Cooper's inventory has been financed 100% with a long-term note. The note is coming due in 2016. 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 $14,000 and $20,000 in 2016. At December 31, 2015, how much of the company's currently maturing note payable can be classified as long-term debt?
A) $7,000
B) $6,000
C) $10,000
D) $9,000

Question

Quizplus · Accepted Answer

The amount of the note that can be classified as long-term debt is based on the minimum amount of refinancing available, which is 50% of the lowest expected inventory value ($14,000), resulting in $7,000.

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