Understanding Balance Sheets

a. Tarn Company has chosen a fiscal year that ends at October 31. Would you expect Tarn Company to report higher or lower current assets and current liabilities on that date than a company of similar size that uses a December 31 fiscal year-end? Explain your answer.

b. You are considering whether to extend credit to Extra Company and note that Extra’s current liabilities are much higher this year than last year. The major cause appears to be a note payable for $150,000 that was included in longterm debt last year and is now reported as a current liability. Has Extra made a mistake in classifying this note?

Can a company simply list a note payable wherever it wants? Explain why the note may have been reclassified.