Question

(Long-Term Debt Disclosure) At December 31, 2017, Redmond Company has outstanding three long-term debt issues. The first is a \(2,000,000 note payable which matures June 30, 2020. The second is a \)6,000,000 bond issue that matures September 30, 2021. The third is a \(12,500,000 sinking fund debenture with annual sinking fund payments of \)2,500,000 in each of the years 2019 through 2023.

Instructions

Prepare the required note disclosure for the long-term debt at December 31, 2017.

Short answer

On 31 December 2017, notes disclosure for the long-term debt will be as follows:

Requirements for maturities and sinking funds:

Year	Amount $
2018	$0
2019	$2,500,000
2020	$4,500,000 $\left(\$2,000,000+\$2,500,000\right)$
2021	$8,500,000 $\left(\$6,000,000+\$2,500,000\right)$
2022	$2,500,000

Step-by-step solution

Definition of Notes to Financial Statement

The information presented at the bottom of the financial statement that provides additional information regarding the assumptions made by the accountant is known as notes to the financial statement.

Notes disclosure for long-term debt

(a) $2,500,000 is added to each year’s disclosure because it is an annual payment for sinking funds.

(b) $2,000,000 is added in 2020 because the note payable will mature on 30 June 2020.

(c) $6,000,000 is added in 2021 because the bond payable will mature on 30 September 2021.