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Chapter 13: Q7IFRS (page 715)

On December 31, 2017, Alexander Company had \(1,200,000 of short-term debt in the form of notes payable due February 2, 2018. On January 21, 2018, the company issued 25,000 ordinary shares for \)36 per share, receiving \(900,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2018, the proceeds from the share sale, supplemented by an additional \)300,000 cash, are used to liquidate the \(1,200,000 debt. The December 31, 2017, statement of financial position is authorized for issue on February 23, 2018.

Instructions

Show how the \)1,200,000 of short-term debt should be presented on the December 31, 2017, statement of financial position.

Short Answer

Expert verified

Alexander Company

Balance Sheet (Extract)

Particular

Amount $

Current liabilities

Note payable

$300,000

Long-Term liabilities

Note payable

$900,000

Total

$1,200,000

Step by step solution

01

Definition of Statement of Financial Position

A statement of financial position can be defined as a statement that summarizes all the obligations and resources of the business entity. Both sides of such a statement are equal, and its basic equation is that total business assets are equal to the sum of total liabilities and equity.

02

Presenting short-term debt on the statement of financial position

$300,000 is recorded as a current liability because it is liquidated using the current assets of the business entity. At the same time, notes payable of $900,000 is reported as a long-term liability because these notes are refinanced by issuing equity shares.

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Most popular questions from this chapter

(Multiple-Step and Single-Step Statements) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2017 information related to P. Bride Company (\(000 omitted).

Administrative expense

Officers鈥� salaries \)4,900

Depreciation of office furniture and equipment \(3,960

Cost of goods sold \)60,570

Rent revenue \(17,230

Selling expense

Delivery expense \)2,690

Sales commissions \(7,980

Depreciation of sales equipment \)6,480

Sales revenue \(96,500

Income tax \)9,070

Interest expense $1,860

Instructions

  1. Prepare an income statement for the year 2017 using the multiple-step form. Common shares outstanding for 2017 total 40,550 (000 omitted).
  2. Prepare an income statement for the year 2017 using the single-step form.
  3. Which one do you prefer? Discuss.

Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.

Within the current liabilities section, how do you believe the accounts be listed? Defend your position.

Under what conditions should a provision be recorded?

How should a debt callable by the creditor be reported in the debtor鈥檚 financial statements?
See all solutions

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