Purdum Farms Borrowed $10 Million by Signing a Five-Year Note

question 90

Multiple Choice

Purdum Farms borrowed $10 million by signing a five-year note on December 31, 2013. Repayments of the principal are payable annually in installments of $2 million each. Purdum Farms makes the first payment on December 31, 2014 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2014, after the first payment is made?

• A) $2 million in current liabilities and $8 million in long-term liabilities.
• B) $2 million in current liabilities and $6 million in long-term liabilities.
• C)Zero in current liabilities and $8 million in long-term liabilities.
• D)Zero in current liabilities and $10 million in long-term liabilities.

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Definitions:

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The process of increasing in size, volume, quantity, or scope.

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A type of neuron with two extensions (one axon and one dendrite), common in sensory systems like the retina of the eye.

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