PepsiCo, Inc., reported the following information about its long-term debt in the notes to a recent financial statement (in millions): Long-term debt is comprised of the following:
|Current year||Preceding year|
|Total long term debt||28359||26773|
|Less current portion||4815||6205|
|Long term debt||23544||20568|
a. How much of the long-term debt was disclosed as a current liability on the current year's December 31 balance sheet?
b. How much did the total current liabilities change between the preceding year and the current year as a result of the current portion of long-term debt?
c. If PepsiCo did not issue additional long-term debt next year, what would be the total long-term debt on December 31 of the upcoming year?
Long term debt:
Long term debts are the financial instrument used by the organization to raise finance. It is also considered as a cheaper source of finance because the interest on these debts is a tax saving expense. The debenture, bonds and long-tern loan are the examples of long term debt.
Answer and Explanation:
Current Liability = Total long term debt - Long term debt
Current liability = ( $ 28,359 - $ 23,544) = $ 4815.
Change in current liabilities = Current Liabilities at the end - Current liability at the Beginning.
Current Liabilities at the end = 4815.
Current Liabilities at the Beginning. = 6205
Change in current liabilities = 4815 - 6205 = -1390
So there is a decrease in the current liabilities by 1390 in comparison to last year.
If the organization has not paid any amount of long term debt, then the long term debt balance will remain the same as 20,568.
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from Financial Accounting: Help and ReviewChapter 8 / Lesson 7