Branch Company, a building materials supplier, has $17,800,000 of notes payable due April 12, 2014. At December 31, 2013, Branch signed an agreement with First Bank to borrow up to $17,800,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 85% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2013, financial statements, the value of Branch's collateral was $19,400,000. On its December 31, 2013, balance sheet, Branch should classify the notes as follows:

a.$2,670,000 short-term and $15,130,000 current liabilities.

b. $17,800,000 of long-term liabilities.

c. $16,490,000 long-term and $1,310,000 current liabilities.

d. $17,800,000 of current liabilities.

Question

Angel

Business

2 November, 16:23

Branch Company, a building materials supplier, has $17,800,000 of notes payable due April 12, 2014. At December 31, 2013, Branch signed an agreement with First Bank to borrow up to $17,800,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 85% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2013, financial statements, the value of Branch's collateral was $19,400,000. On its December 31, 2013, balance sheet, Branch should classify the notes as follows:

a.$2,670,000 short-term and $15,130,000 current liabilities.

b. $17,800,000 of long-term liabilities.

c. $16,490,000 long-term and $1,310,000 current liabilities.

d. $17,800,000 of current liabilities.

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Answers (1)

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Tiffany Acevedo · Answer 1

17800000 total liabilities

19400000 * 0.85 = 16490000 = long term liabilities

17800000 - 16490000 = 1310000 = current liabilities

Hence option C is correct.

$16,490,000 long-term and $1,310,000 current liabilities.