On September 1, 2024, Venetian Airlines borrows $24 million, and records the full amount as Notes Payable (long-term). On December 31, 2024 (balance sheet date), Southwest determines $12 million of the note is due next year, while the remaining $12 million is due in two years. Record the entry to reclassify the current portion of long-term debt. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not millions. For example, $5.5 million should be entered as 5,500,000.)
Question
On September 1, 2024, Venetian Airlines borrows 12 million of the note is due next year, while the remaining 5.5 million should be entered as 5,500,000.)
Solution
The journal entry to reclassify the current portion of long-term debt would be as follows:
Debit: Long-term Notes Payable 12,000,000
This entry reduces the long-term liability (Long-term Notes Payable) by the amount that is due within the next year ($12 million) and increases the current liability (Current Portion of Long-Term Debt) by the same amount. This is done to accurately present the company's financial position, as the portion of the debt due within the next year is now considered a current liability.
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