Q: Please explain why we have two Notes Payable to Bank and Capital Lease Obligations under Liabilities. Thank you.
A: The first Notes Payable to Bank is a short-term line of credit. The second Notes Payable to Bank is a term loan that matures over multiple years. As a result, there is an annual amount due on the term loan, which is designated as Current Maturities LTD. The remaining long-term balance is reported as Notes Payable to the Bank.
Then there is the capital lease obligation, which is a form of long-term financing. As such, it, too, has an annual amount paid down against the capital lease total. Therefore, the capital lease is reported as Current Maturities Capital Leases, which are due and payable in the next year, and Capital Leases, which is the remaining long-term balance of the financing.
Course overview: Cash Flow Analysis and Borrowing Causes