nordstrom borrowed 4 million by issuing long term bonds whose terms require that on 566871

Nordstrom borrowed $4 million by issuing long term bonds whose terms require that on December 31 of each year, Nordstrom make a payment of 10% of the amount borrowed. In addition, Nordstrom must repay the $4 million initial amount borrowed in 20 years. The $4 million obligation is a liability because Nordstrom received the cash and must repay the debt. Nordstrom reports the borrowed amount as a noncurrent liability on its balance sheet (included in Long Term Debt) until the last year. At the end of the 19th year, Nordstrom will reclassify the $4 million as a current liability (included in Current Portion of Long Term Debt). In contrast, the annual 10% interest becomes a liability as time passes. By the end of each year, Nordstrom will record (accrue) $400,000 (_ .10 _ $4 million) as Interest Payable, a current liability. The obligating event is the passage of time.