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P 13-3

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Question

a line of;credit with a commercial bank for up to $5 million any time during;2014. Any borrowings will mature two years from the date of;borrowing.;c. Noncallable 12% bonds with a face amount of $20 million were issued for;$20 million on September 30, 1988. The bonds mature on;September 30, 2014. Sufficient cash is expected to be available to;retire the bonds at maturity.;d. A $12 million 9% bank loan is payable on October 31, 2019. The bank;has the right to demand payment after any fiscal year-end in which;Nevada Harvester's ratio of current assets to current liabilities falls;below a contractual minimum of 1.7 to 1 and remains so for six;months. That ratio was 1.45 on December 31, 2013, due primarily to;an intentional temporary decline in inventory levels. Normal;inventory levels will be reestablished during the first quarter of 2014.;Required;1. Determine the amount that can be excluded from classification as a;current liability (that is, reported as a noncurrent liability) for each.;Explain the reasoning behind your classifications.;2. Prepare the liability section of a classified balance sheet and any;necessary footnote disclosure for Nevada Harvester at December;31, 2013. Accounts payable and accruals are $22 million.

 

Paper#79754 | Written in 18-Jul-2015

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