1. What is the impact of Toshiba’s credit line on its financial statements?
Original blog posting (February 2, 2016)

2. Toshiba
Toshiba Corp. announced it had overstated profits by nearly $2 billion over 6 years
Toshiba’s stock price has fallen from $ in 2014 to $ in 2015
In addition to its current $3.2 billion credit line, the company is seeking another $2.5 billion credit line for restructuring
Photographer:

3. Question 1
What is a credit line? Assume that Toshiba is granted a credit line for $2.5 billion. What entry, if any, will Toshiba make on the day that the credit line papers are signed (assume that no cash is disbursed on the date of loan signing.)

4. Question 2
Assume that Toshiba draws down the entire credit line on March 2, 2016, and puts the cash in its corporate checking account. How will this transaction impact Toshiba’s assets, liabilities, and equity?

5. Question 3
Why might Toshiba not want to issue any common stock over the next two years?

6. Question Recap
What is a credit line? Assume that Toshiba is granted a credit line for $2.5 billion. What entry, if any, will Toshiba make on the day that the credit line papers are signed (assume that no cash is disbursed on the date of loan signing.)
Assume that Toshiba draws down the entire credit line on March 2, 2016, and puts the cash in its corporate checking account. How will this transaction impact Toshiba’s assets, liabilities, and equity?
Why might Toshiba not want to issue any common stock over the next two years?

7. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Questions or comments? Contact Dr. Wendy Tietz at