Problem:

Raffie's Kids, a non-profit organization that provides aid to victims of domestic violence, lowincome families, and special-needs children has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie's bookkeeper is preparing financial statements for the board and in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. $20,000 of the mortgage principal will be paid next year if Raffie's pays according to the mortgage agreement.

Requirement

1. The board members call you, their trusted CPA, to advise them on how Raffie's Kids should report the mortgage on its balance sheet. Provide your recommendation and discuss the reason for your recommendation.

Note: Be sure to show how you arrived at your answer.