On December 31, 2020, Hernandez Company had $3,000,000 of short-term debt in the form of notes…
On December 31, 2020, Hernandez Company had $3,000,000 of short-term debt in the form of notes payable due February 2, 2021. On January 21, 2021, the company issued 50,000 shares of its common stock for $50 per share, receiving $2,500,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2021, the proceeds from the stock sale, supplemented by an additional $500,000 cash, are used to liquidate the $3,000,000 debt. The December 31, 2020, balance sheet is issued on February 23, 2021.
Instructions:
(a) Show how the $3,000,000 of short-term debt should be presented on the December 31, 2020, balance sheet, including note disclosure.
(b) Using the same debt information above, show how the 3,000,000 of short term debt should be presented on December 31, 2020 balance sheet, if Hernandez Company refinanced the debt on December 29,2020 with a note with an annual interest rate of 8% and the new maturity date of the debt is February 5, 2022.
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