Research Case 13-1 (Static) Bank loan; accrued interest [LO13-1, 13-2]A fellow accountant has solicited your opinion regarding the classification of short-term obligations repaid prior to being replaced by along-term security. Cheshire Foods, Inc., issued $5,000,000 of short-term commercial paper during 2020 to finance construction of aplant. At September 30, 2021, Cheshire's fiscal year-end, the company intends to refinance the commercial paper by issuing long-termbonds. However, because Cheshire temporarily has excess cash, in November 2021 it liquidates $2,000,000 of the commercial paperas the paper matures. In December 2021, the company completes a $10,000,000 long-term bond issue. Later during December, itissues its September 30, 2021, financial statements. The proceeds of the long-term bond issue are to be used to replenish $2,000,000In working capital, to pay $3,000,000 of commercial paper as it matures in January 2022, and to pay $5,000,000 of construction costsexpected to be incurred later that year to complete the plant.You initially are hesitant because you don't recall encountering a situation in which short-term obligations were repaid prior to beingreplaced by a long-term security. However, you are encouraged by a vague memory that this general topic is covered by GAAPliterature you came across when reading an Internet article.Required:Determine how the $5,000,000 of commercial paper should be classified by citing the specific nine-digit Codification citation (XXX-XX-XX-XX) in the FASB Codification. Before doing so, formulate your own opinion on the proper treatment.TopicSubtopicSectionParagraph

Current liabilities are the obligations of a business that must be paid back from current assets or…

Required: Determine how the $5,000,000 of commercial paper should be classified by citing the specific nine-digit Codification citation (XXX-XX- XX-XX) in the FASB Codification. Before doing so, formulate your own opinion on the proper treatment.

Required: Determine how the $5,000,000 of commercial paper should be classified by citing the specific nine-digit Codification citation (XXX-XX- XX-XX) in the FASB Codification. Before doing so, formulate your own opinion on the proper treatment.

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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