Raffie’s Kids, a non-profit organization that provides aid to victims of domestic violence,...

Question

Raffie’s Kids, a non-profit organization that provides aid to victims of domestic violence, lowincome families, and special-needs children has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. $20,000 of the mortgage principal will be paid next year if Raffie’s pays according to the mortgage agreement.
Requirement
1. The board members call you, their trusted CPA, to advise them on how Raffie’s Kids should report the mortgage on its balance sheet. Provide your recommendation and discuss the reason for your recommendation.

Robert · Accepted Answer

To, 
The Board Members, 
Raffie’s Kids 
The company should separate the amount of mortgage into current liability and long term 
liability. The amount which is due to be paid within a year is classified as current liability and 
amount due to be paid after a year should be classified as long term liability.

Raffie’s Kids, a non-profit organization that provides aid to victims of domestic violence, lowincome families, and special-needs children has a 30-year, 5% mortgage on the existing building. The...

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