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Chapter 13: Question 8Q (page 715)

How should a debt callable by the creditor be reported in the debtor’s financial statements?

Short Answer

Expert verified

Debt that is callable by the creditor should be grouped under current liability.

Step by step solution

01

Meaning of Financial Statements

Financial statements are the statements prepared by all forms of business organizations to ascertain the result of operating, financial and investment activities and to know the financial position on the date of closing of books of accounts.

02

Reporting of debtor’s financial statements

It is necessary to segregate debt as current as it is assumed that the existing working capital will be used to repay the loan. Liabilities usually become redeemable by the creditor in case of breach of the debt agreement. However, if it can be anticipated that the breach will be corrected within the trial period stipulated in these agreements, the debt may be listed as non-current.

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Most popular questions from this chapter

Question: On February 1, 2018, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2018 (When the December 31, 2017, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company is considered at fault, Viking Manufacturing will have to cover the damages from its own resources.InstructionsDiscuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2017.

BE13-2 (L01) Upland Company borrowed \(40,000 on November 1, 2017, by signing a \)40,000, 9%, 3-month note. Prepare Upland’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.

BE13-4 (L01) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each. Prepare Sport Pro’s August 1, 2017, journal entry and the December 31, 2017, annual adjusting entry, assuming the magazines are published and delivered monthly.

Distinguish between the accounting treatment for marketable versus nonmarketable equity securities.

Use the information from IFRS17-10 but assume the shares were purchased to meet a non-trading regulatory requirements. Prepare Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.
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