questions in 1 - 2 paragraphs each. What is a line of credit? What promulgated accounting literature would your use to support your rationale described in your scenario? What criteria should be met prior to reflecting this loan as a long-term liability? Why would recording the loan as a long-term liability from a business standpoint of view make sense apart from compliance with promulgated standards? What footnote disclosure would be necessary for the line of credit?

questions in 1 - 2 paragraphs each. What is a line of credit? What promulgated accounting literature would your use to support your rationale described in your scenario? What criteria should be met prior to reflecting this loan as a long-term liability? Why would recording the loan as a long-term liability from a business standpoint of view make sense apart from compliance with promulgated standards? What footnote disclosure would be necessary for the line of credit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Bookkeeping

Bookkeeping is the process of recording the financial transactions of a company on a regular basis. With the process of bookkeeping, companies can track important financial information that helps management in making crucial decisions.

Question

You have recorded a revolving line of credit on your company's financial statements due within the next ten
(10) months as a long-term liability. The board of directors of the company has asked you to explain why
you have done so. The company has been in default with its loan covenants, but prior to the issuance of the
financial statements, the bank granted a waiver. With reference to the above scenario, answer the following
questions in 1 - 2 paragraphs each. What is a line of credit? What promulgated accounting literature would
your use to support your rationale described in your scenario? What criteria should be met prior to reflecting
this loan as a long-term liability? Why would recording the loan as a long-term liability from a business
standpoint of view make sense apart from compliance with promulgated standards? What footnote
disclosure would be necessary for the line of credit?

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Step 1: 1. Line of credit

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Step 2: 2. accounting literature to support rationale

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Step 3: 3. criteria should be met prior to reflecting this loan as a long term liability

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Step 4: 4. Recording the loan as a long -term liability from a business stand point

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Step 5: footnote disclosure

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