Question

On December 31, 2020, Bonita Industries has $5960000 of short-term notes payable due on February 14, 2021. On January 10, 2019, Bonita arranged a line of credit with Beach Bank which allows Bonita to borrow up to $4450000 at one percent above the prime rate for three years. On February 2, 2021, Bonita borrowed $3570000 from Beach Bank and used $1540000 additional cash to liquidate $5080000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2020 balance sheet which is issued on March 5, 2021 is

Answer 1

Answer:

$2,420,000

Explanation:

The computation of the current liabilities reported is shown below:

= Short term note payable due - liquidate value of short term note payable + additional cash used

= $5,960,000 - $5,080,000 + $1,540,000

= $2,420,000

First we take the difference of the short term note payable and then we added the additional cash used so that the amount of current liabilities could come