Case A: For each of the following cases, determine the amount of the notes payable reported...

 

 

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Case A: For each of the following cases, determine the amount of the notes payable reported as current and non-current at December 31, 2009. Case 1. Joy Inc. has P3 million of notes payable due June 15, 2010. At December 31, 2009, Joy signed an agreement to borrow up to P3 million to refinance the notes payable on a long term basis. The financing agreement called for borrowings not to exceed 80% of the value of the collateral Joy was providing. At the date of issue of the December 31, 2009 financial statements, the value of the collateral was P3.6 million and was not expected to fall below at this amount. Case 2. Joy Inc. has P2 million of notes payable due June 15, 2010. At February 15, 2010, Joy signed an agreement to borrow up to P2 million to refinance the notes payable on a long term basis. The financing agreement called for the borrowings not to exceed 80% of the value of the collateral was P2.4 million and was not expected to fall below this amount. The financial statements are authorized for issuance on March 5, 2010. Case 3. In October 2008, Sylvester Corp. Acquired land from Tweety Inc. by paying P1,000,000 down and signing a note with a maturity value of P6 million due October 2009. Situation A. Under the terms of the financing agreement, Sylvester has the discretion to roll over the obligation for at least twelve months. In October 2009, management decides to exercise its discretion to extend the maturity date of its obligation to December 31, 2010. Situation B. Under the terms of the financing agreement, Sylvester has the discretion to roll over the obligation for at least twelve months. In October 2009, management decides to exercise its discretion to extend the maturity date of its obligation to December 31, 2011. Situation C. The existing loan agreement does not carry a provision to refinance. In October 2009, Sylvester was experiencing financial difficulty and was unable to pay the maturing obligation and interest of P100,000. On December 31, 2009, Tweety signed an agreement to provide Sylvester a grace period of 15 months from that date, during which period, Tweety will not demand immediate payment in order to give Sylvester the chance to rectify the breach. The financial statements were authorized for issue on March 31, 2010. Situation D. Refer to situation C. Assume the same facts except the maturity value of P6 million due October 2011 and no grace period is given by Tweety. However, December 31, 2009, Tweety has agreed not to demand payment as a consequent of the breach of payment on the interest (breach of contract). The financial statements of 2009 were authorized for issue on March 31, 2010. Situation C. The existing loan agreement does not carry a provision to refinance. In October 2020, Wilson was experiencing financial difficulty and was unable to pay the maturing obligation. On February 1, 2021, Woodrow has agreed not to demand payment for at least 12 months as a consequence of the breach of payment on the principal of the loan. The financial statements were authorized for issue on March 31, 2021. Situation D. The existing loan agreement does not carry a provision to refinance. In October 2020, Wilson was experiencing financial difficulty and was unable to pay the maturing obligation. On December 31, 2020, Woodrow signed an agreement to provide Wilson a grace period of 15 months from that date, during which period, Woodrow will not demand immediate payment in order to give Wilson the chance to rectify the breach. The financial statements were authorized for issue on March 31, 2021. Case A: For each of the following cases, determine the amount of the notes payable reported as current and non-current at December 31, 2009. Case 1. Joy Inc. has P3 million of notes payable due June 15, 2010. At December 31, 2009, Joy signed an agreement to borrow up to P3 million to refinance the notes payable on a long term basis. The financing agreement called for borrowings not to exceed 80% of the value of the collateral Joy was providing. At the date of issue of the December 31, 2009 financial statements, the value of the collateral was P3.6 million and was not expected to fall below at this amount. Case 2. Joy Inc. has P2 million of notes payable due June 15, 2010. At February 15, 2010, Joy signed an agreement to borrow up to P2 million to refinance the notes payable on a long term basis. The financing agreement called for the borrowings not to exceed 80% of the value of the collateral was P2.4 million and was not expected to fall below this amount. The financial statements are authorized for issuance on March 5, 2010. Case 3. In October 2008, Sylvester Corp. Acquired land from Tweety Inc. by paying P1,000,000 down and signing a note with a maturity value of P6 million due October 2009. Situation A. Under the terms of the financing agreement, Sylvester has the discretion to roll over the obligation for at least twelve months. In October 2009, management decides to exercise its discretion to extend the maturity date of its obligation to December 31, 2010. Situation B. Under the terms of the financing agreement, Sylvester has the discretion to roll over the obligation for at least twelve months. In October 2009, management decides to exercise its discretion to extend the maturity date of its obligation to December 31, 2011. Situation C. The existing loan agreement does not carry a provision to refinance. In October 2009, Sylvester was experiencing financial difficulty and was unable to pay the maturing obligation and interest of P100,000. On December 31, 2009, Tweety signed an agreement to provide Sylvester a grace period of 15 months from that date, during which period, Tweety will not demand immediate payment in order to give Sylvester the chance to rectify the breach. The financial statements were authorized for issue on March 31, 2010. Situation D. Refer to situation C. Assume the same facts except the maturity value of P6 million due October 2011 and no grace period is given by Tweety. However, December 31, 2009, Tweety has agreed not to demand payment as a consequent of the breach of payment on the interest (breach of contract). The financial statements of 2009 were authorized for issue on March 31, 2010. Situation C. The existing loan agreement does not carry a provision to refinance. In October 2020, Wilson was experiencing financial difficulty and was unable to pay the maturing obligation. On February 1, 2021, Woodrow has agreed not to demand payment for at least 12 months as a consequence of the breach of payment on the principal of the loan. The financial statements were authorized for issue on March 31, 2021. Situation D. The existing loan agreement does not carry a provision to refinance. In October 2020, Wilson was experiencing financial difficulty and was unable to pay the maturing obligation. On December 31, 2020, Woodrow signed an agreement to provide Wilson a grace period of 15 months from that date, during which period, Woodrow will not demand immediate payment in order to give Wilson the chance to rectify the breach. The financial statements were authorized for issue on March 31, 2021.

Answer rating: 100% (QA)

For most companies the amounts in Notes Payable and Interest Payable are reported on the balance sheet as follows the amount due within one year of th... View the full answer