On December 31, 2020, Alexander Company had $1,200,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, 2021, the company issued 25,000 ordinary shares for $36 per share, receiving $900,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2021, the proceeds from the share sale, supplemented by an additional $300,000 cash, are used to liquidate the $1,200,000 debt. The December 31, 2020, statement of financial position is authorized for issue on February 23, 2021.InstructionsShow how the $1,200,000 of short-term debt should be presented on the December 31, 2020, statement of financial position.

Question
Asked Feb 9, 2020
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On December 31, 2020, Alexander Company had $1,200,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, 2021, the company issued 25,000 ordinary shares for $36 per share, receiving $900,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2021, the proceeds from the share sale, supplemented by an additional $300,000 cash, are used to liquidate the $1,200,000 debt. The December 31, 2020, statement of financial position is authorized for issue on February 23, 2021.

Instructions

Show how the $1,200,000 of short-term debt should be presented on the December 31, 2020, statement of financial position.

 

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Expert Answer

Step 1

Definition:

 

Liability: Liability is an agreement made by a company to pay a certain amount for the goods or services received by the company in the past.

Step 2

Explain the manner in which the short-term debt should be presented on the statement of financial position for the year ended December 31, 2020.

Accounting homework question answer, step 2, image 1

Working note:

 

Calculate the amount of notes payable (current liabilities).

Accounting homework question answer, step 2, image 2

 

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