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FASB Codification Research - Chapter 15

You're part of the external audit team auditing Coover Corporation's financial statements for the year ending December 31, 2014. The audit engagement should be completed by mid- February and Coover anticipates publishing its financial statements, including your CPA firm's audit opinion, by February 28, 2015.

At December 31, 2014 Coover had a $100,000 outstanding note payable that was issued in 2011 and is due March 5, 2015. On January 10, 2015, Coover sold 1,000 shares of its $30 par value common stock for $90,000. Coover intends to use the $90,000 proceeds plus $10,000 cash on hand to repay the note payable on March 5, 2015.

Coover has reported the $100,000 note payable as a current liability at December 31, 2014 because it will be paid off in the short-run. However, the audit senior isn't sure that is the correct way of reporting the note because it wasn't paid off with a current asset. The audit senior has assigned you the task of researching the proper reporting.

Required: Draft a research memo addressing the note payable.