Balance sheet classification At the balance sheet date, a business owes a mortgage note payable of $375,000, the terms of which provide for monthly payments of $1,250. Explain how the liability should be classified on the balance sheet.

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Financial And Managerial Accounting

15th Edition

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Publisher: Cengage Learning,

ISBN: 9781337902663

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Financial And Managerial Accounting

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WARREN + 1 other

Publisher: Cengage Learning,

ISBN: 9781337902663

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To determine

Explain the manner in which the mortgage notes payable should be classified on a balance sheet.

Explanation of Solution

Classified balance sheet

Classified Balance Sheet: In order to improve the ease of understanding, a classified balance sheet is used. Classified balance sheet categorizes each item of assets, liabilities, and stockholders ‘equity into a specific category.

A classified balance sheet is prepared under the following heading:

Assets	Liabilities
Current assets:	Current liabilities:
Cash	Accounts payable
Marketable securities	Interest payable
Accounts receivable	Unearned revenues
Inventories	Notes payable
Prepaid expenses	Current maturities of long-term debt
Office supplies	Total current liabilities
Total current assets
Investments:	Long-term liabilities:
Marketable securities	Bonds payable
Land held for investment	Notes payable
Total investments	Mortgage payable
	Total long-term liabilities
Property, plant and equipment:
Land	Shareholders’ equity:
Building	Common stock
Equipment	Retained earnings
Less: Accumulated depreciation	Total shareholders’ equity
Net property, plant and equipment	Total Liabilities and Shareholders’ Equity
Intangibles:
Copyrights
Total Assets

Table (1)

If it is a short-term mortgage payable, it should be classified under the current liabilities section of the balance sheet...

Balance sheet classification At the balance sheet date, a business owes a mortgage note payable of $375,000, the terms of which provide for monthly payments of $1,250. Explain how the liability should be classified on the balance sheet.

Financial And Managerial Accounting

Solutions

Financial And Managerial Accounting

Balance sheet classification

At the balance sheet date, a business owes a mortgage note payable of $375,000, the terms of which provide for monthly payments of $1,250.

Explain how the liability should be classified on the balance sheet.

Explanation of Solution

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