For the past several years, Farewell Distributors reported a long-term debt of $120,000 in its balance sheet.

Question:

For the past several years, Farewell Distributors reported a long-term debt of $120,000 in its Next year, the company will begin paying off this debt in four annual installments of $30,000 each.
Required:
(a) How should Farewell’s $120,000 debt be reported in the company’s at the end of the current year?
(b) Why is the proper classiﬁcation of a company’s liabilities important to the ﬁrm’s creditors and potential creditors?
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...