Branch Company, a building materials supplier, has $17,400,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First Bank to borrow up to $17,400,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 70% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2021, financial statements, the value of Branch's collateral was $19,900,000. On its December 31, 2021, balance sheet, Branch should classify the notes as follows:

Question

Marcel Harrell

Business

21 October, 13:04

Branch Company, a building materials supplier, has $17,400,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First Bank to borrow up to $17,400,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 70% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2021, financial statements, the value of Branch's collateral was $19,900,000. On its December 31, 2021, balance sheet, Branch should classify the notes as follows:

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Hubby · Answer 1

Current liabilities is $ 3,470,000.00

Long-term liabilities of $13,930,000.00

Explanation:

The amount to ascribe to long-term liabilities is 70% of the collateral value of $19,900,000.

In other words, value of long-term liabilities is $ 13,930,000.00

(70%*$19,900,000).

The current liabilities portion of the notes is balance left when long-term liabilities of $ 13,930,000.00 is deducted from the notes face value of $17,400,000.

current liabilities=Notes payable face value-long-term liabilities

=$17,400,000-$ 13,930,000=$ 3,470,000.00

The notes is divided into$13,930,000 long-term liabilities and current liabilities of $ 3,470,000.00