December 31, 2012, Alexander Company had $1,200,000 of short-term debt in the fo

Question

December 31, 2012, Alexander Company had $1,200,000 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 25,000 shares of its common stock for $36 per share, receiving $900,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2013, the proceeds from the stock sale, supplemented by an additional $300,000 cash, are used to liquidate the $1,200,000 debt. The December 31, 2012, balance sheet is issued on February 23, 2013.

Explanation / Answer

ALEXANDER COMPANY Partial Balance Sheet December 31, 2012 Current liabilities: ============================================================================================================================================================================================= Notes payable (Note 1) $300,000 Long-term debt: Notes payable refinanced in February 2013 (Note 1) 900,000 ---------============================================================================================================================================================================================= Note 1. Short-term debt refinanced. As of December 31, 2012, the company had notes payable totaling $1,200,000 due on February 2, 2013. These notes were refinanced on their due date to the extent of $900,000 received from the issuance of common stock on January 21, 2013. The balance of $300,000 was liquidated using current assets. ============================================================================================================================================================================================= OR Current liabilities: Notes payable (Note 1) $300,000 ============================================================================================================================================================================================= Long-term debt: Short-term debt expected to be refinanced (Note 1) 900,000 =============================================================================================================================================================================================

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