Listed below are the current liability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Listed below are the current liability section and Note 7 of the Year 7 balance sheet of Joli Roma Corporation (the Company), a major oil company.
$ millions
Year 7 Year 6
Current Liabilities
Current portion of long-term obligations
Short-term obligations
Accounts payable
Accrued liabilities
Taxes payable (including income taxes)
$175 $89
691
530
2,996 3,196
1,046 1,099
1,289 997
$6,197 $5,911
Note 7 Short-Term Obligations
The Company's "short-term obligations" consist of notes payable and commercial paper. Notes payable as of December 31, Year 7, totaled $102 million at an average annual interest
rate of 5.7%, compared with $29 million at an average annual interest rate of 5.7% at year-end Year 6. Commercial paper borrowings at December 31, Year 7, were $839 million at an
average annual interest rate of 5.7% compared with $260 million at an average annual interest rate of 5.9% as of December 31, Year 6.
Bank lines of credit available to support existing commercial paper borrowings of the corporation amounted to $588 million at both December 31, Year 7 and Year 6. All of these were
supported by commitment fees.
The corporation also maintains compensating balances with a number of banks for various purposes. Such arrangements do not legally restrict withdrawal or usage of available cash
funds. In the aggregate, they are not material in relation to total liquid assets.

Transcribed Image Text:a. Explain the origin of the $175 million current portion of long-term obligations in current liabilities of Year 7.
The $175 million is the portion of the Company's
◆ coming due in Year 0 and which the company expects to pay off in Year
0
b. What amount of Joli Roma's long-term debt reflected in its current liabilities reported in Year 6 did the Company pay off in Year 7?
The Company paid $ 0 million in Year 7.
c. During Year 7, did the Company reduce its average yearly interest incurred on its short-term obligations described in Note 7?
Assuming interest rates remained constant, the Company
→ its average interest obligations because short-term obligations
d. Do the lines of credit that Joli Roma holds at the end of Year 7 appear as liabilities on its balance sheet?
The lines of credit amounting to $ 0
million
◆ appear as liabilities on its balance sheet.
◆
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