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Topic
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Willem Co. reported the following liabilities at December 31, Year 1:
Accounts payable-trade $ 750,000
Short-term borrowings 400,000
Mortgage payable, current portion $100,000 3,500,000
Other bank loan, matures June 30, Year 2 1,000,000
The $1,000,000 bank loan was refinanced with a 20-year loan on January 15, Year 2, with the first principal payment due January 15, Year 3. Willem’s audited financial statements were issued February 28, Year 2. What amount should Willem report as current liabilities at December 31, Year 1?
a. $1,250,000
b. $2,250,000
c. $1,150,000
d. $850,000
Explanation
Choice “a” is correct. Current liabilities at December 31, Year 1 include the accounts payable-trade of $750,000, the short-term borrowings of $400,000 and the $100,000 current portion of the mortgage payable, for a total of $1,250,000. The $1,000,000 bank loan will not be classified as a current liability because the company refinanced the loan on a long-term basis on January 15, Year 2, prior to the issuance of the financial statements on February 28, Year 2.
My question is, since report currently liability at Dec31 year 1, why not $1,000,000 included as current liability? it’s not refinanced until year 2.
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