Bull Arm Company has the following items at December 31, Year 1:
• $200,000, 5 percent note payable, due March 15, Year 2. The company has reached an agreement with the bank to refinance the note for two years, but the refinancing has not yet been completed.
• $1,000,000, 4 percent bonds payable, due December 31, Year 5. The company has violated an agreement with the bondholders to maintain a minimum balance in retained earnings, which causes the bonds to come due on January 31, Year 2.
• $50,000 overdraft on a bank account. Overdrafts are a normal part of the company’s cash management plan.
Required:
Related to these items, what amount should Bull Arm Company report as current liabilities on its December 31, Year 1 balance sheet?
a. $50,000.
b. $250,000.
c. $1,050,000.
d. $1,200,000.
