At December 31, 2020, Burr Corporation owes $500,000 on a note payable due February 15, 2021.(a) If Burr had restructured the note on December 15, 2020, such that Burr has the contractual right to defer payment of $250,000 of the note until February 15, 2022, how much of the $500,000 should be reported as a current liability at December 31, 2020

First and foremost, initially the whole amount payable( $500,000) was to be paid in one month and 15 days counting from December 31, 2020, hence, since the amount is payable within a year, it should have been classified as the current liability.

However, the refinancing meant that $250,000 would be deferred to 2022 while the balance of $250,000 ($500,000-$250,000) is still payable on the agreed date (February 15, 2021).

As a result, $250,000 would be reported as a current liability while the balance of $250,000 is shown as non-current(long-term) liability.

anthougo anthougo · Answer 2 · 2021-11-30T15:56:34+01:00

Of the $500,000 Note Payable, $250,000 should be reported as a current liability by Burr Corporation, while the remaining $250,000 should be reported as a long-term liability.

Data and Calculations:

Note Payable on December 31, 2020 =$500,000

Maturity date = February 15, 2021

Restructuring date = December 15, 2020

New Maturity date after restructuring = February 15, 2022

Current liability at December 31, 2020 = $250,000 ($500,000 - $250,000)

Long-term liability = $250,000 ($500,000 - $250,000)

Thus, in the balance sheet as of December 31, 2020, Burr Corporation can report $250,000 as a current liability instead of $500,000. The remaining $250,000 is reported as a long-term liability.

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