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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 4, Problem 11E
Textbook Problem
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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.

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:

AssetsLiabilities
Current assets:Current liabilities:
CashAccounts payable
Marketable securitiesInterest payable
Accounts receivableUnearned revenues
InventoriesNotes payable
Prepaid expensesCurrent maturities of long-term debt
Office suppliesTotal current liabilities
Total current assets 
Investments:Long-term liabilities:
Marketable securitiesBonds payable
Land held for investmentNotes payable
Total investmentsMortgage payable
 Total long-term liabilities
Property, plant and equipment: 
LandShareholders’ equity:
BuildingCommon stock
EquipmentRetained earnings
Less: Accumulated depreciationTotal shareholders’ equity
Net property, plant and equipmentTotal 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...

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Financial And Managerial Accounting
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