Question

Jump Corporation has $2,500,000 of short-term debt it expects to retire with proceedsfrom the sale of 85,000 shares of common stock. If the stock is sold for $20 per sharesubsequent 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) $1,700,000
B) $2,500,000
C) $800,000
D) $0 11.

Answer 1

Answer:

$1,700,000

Explanation:

Current liabilities is defined as the obligations a business owes to various parties that is due in less than a year.

Jump Corporation has $2,500,000 of short-term debt this is a current liability that can be reduced by issuing shares.

The shares are issued before the balance sheet is released, so the amount of short term debt that will be exude from current liabilities is the value of shares sold.

Value of shares = price of shares* number of shares

Value of shares= 20* 85,000

Value of shares = $1,700,000