Answered

Find the best solutions to your questions at Westonci.ca, the premier Q&A platform with a community of knowledgeable experts. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Ames, Inc., has $1 million of notes payable due June 15, Year 2. At the financial statement date of December 31, Year 1, Ames signed an agreement to borrow up to $1 million to refinance the notes payable on a long-term basis. The financing agreement called for borrowings not to exceed 80% of the value of the collateral Ames was providing. At the date of issue of the December 31, Year 1, financial statements, the value of the collateral was $1.2 million and was not expected to fall below this amount during Year 2. In its December 31, Year 1, balance sheet, Ames should classify the notes payable asShort-Term Obligations, Long-Term ObligationsA. $0, $1,000,000B. $40,000, $960,000C. $200,000, $800,000D. $1,000,000, $0

Sagot :

Answer: B. $40,000, $960,000

Explanation:

The long term obligation will be 80% of the collateral value which will be:

= 80% × $1.2 million

= 0.8 × $1,200,000

= $960,000.

Therefore, the short term obligation will be:

= $1,000,000 - $960,000

= $40,000

Thank you for choosing our service. We're dedicated to providing the best answers for all your questions. Visit us again. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.