Management Has Both the Intent and the Ability to Refinance

question 127

Multiple Choice

Management has both the intent and the ability to refinance a liability maturing in four months by taking out a new loan at the due date, which would not be due for several years. How would this situation be reported in financial statements prepared as of today's date?

• A) The original liability is classified as current, with a footnote describing management's plan for refinancing.
• B) The original liability is classified as current and the new loan is reported as a long-term liability.
• C) The original liability is classified as long-term; the new loan is not included in liabilities at this date.
• D) The original liability need not be reported at all; only the new loan is reported as a long-term liability.

---

Definitions:

Pintle Hook Assembly

A type of towing hitch system that uses a pintle hook and lunette ring, commonly used for heavy or military trailers.

Trailer Bump

A phenomenon or physical feature on a trailer designed to absorb impact or facilitate smooth towing operations.

Ball Hitches

Ball hitches are a type of towing hitch that uses a ball-shaped connector to attach a trailer to a vehicle, providing a pivot point that allows for some movement between the trailer and the vehicle during towing.