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ACC 312 - Spring 2020 ASC Research Case #1 INFORMATION Marshall Development Co., Inc. is in the business of software and hardware development in the
ACC 312 - Spring 2020 ASC Research Case #1 INFORMATION Marshall Development Co., Inc. is in the business of software and hardware development in the mechanical engineering markets. In 2016 the company borrowed $3,000,000 due in ten years from a large bank. The note agreement indentures included certain restrictive covenants on Marshall Development such as minimum working capital, debt-to- equity ratios, minimum cash balance and current ratio. If Marshall Development fails to meet any of these covenants at any calendar quarter end, the bank could accelerate the immediate payment of the debt. Marshall Development was not in compliance with two of these ratios at December 31, 2019. REQUIRED Determine how the debt should be classified under U.S. GAAP on Marshall Development's balance sheet as of December 31, 2019, given solely the above facts. Assuming Marshall Development obtained a waiver from the bank for these two debt covenant violations on January 20, 2020 which was retroactive to December 31, 2019, and through January 1, 2021, does the classification change? Explain your understanding of the FASB's rationale and thought in reaching its decision on the treatment you described in 2 above. ACC 312 - Spring 2020 ASC Research Case #1 INFORMATION Marshall Development Co., Inc. is in the business of software and hardware development in the mechanical engineering markets. In 2016 the company borrowed $3,000,000 due in ten years from a large bank. The note agreement indentures included certain restrictive covenants on Marshall Development such as minimum working capital, debt-to- equity ratios, minimum cash balance and current ratio. If Marshall Development fails to meet any of these covenants at any calendar quarter end, the bank could accelerate the immediate payment of the debt. Marshall Development was not in compliance with two of these ratios at December 31, 2019. REQUIRED Determine how the debt should be classified under U.S. GAAP on Marshall Development's balance sheet as of December 31, 2019, given solely the above facts. Assuming Marshall Development obtained a waiver from the bank for these two debt covenant violations on January 20, 2020 which was retroactive to December 31, 2019, and through January 1, 2021, does the classification change? Explain your understanding of the FASB's rationale and thought in reaching its decision on the treatment you described in 2 above
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