Purdum Farms Borrowed $10 Million by Signing a Five-Year Note

Multiple Choice

Purdum Farms borrowed $10 million by signing a five-year note on December 31, 2013. Repayments of the principal are payable annually in installments of $2 million each. Purdum Farms makes the first payment on December 31, 2014 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2014, after the first payment is made?

A) $2 million in current liabilities and $8 million in long-term liabilities.
B) $2 million in current liabilities and $6 million in long-term liabilities.
C) Zero in current liabilities and $8 million in long-term liabilities.
D) Zero in current liabilities and $10 million in long-term liabilities.