The following schedule of NY company’s outstanding liabilities as of December 31, 2016 provided as follows: Accounts payables and accruals P 900,000 6% notes payables – due February 1, 2017 1,000,000 8% loan payable – due February 15, 2017 1,500,000 10% loan payable – due march 1, 2017 2,000,000 The following information was provided at the time the 2016 financial statements were being prepared: The 6% note includes a clause that allows NY Company to reschedule the note’s maturity date for a maximum period of 2 years from the date of maturity. The 8% loan includes a stipulation that NY company’s debt to equity ratio should not be higher than 0.40 at all times, otherwise the entire loan would be demandable immediately. At December 1, 2016, NY Company’s debt to equity was 0.45. Management intends to seek a waiver from Yankees finance company with an assurance that it will reduce its debt to equity ratio below 0.40 by January 8, 2017 and that it will not let it to go beyond 0.40 during the duration of the loan. On January 10, 2017, Yankees finance company canceled its demand for payments after NY Company successfully reduces its debt to equity ratio to 0.33. The 10% loan includes a clause that Boston Company must maintain a shop within a 5-block radius from Celtics rural bank; otherwise, the bank will terminate the loan and have it demandable. The loan agreement likewise provided a period of 15-months for Boston Company to set up a new shop from the time it closes its original one before the bank will issue a demand letter for the loan. On October 30, 2016, in accordance with the municipal order, Boston Company sold its shop to allow the construction of a road. At present, Boston Company is still scouting for a new location. Requirement: A.How will NY classify the AP and Accruals? (Write CL if Current or NCL if Non-Current) B.How will NY classify the 6% Notes? (Write CL if Current or NCL if Non-Current) C.How will NY classify the 8% loan? (Write CL if Current or NCL if Non-Current) How will NY classify the 10% loan? (Write CL if Current or NCL if Non-Current)

The following schedule of NY company’s outstanding liabilities as of December 31, 2016 provided as follows: Accounts payables and accruals P 900,000 6% notes payables – due February 1, 2017 1,000,000 8% loan payable – due February 15, 2017 1,500,000 10% loan payable – due march 1, 2017 2,000,000 The following information was provided at the time the 2016 financial statements were being prepared: The 6% note includes a clause that allows NY Company to reschedule the note’s maturity date for a maximum period of 2 years from the date of maturity. The 8% loan includes a stipulation that NY company’s debt to equity ratio should not be higher than 0.40 at all times, otherwise the entire loan would be demandable immediately. At December 1, 2016, NY Company’s debt to equity was 0.45. Management intends to seek a waiver from Yankees finance company with an assurance that it will reduce its debt to equity ratio below 0.40 by January 8, 2017 and that it will not let it to go beyond 0.40 during the duration of the loan. On January 10, 2017, Yankees finance company canceled its demand for payments after NY Company successfully reduces its debt to equity ratio to 0.33. The 10% loan includes a clause that Boston Company must maintain a shop within a 5-block radius from Celtics rural bank; otherwise, the bank will terminate the loan and have it demandable. The loan agreement likewise provided a period of 15-months for Boston Company to set up a new shop from the time it closes its original one before the bank will issue a demand letter for the loan. On October 30, 2016, in accordance with the municipal order, Boston Company sold its shop to allow the construction of a road. At present, Boston Company is still scouting for a new location. Requirement: A.How will NY classify the AP and Accruals? (Write CL if Current or NCL if Non-Current) B.How will NY classify the 6% Notes? (Write CL if Current or NCL if Non-Current) C.How will NY classify the 8% loan? (Write CL if Current or NCL if Non-Current) How will NY classify the 10% loan? (Write CL if Current or NCL if Non-Current)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 61BE: Debt Management Ratios Glow Corporation provides annual and quarterly financial data to the public....

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