Branch Company, a Building Materials Supplier, Has $18,000,000 of Notes

question 67

Multiple Choice

Branch Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2014. At December 31, 2013, Branch signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 75% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2013, financial statements, the value of Branch's collateral was $20,000,000. On its December 31, 2013, balance sheet, Branch should classify the notes as follows:

• A)$15,000,000 long-term and $3,000,000 current liabilities.
• B)$4,500,000 short-term and $13,500,000 current liabilities.
• C)$18,000,000 of current liabilities.
• D)$18,000,000 of long-term liabilities.

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Definitions:

Diversification

A strategy used in investing or business to spread risks by allocating resources across different assets, products, or markets.

Expected Gain

The anticipated benefit or profit from an investment or action.

Diversification

A strategy of investing in a variety of assets to reduce overall risk.

Expected Gain

The anticipated benefit or profit that arises from a specific action or investment.