Cooper's inventory has been financed 100% with a long-term note.The note is coming due in 2011.Cooper has received a commitment from a new lender that permits five-year refinancing of debt up to an amount equal to 50% of inventory, which is expected to range between $9, 000 and $15, 000 in 2011.At December 31, 2010, how much of the company's currently maturing note payable can be classified as long-term debt?
A)$4, 500
B)$6, 000
C)$7, 500
D)$9, 000

Question

Quizplus · Accepted Answer

The amount that can be classified as long-term debt is based on the new lender's commitment, which allows for refinancing of up to 50% of the inventory value. Given the inventory is expected to range between $9,000 and $15,000, the minimum amount that can be guaranteed for refinancing is 50% of $9,000, which is $4,500. This is the portion of the note payable that can be classified as long-term debt.

Cooper's Inventory Has Been Financed 100% with a Long-Term Note