Bonnie's Family is a non-profit organization which assists families with low-income,special needs children, or are victims of domestic violence. They have a 30 year mortgagewith a 5% interest rate which requires a payment of $3,000 per month. In preparing thefinancial statements for the board, you list the mortgage balance of $287,000 as a currentliability based on the board hoping to pay it off within the next year. If Bonnie's paysaccording to the mortgage agreement, only $20,000 will be paid in the next year. Theboard asks an independent CPA to advise how to report the mortgage on the balancesheet.1. Explain how to account for the mortgage payment based on U.S. GAAP, assumingthe board feels they will pay the entire balance in the next year.2. Provide supporting information to the accounting for the mortgage on the balancesheet for your response to requirement 1.

Answered: Bonnie's Family is a non-profit…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Bonnie's Family is a non-profit organization which assists families with low-income,
special needs children, or are victims of domestic violence. They have a 30 year mortgage
with a 5% interest rate which requires a payment of $3,000 per month. In preparing the
financial statements for the board, you list the mortgage balance of $287,000 as a current
liability based on the board hoping to pay it off within the next year. If Bonnie's pays
according to the mortgage agreement, only $20,000 will be paid in the next year. The
board asks an independent CPA to advise how to report the mortgage on the balance
sheet.
1. Explain how to account for the mortgage payment based on U.S. GAAP, assuming
the board feels they will pay the entire balance in the next year.
2. Provide supporting information to the accounting for the mortgage on the balance
sheet for your response to requirement 1.

Expert Solution

Step 1

Mortgage is a liability which is to be repaid by the firm to the lender over the period of time. A mortgage is reported on the balance sheet on the liability side.

The liability on the balance sheet is classified in two broad categories; 1) Current liabilities and 2) Non-current liabilities. Current liabilities are basically the short liabilities.

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions