Question

The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below: a. 11% bonds with a face amount of $40 million were issued for $40 million on October 31, 2012. The bonds mature on October 31, 2032. Bondholders have the option of calling (demanding payment on the bonds on October 31, 2022, at a redemption price of $40 million Market conditions are such that the call is not expected to be exercised, b. Management intended to refinance $6 million of its 10% notes that mature in May 2022. In early March, prior to the actual issuance of the 2021 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $5 million any time c. Noncallable 12% bonds with a face amount of $20 million were issued for $20 million on September 30, 2002. The bonds mature on September 30, 2022. Sufficient cash is expected to be available to retire the bonds at maturity. d. A $12 million 9% bank loan is payable on October 31, 2027. 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, 2021, due primarily to an intentional temporary decline in inventory levels. Normal inventory levels will be reestablished during the first quarter of 2022. Required: 1. For each liability listed above, what amount will be reported as a current liability and as a noncurrent Mobility on the December 31, 2021 balance sheet? 2. Prepare the liability section of a classified balance sheet for Nevada Harvester at December 31, 2021. Accounts payable and accruals are $22 million Complete this question by entering your answers in the tabs below. Required 1 Required 2 For each liability listed above, what amount will be reported as a current liability and as a noncurrent liability on the December 31, 2021 balance sheet? (Enter your answers in millions (ie., 5,000,000 should be entered as 5).) Scenario (s in millions) Current Noncurrent Liability Liability

Answer 1

(1) Current liability and Non-current liability on Dec.31, 2021 balance sheet

Scenario	Current Liability ($ in millions)	Non-Current Liability ($ in millions)
a	$ 40	-
b	$ 1	$ 5
c	$ 20	-
d	-	$ 12

EXPLANATION:

a.) The face amount of $ 40 millions should be reported as Current liability because it is callable by the bondholders at any point of time.

b.) The amount ($6 - $ 5) millions = $1 million should be reported as current liability as the company is unable to refinance this amount.

c.) $20 millions should be reported as current liability as it is payable in current period.

d.) Entire amount i.e. $12 millions should be treated as long-term debt and no amount should be reported as current liability.

(2) Liability section of classified Balance Sheet for Nevada Harvester at December 31, 2021

Nevada Harvester Corporation Balance Sheet (partial) At December 31, 2021
	$ in millions
Current Liabilities:
Accounts payable and accruals		22
10% notes payable, due May 2022		1
Current portion of long-term debt:
11% bonds due October 31, 2032 redeemable on October 31, 2022	40
12% Bonds due September 30, 2022	20	60
Total Current Liabilities		83
Long-term Debt
Currently maturing debt classified as long-term:
10% notes payable due May 2022		5
9% bank loan due October 2027		12
Total Long-term Liabilities		17
Total Liabilities		100

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