At December 31, 2017, Pronghorn Corporation owes $514,900 on a note payable due February 15, 2018. If Pronghorn refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much of the $514,900 should be reported as a current liability at December 31, 2017?

Question

Clayton Lucero

Business

5 April, 15:34

At December 31, 2017, Pronghorn Corporation owes $514,900 on a note payable due February 15, 2018. If Pronghorn refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much of the $514,900 should be reported as a current liability at December 31, 2017?

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Answers (1)

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Jayvion Myers · Answer 1

none.

Explanation:

According to the Financial Accounting Standards Board the rules to reclassified a short-term liaiblity as long-term due to refinancing are:

Intent to do so: Intenetion fro mthe firm to replace the short-term debt with another which is long-term (settle after a year) thus, avoiding the use of working capital.

This intention must also be backed by the ability to refinance.

In this case, the firm has both, the intention and the means to refinence so the note due efbruary 15th, 2018 will be clasiffied as long-term