On December 31. 2021. the liabilities of Abraham Company include the following: a. )A note worth P12 million is due to be settled on March 31, 2026. Abraham is required by the financing agreement to keep current assets equal to at least 200 percent of current liabilities. Abraham has violated this loan covenant as of December 31, 2021. Abraham obtained a grace period from ABC Bank until Janaary 31, 2023 on February 10, 2022, before Abraham's financial statements are authorized for issue, after convincing the bank that the company's normal 3 to 1 ratio of current assets to current liabilities will be restored during 2022: b. ) On September 30, 2000, an P18 million noncancelable 12 percent bonds were issued at face value. The bonds will be paid off on August 31, 2022. Abraham anticipates having enough cash on hand to redeem the bonds when they reach maturity: c. ) On June 30, 2002, PIS million in 10% bonds were issued at face value. Bondholders have the option to call (or demand payment on) the bonds on June 30, 2022, before they mature on June 30, 2031, However, given current market conditions, it is unlikely that the call option will be exercised. In the preparation of statement of financial position, how much should be reported as current liability on December 31, 2021?
On December 31. 2021. the liabilities of Abraham Company include the following: a. )A note worth P12 million is due to be settled on March 31, 2026. Abraham is required by the financing agreement to keep current assets equal to at least 200 percent of current liabilities. Abraham has violated this loan covenant as of December 31, 2021. Abraham obtained a grace period from ABC Bank until Janaary 31, 2023 on February 10, 2022, before Abraham's financial statements are authorized for issue, after convincing the bank that the company's normal 3 to 1 ratio of current assets to current liabilities will be restored during 2022: b. ) On September 30, 2000, an P18 million noncancelable 12 percent bonds were issued at face value. The bonds will be paid off on August 31, 2022. Abraham anticipates having enough cash on hand to redeem the bonds when they reach maturity: c. ) On June 30, 2002, PIS million in 10% bonds were issued at face value. Bondholders have the option to call (or demand payment on) the bonds on June 30, 2022, before they mature on June 30, 2031, However, given current market conditions, it is unlikely that the call option will be exercised. In the preparation of statement of financial position, how much should be reported as current liability on December 31, 2021?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 13C
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Transcribed Image Text:On December 31, 2021, the liabilities of Abraham Company include the folowing:
a. )A note worth P12 million is due to be settled on March 31, 2026. Abraham is
required by the financing agreement to keep current assets equal to at least 200
percent of current liabilities. Abraham has violated this loan covenant as of December
31, 2021. Abraham obtained a grace period from ABC Bank until January 31, 2023
on February 10, 2022, before Abraham's financial statements are authorized for issue,
after convincing the bank that the company's normal 3 to 1 ratio of current assets to
current liabilities will be restored during 2022:
b. ) On September 30, 2000, an P18 million noncancelable 12 percent bonds were
issued at face value. The bonds will be paid off on August 31, 2022. Abraham
anticipates having enough cash on hand to redeem the bonds when they reach
maturity:
c. ) On June 30, 2002, P15 million in 10% bonds were issued at face value.
Bondholders have the option to call (or demand payment on) the bonds on June 30,
2022, before they mature on June 30, 2031, However, given current market conditions,
it is unlikely that the call option will be exercised.
In the preparation of statement of financial position, how much should be reported as
current liability on December 31, 2021?
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