On December 31, 2018, L Inc

question 65

Multiple Choice

On December 31, 2018, L Inc. had a $1,500,000 note payable outstanding, due July 31, 2019. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. Because L temporarily had excess cash, it prepaid $500,000 of the note on January 23, 2019. In February 2019, L completed a $3,000,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2019. On March 13, 2019, L issued its 2018 financial statements. What amount of the note payable should L include in the current liabilities section of its December 31, 2018, balance sheet?

• A) $0.
• B) $500,000.
• C) $1,000,000.
• D) $1,500,000.

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Definitions:

Contract Modification

Any change or alteration made to the terms of a contract, agreed upon by all parties involved.

Price Change

The fluctuation in the selling price of goods or services over a period of time.

Moral Obligation

A duty or commitment that is not legally enforceable but is dictated by personal ethics or social norms.

Adequate Consideration

Sufficient value that is fairly exchanged between parties in a contract.