As of the beginning of 2020, ABC COMPANY has one outstanding note. The note has a 12-percent interest rate and is worth P2,000,000. ABC COMPANY must pay annual interest on February 1 of each year and repay the principal in ten(10) equal annual payments beginning February 1, 2022, according to the terms of the note. In 2020, 2021, 2022, and 2023, how will this note be reflected on the year-end balance sheets? The operating cycle of ABC is eight months long.

Note: Any portion of the debt or interest on the debt that must be paid within

one(1) year, or the operating cycle of eight(8) months, whichever is longer must bereported as a current liability. The dividing line for ABC is one year, the longer of thetwo(2) time periods. At the end of each year, we will ascertain the amounts that areowed and must be paid within the next year and categorize these as current. The balance owed will be reported as long-term debt.