The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below: a. 8% bonds with a face amount of $36 million were issued for $36 million on October 31, 2012. The bonds mature on October 31, 2032. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2022, at a redemption price of $36 million. Market conditions are such that the call is not expected to be exercised. b. Management intended to refinance $10.8 million of its 13% notes that mature in May 2022. In early March, prior to the actual issuance of the 2021 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $5.2 million any time during 2022. Any borrowings will mature two years from the date of borrowing. c. Noncallable 7% bonds with a face amount of $14.0 million were issued for $14.0 million on September 30, 2002. The bonds mature on September 30, 2022. Sufficient cash is expected to be available to retire the bonds at maturity. d. A $28 million 8% bank loan is payable on October 31, 2027. The bank has the right to demand payment after any fiscal year-end in which Nevada Harvester's ratio of current assets to current liabilities falls below a contractual minimum of 1.7 to 1 and remains so for six months. That ratio was 1.45 on December 31, 2021, due primarily to an intentional temporary decline in inventory levels. Normal inventory levels will be reestablished during the first quarter of 2022. Required: 1. For each liability listed above, what amount will be reported as a current liability and as a noncurrent liability on the December 31, 2021 balance sheet? 2. Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2021. Accounts payable and accruals are $35 million.
The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below: a. 8% bonds with a face amount of $36 million were issued for $36 million on October 31, 2012. The bonds mature on October 31, 2032. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2022, at a redemption price of $36 million. Market conditions are such that the call is not expected to be exercised. b. Management intended to refinance $10.8 million of its 13% notes that mature in May 2022. In early March, prior to the actual issuance of the 2021 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $5.2 million any time during 2022. Any borrowings will mature two years from the date of borrowing. c. Noncallable 7% bonds with a face amount of $14.0 million were issued for $14.0 million on September 30, 2002. The bonds mature on September 30, 2022. Sufficient cash is expected to be available to retire the bonds at maturity. d. A $28 million 8% bank loan is payable on October 31, 2027. The bank has the right to demand payment after any fiscal year-end in which Nevada Harvester's ratio of current assets to current liabilities falls below a contractual minimum of 1.7 to 1 and remains so for six months. That ratio was 1.45 on December 31, 2021, due primarily to an intentional temporary decline in inventory levels. Normal inventory levels will be reestablished during the first quarter of 2022. Required: 1. For each liability listed above, what amount will be reported as a current liability and as a noncurrent liability on the December 31, 2021 balance sheet? 2. Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2021. Accounts payable and accruals are $35 million.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
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Transcribed Image Text:The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below:
a. 8% bonds with a face amount of $36 million were issued for $36 million on October 31, 2012. The bonds mature on October 31,
2032. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2022, at a redemption price of
$36 million. Market conditions are such that the call is not expected to be exercised.
b. Management intended to refinance $10.8 million of its 13% notes that mature in May 2022. In early March, prior to the actual
issuance of the 2021 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $5.2
million any time during 2022. Any borrowings will mature two years from the date of borrowing.
c. Noncallable 7% bonds with a face amount of $14.0 million were issued for $14.0 million on September 30, 2002. The bonds mature
on September 30, 2022. Sufficient cash is expected to be available to retire the bonds at maturity.
d. A $28 million 8% bank loan is payable on October 31, 2027. The bank has the right to demand payment after any fiscal year-end in
which Nevada Harvester's ratio of current assets to current liabilities falls below a contractual minimum of 1.7 to 1 and remains so for
six months. That ratio was 1.45 on December 31, 2021, due primarily to an intentional temporary decline in inventory levels. Normal
inventory levels will be reestablished during the first quarter of 2022.
Required:
1. For each liability listed above, what amount will be reported as a current liability and as a noncurrent liability on the December 31,
2021 balance sheet?
2. Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2021. Accounts payable and
accruals are $35 million.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1 Required 2
For each liability listed above, what amount will be reported as a current liability and as a noncurrent liability on the
December 31, 2021 balance sheet? (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be
entered as 5.5).)
Scenario
a.
b.
C.
d.
($ in millions)
Current
Liability
$ 36.0 $
$
5.2
$
$ 14.0 $
$ 0.0 $
Show Transcribed Text
Required 1 Required 2
Noncurrent
Liability
0.0
0.0 x
0.0
0.0
Total Current Liabilities
< Required 1
**************
Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2021. Accounts payable and
accruals are $35 million. (Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as
5.5).)
NEVADA HARVESTER CORPORATION
Balance Sheet (partial)
At December 31, 2021
Current Liabilities
Accounts payable and accruals
13% notes payable, due May 2022
Current portion of long-term debt:
8% bonds payable, due October 31, 2032, redeemable on
October 31, 2022
7% bonds payable, due September 30, 2022
Long-Term Debt
Currently maturing debt classified as long-term:
13% notes payable, due May 2022
8% loan payable, due October 2027
Total Long-term Liabilities
Total Liabilities
< Required 1
››
c
Required 2 >
3
✔✓ 36.0✔
››
✓ 14.0✔
($ in
millions)
$
35.0
5.2 X
50.0
90.2
5.2✔
28.0
33.2
$ 123.4
***********
Required 2 >
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