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.)

The answer is given below;

Explanation:

                                              XYZ

                                        Extracts from Balance Sheet

                                        As at

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.

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

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.

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