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On December 31, 2020, Isle Co
On December 31, 2020, Isle Co. has $6,000,000 of short-term notes payable due on February 14, 2021. On January 10, 2019, Isle arranged a line of credit with Beach Bank which allows Isle to borrow up to $4,500,000 at one percent above the prime rate for three years. On February 2, 2021, Isle borrowed $3,600,000 from Beach Bank and used $1,500,000 additional cash to liquidate $5,100,000 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 .
a. $0.
b. $900,000.
c. $1,500,000.
d. $2,400,000.
Why this question is D, I need detailed explanation with calculation, thanks.
Expert Solution
Computation of 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:
Short-term Notes Payable on December 31, 2020 = ($6,000,000 - $5,100,000) + $1,500,000 = $2,400,000
SO, the correct option is D "$2,400,000".
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