On February 10, 2007, After Issuance of Its Financial Statements

question 46

Multiple Choice

On February 10, 2007, after issuance of its financial statements for 2006, Flynn Company entered into a financing agreement with Lebo Bank, allowing Flynn Company to borrow up to $4,000,000 at any time through 2009.Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan.Flynn Company presently has $1,500,000 of notes payable with First National Bank maturing March 15, 2007.The company intends to borrow $2,500,000 under the agreement with Lebo and liquidate the notes payable to First National.The agreement with Lebo also requires Flynn to maintain a working capital level of $6,000,000 and prohibits the payment of dividends on common stock without prior approval by Lebo Bank.From the above information only, the total short-term debt of Flynn Company as of the December 31, 2007 balance sheet date is

• A)$0.
• B)$1,500,000.
• C)$2,000,000.
• D)$4,000,000.

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