I'm a little confused about the accounting treatment for this kind of events that happened after year-end but before the issuance of financial statement. If the $250,000 portion of note is already paid, shouldn't there be no current liability? Is this a case of subsequent events?

At Question CPA-00489 On December 31, Year 1, Largo, Inc. had a $750,000 note payable outstanding, due July 31, Year 2 Largo borrowed the money to finance construction of a new plant. Largo planned to refinance the note by issuing long-term bonds. Because Largo temporarily had excess cash, it prepaid $250,000 of the note on January 12, Year 2. In February Year 2, Largo completed a $1,500,000 bond offering. Largo will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during Year 2. On March 3, Year 2, Largo issued its Year 1 financial statements. What amount of the note payable should Largo include in the current liabilities section of its December 31, Year 1, balance sheet? A. $750,000 B. $500,000 C. $250,000 D $0 Explanation Choice "C" is correct. Short-term debt that is expected to be refinanced is classified as long-term to t extent of post-balance sheet refinancing. Support must exist for the refinancing. The $250,000 was paid prior to refinancing and should be included as a current liability. Choice "A" is incorrect. The $750,000 is expected to be refinanced with long-term bonds. The bonds were issued prior to issuance of the financial statements, so the $500,000 outstanding can be classified as tong-term Choice "B" is incorrect. The $750,000 is expected to be refinanced with long-term bonds. The bonds were