At December 31, 2021, Newman Engineering's liabilities include the following:

a. $12 million of 6% bonds were issued for $12 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2022. However, the option to call is not expected to be exercised, given prevailing market conditions.
b. $16 million of 5% notes are due on May 31, 2022. A debt covenant requires Newman to maintain current assets at least equal to 177% of its current liabilities. On December 31, 2021, Newman is in violation of this covenant. Newman obtained a waiver from National City Bank until June 2022, having convinced the bank that the companyâs normal 2 to 1 ratio of current assets to current liabilities will be reestablished during the first half of 2022.
c. $9 million of 8% bonds were issued for $9 million on August 1, 1989. The bonds mature on July 31, 2022. Sufficient cash is expected to be available to retire the bonds at maturity.

Required:
Classify the above mentioned debts as current liabilities or noncurrent liabilities.

Since the bondholder have the option to demand the payment in the near future irrespective of whether they will exercise or not, it will be treated as current liability.

2. Classify as Current liabilities up to the sum of $16 million

The notes payable are due within a year and despite the violation of maintaining the condition, it will be treated as current liability.

3. Classify as Current liabilities up to the sum of $9 million

Since the bond matures within a year and there is sufficient amount of cash available for redemption which signifies that there is fair chances of retirement of bonds exits, hence, need to classified as current liability.

Parrain Parrain · Answer 2 · 2022-02-04T13:08:32+01:00

Based on accounting practices, the following are true:

a. Current liability.
b. Current liability.
c. Current liability.

Why are the above current liabilities?

The bondholders can call the bond on May 31, 2022 which is within a year of December 2021. This is therefore a current liability.

Even though they are in violation of the covenant, the amount is still due within the year which makes it a current liability.

The bonds maturing on July 31, 2022 are within a year of the date of the statements which is December 31, 2021.

Find out more on current liabilities at https://brainly.com/question/13388204.