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.

Question
Asked Nov 26, 2019
36 views

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.

check_circle

Expert Answer

Step 1

Prepare partial balance sheet for Gibso...

help_outline

Image Transcriptionclose

Gibson Company Partial Balance sheet December 31, 2020 Particulars Amount (in $) Current liabilities: Notes payable ($18,200,000-$9,360,000) Long-term liabilities: Notes payable expected to be financed on 2021 ($15,600,000 x 60%) $8,840,000 $9,360,000

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Eva received $73,000 in compensation payments from JAZZ Corp. during 2019. Eva incurred $16,000 in b...

A: Step 1: Eva is a self-employed contractor, Eva can file the return after receiving considerable busi...

question_answer

Q: Define the following terms? 1.) Sundry expenses. 2.) Accrued interest. 3.) Credit balance.

A: Sundry expenses: Sundry expenses are expenditures incurred by company which is generally of small va...

question_answer

Q: What is the owner's draw? Give three examples?

A: Owner’s draw: Person one who withdraws money or goods from his own business for his /her personal us...

question_answer

Q: What is meant by Authorized and issued captial?

A: Meaning of Authorised capital  stock:Authorised stock refers to the maxinum number of preferred shar...

question_answer

Q: Journal entry worksheet 1 On January 2, Dixie, Inc., pays a salvage company $1,000 to haul away a ma...

A: Determine the amount of gain or loss on disposal of machine.

question_answer

Q: Consider these transactions: (Credit account titles are automatically indented when amount is entere...

A: a. In the given journal entry, cash and service charges is being debited. The reason being, cash is ...

question_answer

Q: Given the following information for The Pelican Inn, what is the direct labor time variance? Actu...

A: Click to see the answer

question_answer

Q: Prior to adjustment at the end of the year, the balance in Trucks is $298,443 and the balance in Acc...

A: Click to see the answer

question_answer

Q: Assume the following information for Kingbird Corp. Accounts receivable (beginning balance)   $1...

A: Prepare the entries to record sales and collections during the period.