Ask Question
2 April, 16:54

On December 31, 2020, Grand Company had $1,232,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, 2021, the company issued 25,500 shares of its common stock for $48 per share, receiving $1,224,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2021, the proceeds from the stock sale, supplemented by an additional $8,000 cash, are used to liquidate the $1,232,000 debt. The December 31, 2020, balance sheet is issued on February 23, 2021. Show how the $1,232,000 of short-term debt should be presented on the December 31, 2020, balance sheet. (Enter account name only and do not provide descriptive information.)

WileyPlus

+1
Answers (1)
  1. 2 April, 19:05
    0
    Current liabilities:

    Notes payable $8,000

    Non-current/long-term liabilities:

    Notes payable $1,224,000

    Explanation:

    The actual amount of notes payable at 31st December is the difference between the short-term debt and the amount of cash realized from the issue of common stock whose proceeds are meant to be used in liquidating the short-term debt.

    The actual amount of notes payable=$1,232,000-$1,224,000=$8,000

    By issuing common stock of $1,224,000 to repay the short-term debt, the $1,224,000 is effectively converted to funding of long-term nature, hence classified as long-term liabilities
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On December 31, 2020, Grand Company had $1,232,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers