Callable Obligations
The company has the following three loans. As of December 31 of this year, identify which of the three should be classified as current and which should be classified as noncurrent.
(a) On July 15 of next year, Loan A will become payable on demand.
(b) Loan B is scheduled to be repaid in three years. In addition, the loan agreement specifies that if the company's current ratio falls below 1.5, the loan becomes payable on demand. On December 31, the current ratio is 1.8.
(c) Loan C is scheduled to be repaid in three years. In addition, the loan agreement specifies that if the company's "general financial condition deteriorates significantly," the loan becomes payable on demand. As of December 31, it is reasonably possible that this clause will be invoked.