Several times during 2010, Palmer Company issued short-term commercial paper totaling $7 million. On December 31, 2010,

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Several times during 2010, Palmer Company issued short-term commercial paper totaling $7 million. On December 31, 2010, the company's year-end, Palmer intends to refinance the commercial paper by issuing long-term debt. However, because of the temporary existence of excess cash, $3 million of the liability is liquidated in February 2011, as the commercial paper matures. On March 1, 2011, Palmer issues $9 million of long-term bonds, with $3 million of the proceeds going to replenish the working capital used to liquidate the $3 million of commercial paper, $4 million to pay the remaining balance of the commercial paper due after April, and the remaining $2 million to finance an equipment modernization program at Palmer's plant. Palmer's December 31, 2010 year-end financial statements are issued on March 13, 2011.

Required
1. How will the $3 million of commercial paper liquidated prior to the refinancing be classified on Palmer's December 31, 2010 balance sheet? Explain your reasoning.
2. How will the remaining $4 million of commercial paper be classified on Palmer's December 31, 2010 balance sheet? Explain your reasoning.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Intermediate Accounting

ISBN: 978-0324659139

11th edition

Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones

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