CAN SOMEONE EXPLAIN THIS FOR ME!! THANKS!
Question CPA-00657
Able, Inc. had the following amounts of long-term debt outstanding at December 31, 1991:
14 1/2% term note, due 1992 $ 3,000
11 1/8% term note, due 1995 107,000
8% note, due in 11 equal annual principal payments, plus interest
beginning December 31, 1992 110,000
7% guaranteed debentures, due 1996 100,000
Total $320,000
Able's annual sinking-fund requirement on the guaranteed debentures is $4,000 per year. What amount should
Able report as current maturities of long-term debt in its December 31, 1991, balance sheet?
a. $4,000
b. $7,000
c. $10,000
d. $13,000
Explanation
Rule: Current maturities of long-term debt in the balance sheet should include amounts due and payable within
12 months of the balance sheet date.
The $4,000 sinking-fund requirement would be disclosed in a footnote but is not included as a current maturity of
long-term debt. Deposits into a bond sinking fund are an asset held by a trustee to repay the entire liability at
maturity.
Choice “d” is correct. $13,000 current maturities of long-term debt at Dec. 31, 1991.
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