Let us discuss the treatment of notes payable with regards to the short-term and long-term components of notes payable. Typically, notes payable extend past one year. By now, each of you should know that on the classified balance sheet, liabilities are presented in short-term and long-term components. Notes payable requires particular attention because any notes payable that extends past the current year has both a short term component and a long term component. So, let us take the example where there is a $5,000,000 note payable over five years.

Q; How should this note be presented on the classified balance sheet?