Question 1:

On December 31, 2004, Frye Co. has $6,000,000 of short-term notes payable due on February 14, 2005. On January 10, 2005, Frye arranged a line of credit with County Bank which allows Frye to borrow up to $4,500,000 at one percent above the prime rate for three years. On February 2, 2005, Frye borrowed $3,600,000 from County Bank and used $1,500,000 additional cash to liquidate $5,100,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2004 balance sheet which is issued on March 5, 2005 is

a. $0.

b. $900,000.

c. $1,500,000.

d. $2,400,000.

Show your work and how you got to the answer. Thanks.