Reference no: EM132707390
Question - AT Company issued P100, 000,000 of a short term commercial paper during the year 2019 to finance a construction of a plant. At December 31, 2019, the corporation's year -end, AT intends to refinance the commercial paper by issuing a long term debt. However, because the corporation has temporarily has excess cash, in January 2020, it liquidates P30, 000,000 of the commercial paper as the paper matures. In February 2020, AT completes a P180, 000,000 long term debt offering. Later during the month of February, it issues its December 31, 2019 financial statements. The proceeds of the long term debt offering are to be used to replenish P30,000,000 in working capital, to pay P70,000,000 of commercial paper as it matures in March 2020, and to pay P80,000,000 of construction costs expected to be incurred later that year to complete the plant.
Instructions - Please help me to know the solution and explanation.
Requirement 1 - How should the P100, 000,000 of commercial paper be classified on the December 31, 2019, January 31, 2020, and February 28, 2020 balance sheets? Give support for your answer and also consider the cash element.
Requirement 2 - What would your answer be, if instead of a refinancing at the date of issuance of the financial statements, a financing agreement existed at that date?
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