Victory, Inc. is a manufacturer and retailer of household furniture. Your audit of the company’s financial statements for the year ended December 31, 20x1, discloses the following debt obligations of the company at the end of the reporting period. A P200,000 short-term obligation due on March 1, 20x2. Its maturity could be extended to March 1, 20x4, provided Victory agrees to provide additional collateral. On February 12, 20x2, an agreement is reached to extend the loan’s maturity to March 1, 20x4. A short-term obligation of P4,200,000 in the form of notes payable due February 5, 20x2. The company issued 80,000 ordinary shares for P40 per share on January 25, 20x2. The proceeds form the issuance, plus P1,000,000 cash, were used to settle the debt on February 5, 20x2. A long-term obligation of P1,500,000 due on December 31, 2x11. On November 10, 20x1, Victory breaches a covenant on its debt obligation, and the loan becomes payable on demand. An agreement is reached to provide a waiver of the breach on January 11, 20x2. A long-term obligation of P4,000,000. The loan is maturing over eight (8) years, amounting to P500,000 annually. The loan is dated September 1, 20x1, and the first maturity date is September 1, 20x2. A debt obligation of P600,000 maturing on December 31, 20x4. The debt is callable on demand by the lender at any time. What amount of current liabilities should be reported on the December 31, 20x1, statement of financial position?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 12C

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Victory, Inc. is a manufacturer and retailer of household furniture. Your audit of the company’s financial statements for the year ended December 31, 20x1, discloses the following debt obligations of the company at the end of the reporting period.

1. A P200,000 short-term obligation due on March 1, 20x2. Its maturity could be extended to March 1, 20x4, provided Victory agrees to provide additional collateral. On February 12, 20x2, an agreement is reached to extend the loan’s maturity to March 1, 20x4.
2. A short-term obligation of P4,200,000 in the form of notes payable due February 5, 20x2. The company issued 80,000 ordinary shares for P40 per share on January 25, 20x2. The proceeds form the issuance, plus P1,000,000 cash, were used to settle the debt on February 5, 20x2.
3. A long-term obligation of P1,500,000 due on December 31, 2x11. On November 10, 20x1, Victory breaches a covenant on its debt obligation, and the loan becomes payable on demand. An agreement is reached to provide a waiver of the breach on January 11, 20x2.
4. A long-term obligation of P4,000,000. The loan is maturing over eight (8) years, amounting to P500,000 annually. The loan is dated September 1, 20x1, and the first maturity date is September 1, 20x2.
5. A debt obligation of P600,000 maturing on December 31, 20x4. The debt is callable on demand by the lender at any time.
What amount of current liabilities should be reported on the December 31, 20x1, statement of financial position?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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