Valencia Corporation has the following liabilities at December 31, 2011: Valencia's December 31, 2011 financial statements were issued on March 19, 2012.On January 23, 2012, the entire €1,150,000 balance of the 8.9% note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition, on December 29, 2011, Valencia consummated a non-cancelable agreement with the lender to refinance the 7.25%, €1,080,000 note on a long-term basis, on readily determinable terms that have not yet been implemented.On the December 31, 2011 statement of financial position, the amount of these notes payable that Valencia should classify as short-term obligations is

Question

Valencia Corporation has the following liabilities at December 31, 2011:  Valencia's December 31, 2011 financial statements were issued on March 19, 2012.On January 23, 2012, the entire €1,150,000 balance of the 8.9% note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition, on December 29, 2011, Valencia consummated a non-cancelable agreement with the lender to refinance the 7.25%, €1,080,000 note on a long-term basis, on readily determinable terms that have not yet been implemented.On the December 31, 2011 statement of financial position, the amount of these notes payable that Valencia should classify as short-term obligations is

Quizplus · Accepted Answer

According to the question, the 8.9% note was refinanced on January 23, 2012, which means it was still outstanding on December 31, 2011, and should be classified as a short-term obligation. However, the 7.25% note was scheduled to be refinanced on a long-term basis on readily determinable terms, which suggests that it should be classified as a long-term obligation even though it had not yet been implemented by December 31, 2011. Therefore, only the €1,080,000 balance of the 7.25% note should be classified as a short-term obligation, giving us a total of $1,080,000 in short-term obligations.

Valencia Corporation Has the Following Liabilities at December 31, 2011