Question

XYZ borrowed $50,000 this year. Half of the loan will be repaid next year and the remainder will be paid the following year. How will the $50,000 be reported on its balance sheet at the end of this year? (Check all that apply.)

Answer 1

Under current liabilities you must record:

Current portion of long-term debt (CPLTD) $25,000

Accrued interest payable XXX (the interest rate is not given)

Under long term liabilities you must record:

Long-term debt (LTD) $25,000

Step-by-step explanation:

Current portion of long-term debt (CPLTD) account in the balance sheet is used to report the amount of long-term debt principal that is due within a year. Accrued interest expense must be recorded separately, since interests and principal must be treated separately.

Answer 2

The answer is given below;

Step-by-step explanation:

XYZ

Extracts from Balance Sheet

As at XXXXX

Current Liabilities

Current portion of long term loan *$25,000

Long Term Liabilities

Long Term Loan $25,000

As the 50% of the loan will be repaid in next year, therefore ($50,000/2) will be shown in current liabilities. The rest of the loan is shown as long term loan as it will be repaid after 12 months.