1 answer

On December 31, 2017, Stellar Company has $6,953,000 of short-term debt in the form of notes...

Question:

On December 31, 2017, Stellar Company has $6,953,000 of short-term debt in the form of notes payable to Gotham State Bank due in 2018. On January 28, 2018, Stellar enters into a refinancing agreement with Gotham that will permit it to borrow up to 66% of the gross amount of its accounts receivable. Receivables are expected to range between a low of $5,950,000 in May to a high of $7,953,000 in October during the year 2018. The interest cost of the maturing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2022. Stellar’s December 31, 2017, balance sheet is issued on February 15, 2018. Prepare a partial balance sheet for Stellar at December 31, 2017, showing how its $6,953,000 of short-term debt should be presented. (Enter account name only and do not provide descriptive information.) STELLAR COMPANY Partial Balance Sheet : $ :


Answers

Answer-

Stellar Company
Partial Balance Sheet
December 31,2017
Current Liablitity
Notes Payable Note 1 $                                          3,026,000.00
Long Term Debit
Notes Payable expected to be refinanced in 2018 Note 1 $                                          3,927,000.00
$                                          6,953,000.00

Note 1

Note payable expected to be refinanced-Minimum & Maximum

5,950,000*66%=$3,927,000

7,953,000*66%=$5,248,980

Total AR=$6,953,000

Expected Minimum refinanced debt=$3,927,000

Long term Debt =3,927,000

Short term Debt=Total AR-Expected refinanced debt

=$6,953,000-3,927,000

=$3,026,000

.

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