(Refinancing of Short-Term Debt) On December 31, 2004, Chris Atkins Company has $7,000,000 of short-term debt in...
Question:
(Refinancing of Short-Term Debt) On December 31, 2004, Chris Atkins Company has $7,000,000 of short-term debt in the form of notes payable to Blue Lagoon State Bank due periodically in 2005. On January 28, 2005, Atkins enters into a refinancing agreement with Blue Lagoon that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables are expected to range between a low of $6,000,000 in May to a high of $8,000,000 in October during the year 2005. The interest cost of the maturing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2009. Atkin’s December 31, 2004, balance sheet is issued on February 15, 2005.
Instructions Prepare a partial balance sheet for Atkins at December 31, 2004, showing how its $7,000,000 of short-term debt should be presented, including footnote disclosure.
Step by Step Answer:
Intermediate Accounting
ISBN: 9780471448969
11th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield