To explain: Commercial paper shows up either as a current asset or a current liability on the corporate balance sheet.
Introduction:
Commercial paper:
It is a short-term debt instrument, which is issued by one corporation to another for the exchange of inventories or any accounts payable that the issuing company owes to the issued company. It’s a risky instrument as it is not backed up by any sort collateral and is not registered under Security and Exchange Commission, until it is issued under 270 days.
Current assets:
These are assets which can be converted into cash & cash equivalents within a financial year.
Current liability:
Current liabilities are liabilities which are obligated to be paid off within a financial year by the company.
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Loose Leaf for Foundations of Financial Management Format: Loose-leaf
- Write CL if the item is normally reported as a current liabilities, NCL if non-current. If not a liability, write NA. 1. Accounts payable 2. Bank Overdraft 3. Share dividends payable 4. Trade notes payable 5. Deferred tax liabilities 6. Deferred revenue 7. Cumulative Redeemable Preference Shares 8. Provision for warranties 9. Salaries Payable 10. Bonds Payablearrow_forward3. a. List and describe three types of deferred credits? b. Do they meet the definition of a liability? Of short or long term? c. Why do some accountants not consider them to be a liability? d. Do deferred credits affect liquidity? 4. List and discuss four reasons a company would prefer to issue debt rather than equity securities. 5. When and why should liabilities for each of the following items be recorded on the books of an ordinary business corporation? a. Purchase of goods on account. b. Officers' salaries c. Dividends d. Interest e. Loss contingenciesarrow_forward21 - Which of the following is one of the features of resource accounts?A) They give the remainder of the debtB) They are included in the liabilities of the balance sheet.C) Decreases are credited.D) no regulatory account at allE) Increases are recorded in debt.arrow_forward
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- When do companies recognize gains and losses from the extinguishment of debt? Where are the gains and losses disclosed on the income statement?arrow_forwardTrue (t) or False (f) _____ A company whose current liabilities exceed its current assets may have a liquidity problemarrow_forward4 . Both accounts payable and deferred revenue are classifi ed as current liabilities. Discuss the following statements: A . When assessing a company’s liquidity, the implication of amounts in accounts payable diff ers from the implication of amounts in deferred revenue. B . Some investors monitor amounts in deferred revenue as an indicator of future revenue growth.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning