Business, 06.03.2020 05:22 KillerSteamcar

The Tony Hawk Skate Park has a 5-year installment loan with monthly payments of $5,000 including interest. Currently, the first twelve monthly payments have been recorded as a current liability. The VP of Finance, tells board members that he plans to classify the current portion of the installment note as long-term. He explains that lenders will be more willing to let the company borrow and will offer lower interest rate if the company reports fewer current liabilities. a. Classifying the first twelve installment payments as a current liability is not required by GAAP.
b. Reporting the current portion of a long-term note as long-term debt is a misrepresentation of the financial position of the company.
c. The ability to borrow at lower interest rates is more important than being ethical.
d. Presenting investors with a strong current ratio is acceptable at any cost.

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The Tony Hawk Skate Park has a 5-year installment loan with monthly payments of $5,000 including int...

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