If Loan Covenants on Long-Term Debt Are Violated,but the Company

question 18

Multiple Choice

If loan covenants on long-term debt are violated,but the company renegotiates the loan prior to releasing its financial statements,then under

• A)ASPE the debt remains long-term,but under IFRS it gets reclassified as current liability.
• B)ASPE and IFRS the debt remains long-term.
• C)ASPE the debt gets reclassified as current liability,but under IFRS it remains long-term
• D)ASPE and IFRS the debt gets reclassified as current liability.

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Definitions:

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors hold true.

Fixed Manufacturing Cost

Costs that do not vary with the level of production, such as rent, salaries of permanent employees, and depreciation of factory equipment.

Manufacturing Overhead Cost

The total of all costs associated with manufacturing beyond direct materials and direct labor, including indirect expenses such as maintenance and factory utilities.

Direct Manufacturing Cost

Costs that are directly attributable to the manufacturing process, including direct labor and direct materials cost.