On January 1, 2016, Lacey Treetoppers borrowed $300,000. The principal is to be paid back in annual
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On January 1, 2016, Lacey Treetoppers borrowed $300,000. The principal is to be paid back in annual payments of $20,000 on December 30 of each year.
a. Assuming that Lacey has met all principal payments on a timely basis, how should this liability be reported on the December 31, 2020, balance sheet?
b. Assume that during December 2020, the management of Lacey realizes that including the upcoming $20,000 principal payments as a current liability reduces the company's current ratio below 2: 1, the ratio required in a long-term note payable signed by the company. Discuss how management might be able to avoid classifying the current maturity as a current liability.
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a or b both combine answer Lacey Treetoppers has to make a total of fifteen payments of 20000 eac...View the full answer
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