On December 31, 2020, Gibson Company has $18,200,000 of short-term debt in the form of notes payable to Blue Lagoon State Bank due in 2021. On January 28, 2021, Gibson 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 $15,600,000 in May to a high of $20,800,000 in October during the year 2021. 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 2025. Gibson intends to use the refinancing agreement to the fullest extent possible. Gibson’s December 31, 2020, balance sheet is issued on February 15, 2021. Prepare a partial balance sheet for Gibson at December 31, 2020, showing how its $18,200,000 of short-term debt should be presented, including note disclosure.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

On December 31, 2020, Gibson Company has $18,200,000 of short-term debt in the form of notes payable to Blue Lagoon State Bank due in 2021. On January 28, 2021, Gibson 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 $15,600,000 in May to a high of $20,800,000 in October during the year 2021. 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 2025. Gibson intends to use the refinancing agreement to the fullest extent possible. Gibson’s December 31, 2020, balance sheet is issued on February 15, 2021.

Prepare a partial balance sheet for Gibson at December 31, 2020, showing how its $18,200,000 of short-term debt should be presented, including note disclosure.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Accounting for Notes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education