At December 31, 2018, Burr AG owes €500,000 on a note payable due February 2019. (a) If Burr intends to refinance the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much (if any) of the €500,000 should be reported as a current liability at December 31, 2018? (b) If Burr pays off the note on February 15, 2019, and then borrows €1,000,000 on a long-term basis on March 1, how much (if any) of the €500,000 should be reported as a current liability at December 31, 2018, the end of the fiscal year?

Question
Asked Jul 30, 2019

At December 31, 2018, Burr AG owes €500,000 on a note payable due February 2019. (a) If Burr intends to refinance the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much (if any) of the €500,000 should be reported as a current liability at December 31, 2018? (b) If Burr pays off the note on February 15, 2019, and then borrows €1,000,000 on a long-term basis on March 1, how much (if any) of the €500,000 should be reported as a current liability at December 31, 2018, the end of the fiscal year?

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Step 1

Current liability: Current liability is an obligation that the companies need to pay from the remaining current assets or creation of other current liabilities within a fiscal year or the operating cycle whichever is higher.

Step 2

(a)            

 

There must be nothing reported as a current liability at December 31, 2018, as the management has decided to issue bonds to...

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