Statement I- A long-term debt that is due to be settled within twelve months after the end of the reporting period is classified as noncurrent when an agreement to refinance or reschedule payment on a long-term basis is completed after the end of the reporting period and before the financial statements are authorized for issue Statement II – When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified noncurrent when the lender agreed on or before the end of reporting period to provide a grace period at least twelve months after that date a. Only statement I is correct b. Only statement II is correct c. Both statements are correct d. Both statements are incorrect

Statement I- A long-term debt that is due to be settled within twelve months after the end of the reporting period is classified as noncurrent when an agreement to refinance or reschedule payment on a long-term basis is completed after the end of the reporting period and before the financial statements are authorized for issue Statement II – When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified noncurrent when the lender agreed on or before the end of reporting period to provide a grace period at least twelve months after that date a. Only statement I is correct b. Only statement II is correct c. Both statements are correct d. Both statements are incorrect

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 1MC: Which of the following is not considered a current liability? A. Accounts Payable B. Unearned...

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TRUE OR FALSE? (Based on the book) A financial liability that is due within one year after the reporting period shall be classified as current when it is refinanced on a long-term basis after the end of the reporting period.
9. Which of the following items would be excluded from current liabilities? Group of answer choices a. Normal accounts payable which had been assigned by the creditor to a finance company. b. Long-term debt callable within one year or less because the debtor violated a debt provision. c. A short-term debt which at the discretion of the entity can be rolled over at least twelve months after the balance sheet date. d. A long-term liability callable or due on demand by the creditor even though the creditor have given no indication that the debt will be called.
5. An entity classifies the obligation as non-current if an entity expects, and has the discretion, to refinance or rollover an obligation for at least twelve months after the reporting period under an existing loan facility, even if it would otherwise be due within a shorter period. Select one: True or False
In which of the following instances would a liability that would otherwise be presented as current is presented as noncurrent a. The liability is payable on demand but the lender promises the entity after the reporting period that the lender will not demand payment in the next 12 months b. The entity enters into a refinancing agreement after the reporting period but before the financial statements are authorized for issue c. The entity enters into a refinancing agreemerit and the agreement is completed by the balance sheet date d. The liability is payable on demand but the entity estimates that it is probable that the lender will not demand payment
an entity has an existing note maturing within 12 months from the balance sheet date. The entity has the right to refinance the obligation for 15 months from the report date the obligation should be accounted for as A. Accounted for as a current liability when refinancing was done after the report date and after the issuance of the financial statement, with a corresponding disclosure in the notes regarding the refinancingB. Accounted for as a current liability when refinancing was done on or before the reporting date.C. Accounted for as a current liability when refinancing was done after the report date but before the issuance of the financial statement. D. Accounted for as a noncurrent liability when refinancing was done on or before the maturity date
TRUE OR FALSE?The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.
Which of the following statements is true? a. If any portion of a non-current liability is to be paid in the next year, the entire debt should be classified as a current liability. b. "Current maturities of non-current debt” refers to the amount of interest on notes payable that must be paid in the current year. c. Even though current and non-current debt must be shown separately on the statement of financial position, it is not necessary to prepare a journal entry to recognize this. d. A non- current liability is an obligation that is expected to be paid within one year.
Which of the following is not considered a current liability? A. Accounts Payable B. Unearned Revenue C. the component of a twenty-year note payable due in year 20 D. current portion of a noncurrent note payable
An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? a. Current liabilities b. Current assets c. Noncurrent liabilities d. Noncurrent assets
When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting periodwith the effect that the liability becomes payable on demand, the liability is classified as noncurrent whenI. The lender has agreed after the end if the reporting period and before the financial statements areauthorized for issue not to demand payment as a consequence of the breach.II. The lender has agreed on or before the end of the reporting period to provide a grace period ending atleast twelve months after that date. a. Both I and IIb. Neither I and IIc. I onlyd. II only
When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as Current under all circumstances Noncurrent under all circumstances Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach. Noncurrent if the lender agreed after the reporting period to provide grace period for at least twelve months after the reporting period.