On December 31, 2014, Hornsby Corporation had $1.2 million of short-term debt in the form of notes

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On December 31, 2014, Hornsby Corporation had $1.2 million of short-term debt in the form of notes payable due on February 2, 2015. On January 21, 2015, in order to ensure that they had sufficient funds to pay for their short-term debt when it matured, the company issued 25,000 common shares for $38 per share, receiving $950,000 in proceeds after brokerage fees and other costs of issuance. On February 2, 2015, the proceeds from the sale of the shares, along with additional $250,000 cash, were used to liquidate the $1.2-million debt. The December 31, 2014 balance sheet is issued on February 23, 2015.
Instructions
(a) Assuming that Hornsby follows ASPE, show how the $1.2 million of short-term debt should be presented on the December 31, 2014 balance sheet, including the note disclosure.
(b) Assuming that Hornsby follows IFRS, explain how the $1.2 million of short-term debt should be presented on the December 31, 2014 statement of financial position.
(c) Considering only the effect of the $1.2-million short-term notes payable, would Hornsby's current ratio appear higher if Hornsby followed ASPE, or if Hornsby followed IFRS? Discuss your answer from the perspective of a creditor.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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