Question
Branch Company, a building materials supplier, has $17,300,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First
Branch Company, a building materials supplier, has $17,300,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First Bank to borrow up to $17,300,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 70% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2021, financial statements, the value of Branch's collateral was $19,700,000. On its December 31, 2021, balance sheet, Branch should classify the notes as follows:
$17,300,000 of current liabilities.
$13,790,000 long-term and $3,510,000 current liabilities.
$17,300,000 of long-term liabilities.
$5,190,000 long-term and $12,110,000 current liabilities.
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