AC325

FASB Codification Research Chapter 15

You are part of the external audit team auditing Coover Corporations financial statements for the year ending December 31, 2014. The audit engagement should be completed by mid- February and Coover anticipates publishing its financial statements, including your CPA firms audit opinion, by February 28, 2015.

At December 31, 2014 Coover had a $100,000 outstanding note payable that was issued in 2011 and is due March 5, 2015. On January 10, 2015, Coover sold 1,000 shares of its $30 par value common stock for $90,000. Coover intends to use the $90,000 proceeds plus $10,000 cash on hand to repay the note payable on March 5, 2015.

Coover has reported the $100,000 note payable as a current liability at December 31, 2014 because it will be paid off in the short-run. However, the audit senior isnt sure that is the correct way of reporting the note because it wasnt paid off with a current asset. The audit senior has assigned you the task of researching the proper reporting.