Practice Brief Exercise 13-2 At December 31, 2017 (the end of the fiscal year),

Question

Practice Brief Exercise 13-2 At December 31, 2017 (the end of the fiscal year), Swifty Corporation owes $2,360,000 on a note payable due January 31, 2018. If Swifty refinances the obligation by issuing a long-term note on February 20, 2018 and using the proceeds to pay off the note due January 31, how much of the $2,360,000 should be reported as a current liability at December 31, 2017? (Do not leave any answer field blank. Enter O for amounts.) Amount to be reported as a current liability at December 31, 2017 s If Swifty pays off the note on January 31, 2018, and then borrows $3,540,000 on a long-term basis on February 15, how much of the $2,360,000 should be reported as a current liability at December 31, 2017? (Do not leave any answer field blank. Enter O for amounts.) Amount to be reported as a current liability at December 31, 2017 s Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Answer to first question only as per policy since two questions are unrelated.

Exercise 13-2

(a) Under US GAAP, a debt is not classified as current if, after the reporting date but before the financial statements are issued or available for issuance, the debt is refinanced as long term. Hence, Amount to be reported as current liability in first situation is NiL

(b) Under situation two, the note is paid off before the Company borrows on long term basis, hence the same will be treated as extinguishment of liability. Hence, Amount to be reported as current liability in second situation is $ 2,360,000.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.