Question

San Marcos Athletic Club wants to expand its facilities. On September 1, 2017, it secures a loan by signing a two year note for $250,000 at 5% annual interest. Interest payments are due 12 months to the day the note is signed. Principal is due in two years from the day the note is signed. What type of liability is the note

Answer 1

Long term liability

Step-by-step explanation:

This is a long term liability and it will be recorded with the name notes payable in the balance sheet.

Specifically, this loan will appear under long-term liability in the balance since it is a two year note for $250,000.

Note that that a long-term is a loan that its repayments are usually made for a few or several years. However, a short-term loan is a loan to be repaid within a year.

Since the liability is the question is a two year note, it is not a short term liability but a long term liability.