E$12\mathrm{.}16($LO $4)($Refinancing of Short$-$Term Debt$)$ On December $31,2025,$ Holmes Company has $$7,000,000$ of short$-$term debt in the form of notes payable to Gotham State Bank due in $2026.$ On December $28,2025,$ Holmes enters into a refinancing agreement with Gotham that will permit it to borrow up to $60\%$ of the gross amount of its accounts receivable. Receivables are expected to range between a low of $$6,000,000$ in May to a high of $$8,000,000$ in October during the year $2026.$ 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 $2030.$ Holmes's December $31,2025,$ balance sheet is issued on

February $15,2026.$

Instructions

Prepare a partial balance sheet for Holmes at December $31,2025,$ showing how its $$7,000,000$ of short$-$term debt should be presented, including footnote disclosure.