Which of the following debt should be classified as a current liability on December 31, 2020 in the Company's balance sheet? A. $24 million of 6% bonds were issued for $24 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2021. However, the option to call is not expected to be exercised, given prevailing market conditions. B. Blues Company borrowed $100,000 through a 7% note payable dated December 31, 2016. Interest is due annually on December 31, and the principal is due on December 31 2021. The note will be paid on December 31, 2021, with amounts Blues Company accumulated in a long-term investment fund classified as a long-term asset. a. B only. b. Neither A nor B c. A only.

Which of the following debt should be classified as a current liability on December 31, 2020 in the Company's balance sheet? A. $24 million of 6% bonds were issued for $24 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2021. However, the option to call is not expected to be exercised, given prevailing market conditions. B. Blues Company borrowed $100,000 through a 7% note payable dated December 31, 2016. Interest is due annually on December 31, and the principal is due on December 31 2021. The note will be paid on December 31, 2021, with amounts Blues Company accumulated in a long-term investment fund classified as a long-term asset. a. B only. b. Neither A nor B c. A only.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 52BE

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Which of the following modification of terms will not qualif, for derecognition of financial liability? * a. A P1,000,000 bonds payable was due for payment on September 01, 2019. The maturity date has been extended up to September 01, 2020 with the face amount still the same. b. The market rate of interest associated with 2,500 bonds was 10% when these bonds were sold. Present value of the bonds was computed based on this percentage. Months later, prices in the market significantly changed making a shift from 10% to 11.5% effective rate. c. P375,000 of interest that accrued from the last date of interest payment up to the present time has been condoned or forgiven. The face amount though of P5,000,000 is unchanged and would be paid at the original date stated on the bond indentures. d. A previous P2,000,000 bonds was replaced by another bond payable of the same amount but with a different nominal rate of 9% instead of the old 11% rate.
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