Question

Moura Company has $22,000,000 of notes payable due April 12, 2022. At December 31, 2021, Moura signed an agreement with First Bank to borrow up to $22,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 80% of the value of the collateral that Moura provided. At the date of issue of the December 31, 2021, financial statements, the value of Moura's collateral was $18,000,000. What amount of the note payable should Moura include in the noncurrent liabilities section of its December 31, 2021, balance sheet?

Answer 1

$7,600,000

Step-by-step explanation:

Value of the loan = Value of the collateral * 8% = $18,000,000 * 80% = $14,400,000

Note payable outstanding = Notes payable due April 12, 2022 - Loan value = $22,000,000 - $14,400,000 = $7,600,000.

Therefore, the note payable amount that Moura should include in the noncurrent liabilities section of its December 31, 2021, balance sheet is $7,600,000.