How Should Long-Term Debt Be Reported If It Matures Within

question 6

Multiple Choice

How should long-term debt be reported if it matures within one year and the company has arranged, before its current year end, to convert the debt into shares?

• A) as non-current and accompanied with a note explaining the method to be used in its liquidation
• B) in a special section between liabilities and shareholders' equity
• C) as non-current
• D) as a current liability

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Definitions:

Fictitious Payee Rule

A principle in commercial law that protects the drawer of a check if the check is made payable to a non-existent or not intended recipient, under certain conditions.

Bookkeeper

A person responsible for recording the financial transactions and maintaining the financial records of a business.

Negotiable Instruments

Written documents that guarantee the payment of a specific amount of money to the bearer or to a specific person, under certain conditions.

Fraud in the Inducement

A type of fraud that occurs when a person is deceived into entering into an agreement through misrepresentation of material facts.