question 6 (5 points) wolfe company has a 5 - year mortgage for $120,000, which requires four equal payments…

question 6 (5 points) wolfe company has a 5 - year mortgage for $120,000, which requires four equal payments of principal plus interest. in the first year of the mortgage, wolfe will report this liability as a a) current liability of $30,000 and a long - term liability of $90,000. b) long - term liability of $120,000. c) current liability of $120,000. d) current liability of $90,000 and a long - term liability of $30,000.

question 6 (5 points) wolfe company has a 5 - year mortgage for $120,000, which requires four equal payments of principal plus interest. in the first year of the mortgage, wolfe will report this liability as a a) current liability of $30,000 and a long - term liability of $90,000. b) long - term liability of $120,000. c) current liability of $120,000. d) current liability of $90,000 and a long - term liability of $30,000.

Answer

Brief Explanations:

Current liabilities are obligations due within one - year or the operating cycle, whichever is longer. Long - term liabilities are obligations due beyond one - year. The mortgage is for 5 years. The principal is $120,000 and there are four equal principal payments. So the annual principal payment is $\frac{120000}{4}=30000$. The amount due within the first year (current liability) is the principal payment for the first year, which is $30,000, and the remaining amount ($120000 - 30000=90000$) is a long - term liability.

Answer:

A. current liability of $30,000 and a long - term liability of $90,000.