hard · Financial Accounting liabilities-bonds-payable
A company has $3,000,000 of bonds maturing in 4 months. After the balance sheet date but before the financial statements are issued, it refinances the entire amount on a long-term basis. Separately, it has a $2,000,000 short-term obligation it INTENDS to refinance and holds a noncancelable financing agreement with a lender that expires in 8 months, under which it can borrow up to $1,400,000 (the lender is financially capable and there is no violation of the agreement).
Under U.S. GAAP, what total amount of these obligations may be excluded from current liabilities?
- $4,400,000—the full $3,000,000 actually refinanced after year-end plus the $1,400,000 supportable by the financing agreement
- $5,000,000—both obligations qualify in full because intent to refinance plus an existing arrangement is sufficient regardless of the agreement's capacity
- $3,000,000—only the obligation actually refinanced before issuance qualifies; mere ability to borrow does not support exclusion
- $1,400,000—only the amount available under the noncancelable financing agreement qualifies, since post-year-end refinancing occurs in the wrong period
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