Jenkins Corporation Has $2,500,000 of Short-Term Debt It Expects to Retire

question 88

Multiple Choice

Jenkins Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 75,000 ordinary shares.If the shares are sold for $20 per share subsequent to the statement of financial position date, but before the statement of financial position is issued, what amount of short-term debt could be excluded from current liabilities?

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

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Definitions:

Law of Diminishing Returns

A principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Marginal Cost Curves

Graphs that show how the cost of producing one additional unit changes as the production volume increases.

Variable Costs

Costs that change in proportion to the level of output or activity, such as raw materials, labor, and utilities.

Output

The quantity of goods or services produced by a business, industry, or country.