When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as noncurrent when I. The lender has agreed after the end if the reporting period and before the financial statements are authorized for issue not to demand payment as a consequence of the breach. II. The lender has agreed on or before the end of the reporting period to provide a grace period ending at least twelve months after that date. a. Both I and II b. Neither I and II c. I only d. II only

When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as noncurrent when I. The lender has agreed after the end if the reporting period and before the financial statements are authorized for issue not to demand payment as a consequence of the breach. II. The lender has agreed on or before the end of the reporting period to provide a grace period ending at least twelve months after that date. a. Both I and II b. Neither I and II c. I only d. II only

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 101.1C: Debtholders receive note contracts, one for each note, that describe the payments promised by the...

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When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as Current under all circumstances Noncurrent under all circumstances Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach. Noncurrent if the lender agreed after the reporting period to provide grace period for at least twelve months after the reporting period.
In which of the following instances would a liability that would otherwise be presented as current is presented as noncurrent a. The liability is payable on demand but the lender promises the entity after the reporting period that the lender will not demand payment in the next 12 months b. The entity enters into a refinancing agreement after the reporting period but before the financial statements are authorized for issue c. The entity enters into a refinancing agreemerit and the agreement is completed by the balance sheet date d. The liability is payable on demand but the entity estimates that it is probable that the lender will not demand payment
TRUE OR FALSE? The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.
TRUE OR FALSE?The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.
TRUE OR FALSE? (Based on the book.)The effect of a lender agreeing to give the borrowing entity a grace period within the reporting period will make a liability noncurrent.
40. When an entity breaches an undertaking under a long-term loan agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, (choose the incorrect statement) a. The liability is classified as non-current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach b. The liability is classified as current because, at the balance sheet date, the entity does not have an unconditional right to defer its settlement for at least twelve months after that date. c. The liability is normally classified as current; however, the liability is classified as non-current if the lender agreed by the balance sheet date to provide a period of grace ending at least twelve months after the balance sheet date, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment. d. The…
TRUE OR FALSE?1. Short-term obligation refinanced on a long-term basis at the end of the reporting period is a current liability.2. An entity must make the current and noncurrent presentation of assets and liabilities, except when a presentation based on liquidity provides information that is reliable and more relevant.3. A liability is classified as noncurrent when at the end of the reporting period the entity has the right to defer settlement of the liability for at least twelve months after the reporting period.
TRUE OR FALSE? 1. Current assets less current liabilities equals net assets.2. The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.3. The effect of a lender agreeing to give the borrowing entity a grace period within the reporting period will make a liability noncurrent.
TRUE OR FLASE? The effect of a lender agreeing to give the borrowing entity a grace period within the reporting period will make a liability noncurrent.
Short-term obligations can be reported as noncurrent liabilities if the company (a) intends to refinance ona long-term basis and (b) demonstrates the ability to do so by actual financing or a formal agreement to doso.
8. Which of the following is a current liability? a. Deferred tax liability b. An obligation for which the entity has an unconditional right to defer. C A long-term obligation that becomes payable on demand because of a breach of loan agreement but the lender agrees before the balance sheet date to provide a graæ period for the lender to rectify the breach. d. An obligation for which the entity has a conditional righ to defer.
Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org).Required:Determine the specific citation for accounting for each of the following items:1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed.2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities.3. Accounting for the revenue from separately priced extended warranty contracts.4. The criteria to determine if an employer must accrue a liability for vacation pay