On January 1, 2019, Pigero Company took 3-year, P4,000,000 loan from a bank. The loan agreement requires Pigero to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on demand. As of December 31, 2019, Pigero’s current ratio is 1.8:1. On December 31, 2019, the bank agreed not to collect the loan in 2020 and gave Pigero 12 months to rectify the breach of loan agreement. How much is presented as current liability in relation to the loan in Pigero’s 2019 year-end financial statement?
On January 1, 2019, Pigero Company took 3-year, P4,000,000 loan from a bank. The loan agreement requires Pigero to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on demand. As of December 31, 2019, Pigero’s current ratio is 1.8:1. On December 31, 2019, the bank agreed not to collect the loan in 2020 and gave Pigero 12 months to rectify the breach of loan agreement. How much is presented as current liability in relation to the loan in Pigero’s 2019 year-end financial statement?
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 61P
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Question
On January 1, 2019, Pigero Company took 3-year, P4,000,000 loan from a bank. The
loan agreement requires Pigero to maintain a
falls below 2:1, the loan becomes payable on demand. As of December 31, 2019,
Pigero’s current ratio is 1.8:1. On December 31, 2019, the bank agreed not to collect
the loan in 2020 and gave Pigero 12 months to rectify the breach of loan agreement.
How much is presented as current liability in relation to the loan in Pigero’s 2019
year-end financial statement?
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