Roofer's Inc.had an operating line of credit of $100,000 and overdrew its bank balance to result in a negative cash balance of $33,000 at year-end.This would be reported in the statement of financial position as
A)a current liability of $33,000.
B)a non-current liability of $67,000.
C)a current asset of $67,000.
D)a current asset of $(33,000).

Question

Quizplus · Accepted Answer

The negative cash balance of $33,000 represents the amount by which Roofer's Inc. has exceeded its operating line of credit, thus creating a liability. Since this overdraft occurred within the operating line of credit, it is considered a short-term obligation and should be reported as a current liability of $33,000 on the statement of financial position.