How should a mortgage loan payable be reported on a classified balance sheet?

Definition of a Mortgage Loan Payable

The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest that has accrued since the last payment should be reported as Interest Payable, a current liability. Future interest is not reported on the balance sheet.)

Any principal that is to be paid within 12 months of the balance sheet date is reported as a current liability. The remaining amount of principal is reported as a long-term liability (or noncurrent liability).

Example of a Mortgage Loan Payable

Let's assume that a company has a mortgage loan payable of $238,000 and is required to make monthly payments of approximately $4,500 per month. Each of the monthly payments includes a $3,000 principal payment plus an interest payment of approximately $1,500. This means that during the next 12 months, the company will be required to repay $36,000 ($3,000 x 12 months) of the loan's principal. Therefore $36,000 is reported as a current liability. The remaining principal of $202,000 ($238,000 minus $36,000) is reported as a long-term (or noncurrent) liability since this amount will not be due within one year of the balance sheet date.

You can find the amount of principal due within the next year by reviewing the loan's amortization schedule or by asking your lender.

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