The Following Information Is Given for Airflight Airlines

question 61

Essay

The following information is given for Airflight Airlines:
-As of December 31, 2015, Airflight had $10,000 of notes coming due on January 30, 2016. Also as of December 31, 2015, Airflight was negotiating to issue long-term debt so that it could use the proceeds to liquidate these short-term notes as they mature. On January 4, 2016, the company used $3,000 of excess cash to pay off part of the note. On January 29, 2016, a refinancing of the entire $10,000 was completed. The $3,000 was replaced and the rest of the notes were extended for another two years.
-Airflight has negotiated a long-term refinancing contract which permits Airflight to borrow an up to 60% of accounts receivable balances to refinance debt. Accounts receivable are expected to range between $12,000 and $16,000 next year.
-Airflight also has negotiated a new long-term refinancing contract which permits Airflight to borrow an amount up to 35% of inventory to refinance debt. Inventory is expected to range between $75,000 and $85,000 next year.
Required:
a. On the December 31, 2015 balance sheet, how much of the $10,000 note should be shown as short-term?
b. Airflight has a currently maturing note payable of $20,000 related to the accounts receivable refinancing contract. How much of the $20,000 note payable can be classified as long-term debt at the end of 2015?
c. Compute the amount of the company's currently maturing note payable of $50,000 related to refinancing inventory that must be classified as short-term debt on December 31, 2015.

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Definitions:

Restructuring

The act of reorganizing the legal, ownership, operational, or other structures of a company to make it more profitable or better organized for its present needs.

Core Values

The fundamental beliefs or guiding principles that a person or organization holds as central to their identity and practices.

Basic Beliefs

Fundamental convictions or values that form the foundation of individual or organizational thinking, attitudes, and behaviors.

Workers' Behaviour

refers to the actions, attitudes, and performance of employees in the workplace, which can influence productivity and organizational culture.