Question

On December 31, 2020, Flounder Company had $1,319,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, 2021, the company issued 27,300 shares of its common stock for $48 per share, receiving $1,310,400 proceeds after brokerage fees and other costs of issuance. On February 2, 2021, the proceeds from the stock sale, supplemented by an additional $8,600 cash, are used to liquidate the $1,319,000 debt. The December 31, 2020, balance sheet is issued on February 23, 2021.

Instructions
Required:
Show how the $1,319,000 of short-term debt should be presented on the December 31, 2020, balance sheet, including note disclosure.

Answer 1

Flounder Company Partial Balance Sheet December 31, 2020

Current liabilities:

Notes payable (Note 1) $8,600

Long-term debt:

Notes payable refinanced in February 2021(Note 1) $1,310,400

Step-by-step explanation:

Flounder Company Partial Balance Sheet December 31, 2020

Current liabilities:

Notes payable (Note 1) $8,600

Long-term debt:

Notes payable refinanced in February 2021(Note 1) $1,310,400

Short-term debt refinanced. As of December 31, 2020, the company had notes payable totaling $1,319,000 which was due on February 2, 2021 in which these notes were refinanced on their due date to $1,310,400 received from the issuance of common stock on January 21, 2021 and thr balance of $8,600 was liquidated using current assets.