Consider the following liabilities of Future Brands, Inc., at December 31, 2018, the company’s fiscal year-end.Should they be reported as current liabilities or long-term liabilities?1. $77 million of 8% notes are due on May 31, 2022. The notes are callable by the company’s bank, beginningMarch 1, 2019.2. $102 million of 8% notes are due on May 31, 2023. A debt covenant requires Future to maintain a currentratio (ratio of current assets to current liabilities) of at least 2 to 1. Future is in violation of this requirementbut has obtained a waiver from the bank until May 2019, since both companies feel Future will correct thesituation during the first half of 2019.
Consider the following liabilities of Future Brands, Inc., at December 31, 2018, the company’s fiscal year-end.
Should they be reported as current liabilities or long-term liabilities?
1. $77 million of 8% notes are due on May 31, 2022. The notes are callable by the company’s bank, beginning
March 1, 2019.
2. $102 million of 8% notes are due on May 31, 2023. A debt covenant requires Future to maintain a
ratio
but has obtained a waiver from the bank until May 2019, since both companies feel Future will correct the
situation during the first half of 2019.
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