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Sheffield Corp. has three notes payable outstanding on December 31, 2016, as follows: 1. A six-year,...

Sheffield Corp. has three notes payable outstanding on December 31, 2016, as follows:

1. A six-year, 6%, $120,000 note payable issued on March 31, 2016. Sheffield Corp. is required to pay $20,000 plus interest on March 31 each year starting in 2017.

2. A seven-month, 4%, $60,000 note payable issued on July 1, 2016. Interest and principal are payable at maturity.

3. A 30-month, 5%, $240,000 note payable issued on September 1, 2016. Sheffield Corp. is required to pay $8,000 plus interest on the first day of each month starting on October 1, 2016. All payments are up to date.

* Calculate the current portion of each note payable.

* Calculate the non-current portion of each note payable.

* Calculate any interest payable at December 31, 2016.

Solutions

Expert Solution

Current Portion

Notes Amount Current portion
1 6 years 6% $        120,000 $               20,000
2 7 months 4% $          60,000 $               60,000
3 30 months 5% $ 104,000 $             128,000


1. Current portion = Principal payment to be made in the year

Current portion = $20,000

= $20,000

2.

Current portion = $60,000

3.

Current portion of principal = $8,000 for the month of December + $8,000 x 12 (next year)

Payments made = $8,000 x 3 months = $24,000

Current portion = ($8,000 x 16 months)

= $128,000 - 24,000 = $104,000

Non current portion

Notes Amount Non- Current portion
1 6 years 6% $        120,000 $                         100,000
2 7 months 4% $          60,000 $                                    -  
3 30 months 5% $        240,000 $                         112,000

1.

$20,000 principal payment to be in the year. Balance is non-current.

2.

No non-current portion as the notes expire in the coming year.

3.

$240,000 / 30 months x 14 months = $112,000

4 months in the current year and 12 months in the next year. Remaining will be non-current.

Interest payable

1.

Interest accrued =($120,000 x 6% /12 months) x 9 months

= $600 x 9 = $5,400

2.

Interest accrued =($60,000 x 4% /12 months) x 6 months

= $200 x 6 = $1,200

3.

Interest accrued =($240,000 x 5% /12 months) x 1 month

= $1,000 x 1 = $1,000

Interest payable = 5400 + 1200 + 1000

= $7,600

ekkarill92 answered 2 years ago
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