest is always an expense and never reported on the balance sheet.