Question

Branch Company, a building materials supplier, has $18,400,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First Bank to borrow up to $18,400,000 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 $19,600,000. On its December 31, 2021, balance sheet, Branch should classify the notes as follows:

a. $18,400,000 of long-term liabilities.
b. $18,400,000 of current liabilities.
c. $3,680,000 long-term and $14,720,000 current liabilities.
d. $15,680,000 long-term and $2,720,000 current liabilities.

Answer 1

The answer is "Choice d"

Step-by-step explanation:

Please find the complete question in the attached file.

Follows are the calculation to this question:

The notes on payable=
`\$18,400,000`

Calculating the Refinancing ability:

`=\$ 19,600,000 * 80\% \\\\ = \$ 19,600,000 * (80)/(100) \\\\ = \$ 196,000 * 80 \\\\ =\$15,680,000`

The current liability=
`\$2,720,000`