which of the following instances would a liability that would otherwise be presented as current is presented as noncurrent a. The liability is payable on demand but the lender promises the entity after the reporting period that the lender will not demand payment in the next 12 months b. The entity
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In which of the following instances would a liability that would otherwise be presented as current is presented as noncurrent
a. The liability is payable on demand but the lender promises the entity after the reporting period that the lender will not demand payment in the next 12 months
b. The entity enters into a refinancing agreement after the reporting period but before the financial statements are authorized for issue
c. The entity enters into a refinancing agreemerit and the agreement is completed by the
d. The liability is payable on demand but the entity estimates that it is probable that the lender will not demand payment
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Solved in 2 steps
- When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as Current under all circumstances Noncurrent under all circumstances Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach. Noncurrent if the lender agreed after the reporting period to provide grace period for at least twelve months after the reporting period.When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting periodwith the effect that the liability becomes payable on demand, the liability is classified as noncurrent whenI. The lender has agreed after the end if the reporting period and before the financial statements areauthorized for issue not to demand payment as a consequence of the breach.II. The lender has agreed on or before the end of the reporting period to provide a grace period ending atleast twelve months after that date. a. Both I and IIb. Neither I and IIc. I onlyd. II onlyAccess the FASB Accounting Standards Codification at the FASB website (www.fasb.org).Required:Determine the specific citation for accounting for each of the following items:1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed.2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities.3. Accounting for the revenue from separately priced extended warranty contracts.4. The criteria to determine if an employer must accrue a liability for vacation pay
- 5. An entity classifies the obligation as non-current if an entity expects, and has the discretion, to refinance or rollover an obligation for at least twelve months after the reporting period under an existing loan facility, even if it would otherwise be due within a shorter period. Select one: True or FalseAccess the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ) Required: Determine the specific citation for accounting for each of the following items: 1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed. 2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities. 3. Accounting for the revenue from separately priced extended warranty contracts. 4. The criteria to determine if an employer must accrue a liability for vacation pay.TRUE OR FALSE? A liability is classified as noncurrent when at the end of the reporting period the entity has the right to defer settlement of the liability for at least twelve months after the reporting period.
- an entity has an existing note maturing within 12 months from the balance sheet date. The entity has the right to refinance the obligation for 15 months from the report date the obligation should be accounted for as A. Accounted for as a current liability when refinancing was done after the report date and after the issuance of the financial statement, with a corresponding disclosure in the notes regarding the refinancingB. Accounted for as a current liability when refinancing was done on or before the reporting date.C. Accounted for as a current liability when refinancing was done after the report date but before the issuance of the financial statement. D. Accounted for as a noncurrent liability when refinancing was done on or before the maturity date(Disclosures, Conditional and Contingent Liabilities) Presented below are three independent situations.Situation 1: A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled, and the probable amounts of claims related to sales for a given period can be determined.Situation 2: Subsequent to the date of a set of financial statements but prior to the issuance of the financial statements, a company enters into a contract that will probably result in a significant loss to the company. The amount of the loss can be reasonably estimated.Situation 3: A company has adopted a policy of recording self-insurance for any possible losses resulting from injury to others by the company’s vehicles. The premium for an insurance policy for the same risk from an independent insurance company would have an annual cost of $4,000. During the period covered by the financial statements, there were no accidents involving the company’s vehicles that…The following covenants are extracted from the indenture of abond issue. The indenture provides that failure to comply with its terms in any respectautomatically makes the loan immediately due (the regular date is 20 years hence). Listany audit steps or reporting requirements you think should be taken or recognized inconnection with each one of the following:a. The debtor company shall endeavor to maintain a working capital ratio of 2 to 1at all times, and in any fiscal year following a failure to maintain said ratio, thecompany shall restrict compensation of officers to $100,000 per individual. Officersfor this purpose shall include chairman of the board of directors, president, all vicepresidents, secretary, and treasurer.b. The debtor company shall keep all property that is security for this debt insuredagainst loss by fire to the extent of 100% of its actual value. Policies of insurancecomprising this protection shall be filed with the trustee.c. The debtor company shall pay all…
- In accounting for lease contracts, companies reporting under U.S. GAAP are required to treat the cash payments as "rent expense" if the contract is for 24 months or less. O do not need to capitalize the leased right-to-use asset if the contract is deemed immaterial. O have the discretion to classify the cash payments as "rent expense". O have to disclose every detail of the contract in the footnotes to the financial statements.9. Which of the following items would be excluded from current liabilities? Group of answer choices a. Normal accounts payable which had been assigned by the creditor to a finance company. b. Long-term debt callable within one year or less because the debtor violated a debt provision. c. A short-term debt which at the discretion of the entity can be rolled over at least twelve months after the balance sheet date. d. A long-term liability callable or due on demand by the creditor even though the creditor have given no indication that the debt will be called.Which of the following statements is true? a. If any portion of a non-current liability is to be paid in the next year, the entire debt should be classified as a current liability. b. "Current maturities of non-current debt” refers to the amount of interest on notes payable that must be paid in the current year. c. Even though current and non-current debt must be shown separately on the statement of financial position, it is not necessary to prepare a journal entry to recognize this. d. A non- current liability is an obligation that is expected to be paid within one year.