Ames, Inc. has $500,000 of notes payable due June 15, year 3. Ames signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until year 4. The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing. At the date of issuance of the December 31, year 2 financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during year 3. In Ames Inc., December 31, year 2 balance sheet, the obligation for these notes payable should be classified as Short-term Long-term $500,000 $0 $100,000 $400,000 $ 20,000 $480,000 $0 $500,000
Ames, Inc. has $500,000 of notes payable due June 15, year 3. Ames signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until year 4. The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing. At the date of issuance of the December 31, year 2 financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during year 3. In Ames Inc., December 31, year 2 balance sheet, the obligation for these notes payable should be classified as Short-term Long-term $500,000 $0 $100,000 $400,000 $ 20,000 $480,000 $0 $500,000
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 1PA: On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10%...
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Ames, Inc. has $500,000 of notes payable due June 15, year 3. Ames signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until year 4. The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing. At the date of issuance of the December 31, year 2 financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during year 3. In Ames Inc., December 31, year 2 balance sheet, the obligation for these notes payable should be classified as
| Short-term | Long-term | |
| $500,000 | $0 |
| $100,000 | $400,000 |
| $ 20,000 | $480,000 |
| $0 | $500,000 |
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