Question

On December 31, 2014, Kennedy Company had $1,500,000 of short-term debt in the form of notes payable due February 2, 2015. As of the balance sheet date, Kennedy was in the process of issuing 25,000 shares of its stock; the proceeds of which would be used to satisfy the notes payable. This stock was issued on January 21, 2015 for $40 per share. On February 2, 2015, the proceeds from the stock sale, supplemented by an additional $500,000 in cash, are used to liquidate the $1,500,000 debt. The December 31, 2014, balance sheet is issued on February 23, 2015. How should the $1,500,000 of short-term debt be presented on the December 31, 2014 balance sheet?

Answer 1

The $1,500,000 of short-term debt should be presented on the December 31, 2014 balance sheet as a current liability.

Step-by-step explanation:

The $1,500,000 of short-term debt should be presented on the December 31, 2014 balance sheet as a current liability. Since the debt was due on February 2, 2015, it falls within the short-term debt category and should be reported separately from long-term debt. On the balance sheet, it would be listed under the liabilities section, specifically under current liabilities.