1. Jump Corporation has $3,000,000 of short-term debt it expects to retire with proceeds from the...
1. Jump Corporation has $3,000,000 of short-term debt it expects
to retire with proceeds from the
sale of 85,000 shares of common stock. If the stock is sold for $25
per share subsequent to the
balance sheet date, but before the balance sheet is issued, what
amount of short- term debt could
be excluded from current liabilities?
a. $2,125,000 b. $3,000,000
c. $875,000
d. $0
Homework Answers
Answer -
d. $0 amount of short- term debt could be excluded from current liabilities.
Explanation -
Balance sheet prepared by the company and the management at the end of the financial year. Company considers all the transactions that taken place between balance sheet date. Hence those transaction which affect subsequent to balance sheet dates shall not be part of the current financial statement.
Transaction which took plance subsequent to balance sheet dates are those which pertains to next financial year. Hence in the current financial year those can not be accounted.
Current Liabilities should reported $3,000,000 at the balance sheet liabilities side.
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