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

question 25

Multiple Choice

Cooper's inventory has been financed 100% with a long-term note. The note is coming due in 2014. 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 2014. At December 31, 2013, 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

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Definitions:

Quantity Supplied

Quantity supplied refers to the total amount of a good or service that producers are willing and able to sell at a given price over a specific time period.

Price Ceiling

A legal maximum price that can be charged for a good or service, set by government regulation.

Rationing Process

A system of allocating goods and services when demand exceeds supply, often through mechanisms other than price.

Market Price

The price at which a good or service is bought and sold in a marketplace, determined by the supply and demand dynamics of that market.