On December 31, 2020, Hornsby Corporation had $1.2 million of short-term debt in the form of notes

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On December 31, 2020, Hornsby Corporation had $1.2 million of short-term debt in the form of notes payable due on February 2, 2021. On January 21, 2021, in order to ensure that it had sufficient funds to pay for the short-term debt when it matured, Hornsby 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, 2021, the proceeds from the sale of the shares, along with an additional $250,000 cash, were used to liquidate the $1.2-million debt. The December 31, 2020 balance sheet is issued on February 23, 2021. 


Instructions 

a. Assuming that Hornsby follows ASPE, show how the $1.2 million of short-term debt should be presented on the December 31, 2020 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, 2020 SFP. 

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 a creditor's perspective

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Related Book For  answer-question

Intermediate Accounting Volume 2

ISBN: 9781119497042

12th Canadian Edition

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

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