a line of

credit with a commercial bank for up to $5 million any time during

2014. Any borrowings will mature two years from the date of

borrowing.

c. Noncallable 12% bonds with a face amount of $20 million were issued for

$20 million on September 30, 1988. The bonds mature on

September 30, 2014. Sufficient cash is expected to be available to

retire the bonds at maturity.

d. A $12 million 9% bank loan is payable on October 31, 2019. The bank

has the right to demand payment after any fiscal year-end in which

Nevada Harvester's ratio of current assets to current liabilities falls

below a contractual minimum of 1.7 to 1 and remains so for six

months. That ratio was 1.45 on December 31, 2013, due primarily to

an intentional temporary decline in inventory levels. Normal

inventory levels will be reestablished during the first quarter of 2014.

Required:

1. Determine the amount that can be excluded from classification as a

current liability (that is, reported as a noncurrent liability) for each.

Explain the reasoning behind your classifications.

2. Prepare the liability section of a classified balance sheet and any

necessary footnote disclosure for Nevada Harvester at December

31, 2013. Accounts payable and accruals are $22 million.

  • Posted: 6 years ago
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