Consider the following liabilities of Future Brands, Inc., at December 31, 2021, 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, 2025. The notes are callable by the company’s bank, beginning March 1, 2022.2. $102 million of 8% notes are due on May 31, 2026. A debt covenant requires Future to maintain a current ratio (ratio of current assets to current liabilities) of at least 2 to 1. Future is in violation of this requirement but has obtained a waiver from the bank until May 2022, since both companies feel Future will correct the situation during the first half of 2022.
Consider the following liabilities of Future Brands, Inc., at December 31, 2021, 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, 2025. The notes are callable by the company’s bank, beginning March 1, 2022.2. $102 million of 8% notes are due on May 31, 2026. A debt covenant requires Future to maintain a current ratio (ratio of current assets to current liabilities) of at least 2 to 1. Future is in violation of this requirement but has obtained a waiver from the bank until May 2022, since both companies feel Future will correct the situation during the first half of 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Consider the following liabilities of Future Brands, Inc., at December 31, 2021, 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, 2025. The notes are callable by the company’s bank, beginning March 1, 2022.
2. $102 million of 8% notes are due on May 31, 2026. A debt covenant requires Future to maintain a
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