Question

Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2018, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $200,000, plus accrued interest, on June 30 of every year until the note is paid in full (on June 30, 2023). Show how the results of this transaction would be reported in a classified balance sheet prepared as of December 31, 2018. (Do not round intermediate calculations.)

Answer 1

Step-by-step explanation:

Balance sheet for Barton Chocolates as at December 31,2018

Current liabilities 230,000

Non current liabilities 800,000

Workings.

Loan - $1,000,000

Loan date = July 1

Reporting date = December 31

Timeline = 6 months / 1/2 years

Yearly installment = $200,000

Interest payable = 6/100*1000000*1/2 = 30,000

Current liabilities are liabilities that are due for settlement within a year

Therefore the current liability portion = $200000+30000= $230,000

The non current liability is the balance of the principal loan amount = 1000000=200000= 800000