On February 10, 2017, after issuance of its financial statements for calendar 2016, Diogenes Corp.entered into a financing agreement with Gigantic Bank, allowing Diogenes Corp.to borrow up to $6,000,000 at any time through 2019.Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of the loan.Diogenes presently has $2,250,000 of notes payable with Provincial Bank maturing March 15, 2018.The company intends to borrow $3,750,000 under the agreement with Gigantic and pay off the notes payable to Provincial.The agreement with Gigantic also requires Diogenes to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common shares without prior approval by Gigantic.From the above information only, the total short-term debt of Diogenes Corp.on the December 31, 2016 statement of financial position is
A)$0.
B)$2,250,000.
C)$3,000,000.
D)$6,000,000.

Question

Quizplus · Accepted Answer

The information given states that Diogenes Corp. has $2,250,000 of notes payable with Provincial Bank maturing on March 15, 2018. This qualifies as short-term debt on the December 31, 2016 statement of financial position, as it is payable within one year. Therefore, the total short-term debt is $2,250,000. The financing agreement with Gigantic Bank takes effect after the issuance of the 2016 financial statements and does not affect the 2016 statement of financial position.

On February 10, 2017, After Issuance of Its Financial Statements