Estimating Principal Due in Next 12 Months with Monthly Payments

dc.contributor.authorLaDue, Eddy L.
dc.date.accessioned2019-10-15T20:51:30Z
dc.date.available2019-10-15T20:51:30Z
dc.date.issued1991-01
dc.descriptionA.E. Ext. 91-1
dc.description.abstractThe Farm Financial Standards Task Force recommends that principal to be repaid within the next 12 months on intermediate and long term loans be listed as a current liability on farm balance sheets. The basic reasons for this are to make current liabilities a better measure of obligations to be met during the next year, to improve the correspondence between current liabilities and current assets so that ratios such as the current ratio make more sense and to be consistent with Generally Accepted Accounting Principals. Thus, for each term loan, the preparer of a balance sheet must determine not only the total amount of principal outstanding, but also the amount of that principal which is due within the next 12 months. The principal amount due within the next 12 months is listed as a current liability and the remainder is listed as a noncurrent (intermediate or long term) liability. Calculating the amount of principal due within the next 12 months is a simple task for some loans. Constant principal payment loans are, of course, the easiest. Loans with constant principal and interest payments and annual payments can also be handled quite simply: subtract one year's interest on the outstanding principal from the annual payment. However, making the calculations for loans with constant monthly (principal and interest) payments is a much more complicated undertaking. If the loan is on a computer system to which the balance sheet preparer has access, the information may be easily available. But, for those other loans, another procedure will be required. This article presents alternate ways of calculating or estimating the principal due within the next 12 months for loans with monthly payments. The methods vary in the amount of information required and the degree of accuracy provided.
dc.identifier.urihttps://hdl.handle.net/1813/68770
dc.language.isoen_US
dc.publisherCharles H. Dyson School of Applied Economics and Management, Cornell University
dc.titleEstimating Principal Due in Next 12 Months with Monthly Payments
dc.typereport
dcterms.licensehttp://hdl.handle.net/1813/57595
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