Branch Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2019. At December 31, 2018, Branch signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 75% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2018, financial statements, the value of Branch's collateral was $20,000,000. On its December 31, 2018, balance sheet, Branch should classify the notes as follows:
A) $15,000,000 long-term and $3,000,000 current liabilities.
B) $4,500,000 short-term and $13,500,000 current liabilities.
C) $18,000,000 of current liabilities.
D) $18,000,000 of long-term liabilities.
Correct Answer:
Verified
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