The balance sheet at December 31, 2013, for Nevada Harvester Corporation includes the liabilities...

Question:

The balance sheet at December 31, 2013, for Nevada Harvester Corporation includes the liabilities listed below:

a. 12% bonds with a face amount of $48 million were issued for $48 million on October 31, 2004. The bonds mature on October 31, 2024. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2014, at a redemption price of $48 million. Market conditions are such that the call is not expected to be exercised.

b. Management intended to refinance $11.1 million of its 12% notes that mature in May 2014. In early March, prior to the actual issuance of the 2013 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $6.6 million any time during 2014. Any borrowings will mature two years from the date of borrowing.

c. Noncallable 14% bonds with a face amount of $33 million were issued for $33 million on September 30, 1988. The bonds mature on September 30, 2014. Sufficient cash is expected to be available to retire the bonds at maturity.

d. A $23 million 11% bank loan is payable on October 31, 2019. The bank has the right to demand payment after any fiscal year-end in which Nevada Harvester's ratio of current assets to current liabilities falls below a contractual minimum of 1.7 to 1 and remains so for six months. That ratio was 1.45 on December 31, 2013, due primarily to an intentional temporary decline in inventory levels. Normal inventory levels will be reestablished during the first quarter of 2014.

Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2013. Accounts payable and accruals are $14 million. (Enter your answers in millions.)

Balance Sheet:

The statement of the balance sheet shows the balance between the assets and the liabilities of the organization. The balance sheet is made in both tabular formats vertical and horizontal. The balance sheet is included capital and net income of the organization.

Answer and Explanation:

Liability section of classified balance sheet is:

Balance sheet at the year ended is:

Liabilities Amount
Accounts Payable 14000000
12% Notes payable 4500000
12% bonds due on 31 October 2014 48000000
14% Bonds due on 30 September 33000000
Total current liabilities 99500000
Non- current liabilities -
10% notes payable may 2014 6600000
11% bank Loan 23000000
Total Non-current liabilities 23660000
Total Liabilities 123160000

Working Note:

{eq}\begin{align*} & = 11100000 - 6600000\\ & = 4500000 \end{align*} {/eq}


Learn more about this topic:

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Comparative Statements as Balance Sheet Disclosures

from Accounting 201: Intermediate Accounting I

Chapter 4 / Lesson 9
918

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