The Following Information Is Given for Airflight Airlines

The following information is given for Airflight Airlines:
Airflight had $10,000 of notes coming due on January 30, 2014. On January 4, 2014, the company used $3,000 of excess cash to pay off part of the note. On January 29, 2014, a refinancing of the entire $10,000 was completed. The $3,000 was replaced and the rest of the notes were extended for another two years.
Airflight has negotiated a long-term refinancing contract permitting refinancing of up to 60% of accounts receivable balances. Accounts receivable were expected to range between $12,000 and $16,000 the following year.
Airflight also has negotiated a new long-term refinancing contract permitting refinancing up to 35% of inventory, which is expected to range between $75,000 and $85,000 next year.
Required:
a.On the December 31, 2013 balance sheet, how much of the $10,000 note should be shown as short-term?
b.Airflight has a currently maturing note of $20,000 related to the accounts receivable refinancing contract. How much can be classified as long-term debt at the end of 2013?
c.Compute the amount of the company's currently maturing note payable of $50,000 related to refinancing inventory that must be classified as short-term debt on December 31, 2013.

Correct Answer:

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a.$3,000
b.$12,000 ...

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