Question;Chapter 13 Case StudyYou have been given a research project by your boss regarding the classification of short- term obligations repaid prior to being replaced by a long- term security. Kraft Foods, Inc., issued $5,000,000 of short-term commercial paper during 2008 to finance construction of a plant. At September 30, 2009, Kraft?s fiscal year-end, the company intends to refinance the commercial paper by issuing long-term bonds. However, because Kraft temporarily has excess cash, in November 2009 it pays off $2,000,000 of the commercial paper as the paper matures.In December 2009, the company completes a $10,000,000 long-term bond issue. Later during December, it issues its September 30, 2009 financial statements. The proceeds of the long- term bond issue are to be used to replenish $2,000,000 in working capital used in November to pay off a part of the commercial paper, to pay $3,000,000 of commercial paper as it matures in January 2010, and to pay $5,000,000 of construction costs expected to be incurred later that year to complete the plant.You initially are hesitant because you don?t recall encountering a situation in which short-term obligations were repaid prior to being replaced by a long-term security. However, you are encouraged by remembering that this general topic is covered by an old FASB pronouncement: ? Classification of Obligations Expected to Be Refinanced,? Statement of Financial Accounting Standards No. 6 (Stamford, Conn.: FASB, 1975). Also, ?Classification of Obligation Repaid Prior to Being Replaced by a Long-Term Security,? FASB Interpretation No. 8, addresses this situation specifically.Required:Format: List each question and after the question, state your answer in complete sentences/paragraph form. If calculations are involved, show ALL calculations for complete credit.1. Formulate your own opinion on the proper treatment for the $5,000,000 commercial paper based on your reading in the text. Explain how you think the item should be reported and give textbook pages to support your conclusions.2. Determine how the $5,000,000 of commercial paper should be classified by researching the FASB Accounting Standards Codification (ASC). Explain the results of your research and cite the appropriate section of the Codification.NOTE: The FASB Codification link and sign-in information is in Course Material. You must use the Accounting Standards Codification (ASC) citations for your answers. You may use the old FASB statement information given above to find the Codification location, but your citations MUST be in ASC format. For example, ASC 740-10-25 is the format for your citation (however, 740-10-25 has nothing to do with this case solution--it is only an example of how to show the citation).3. Compare your previous answer in #1 based on your reading of the textbook to the FASB Codification required treatment in #2. What are the differences?
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