On February 10, 2020, After Issuance of Its Financial Statements

question 16

Multiple Choice

On February 10, 2020, after issuance of its financial statements for calendar 2019, Mantack Corp. entered into a financing agreement with Friedman Bank, allowing Mantack Corp. to borrow up to $ 4,000,000 at any time through 2022. Amounts borrowed under the agreement bear interest at 3% above the bank's prime interest rate and mature two years from the date of the loan. Mantack presently has $ 1,500,000 of notes payable with Bringham Bank maturing March 15, 2021. The company intends to borrow $ 2,500,000 under the agreement with Friedman and pay off the notes payable to Bringham. The agreement with Friedman also requires Mantack to maintain a working capital level of $ 9,000,000 and prohibits the payment of dividends on common shares without prior approval by Friedman. From the above information only, the total short-term debt of Mantack Corp. on the December 31, 2019 statement of financial position is

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

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Definitions:

Bond Interest

The periodic payment made to bond investors, representing the interest earned on the bond's face value.

Amortization

The process of gradually writing off the initial cost of an asset over its useful life or the repayment of a loan over time through scheduled payments.

Bond Discount

The gap between what a bond is worth (its face value) and the lower amount it is sold for in the market.

Amortization Methods

Various techniques used to gradually write off the initial cost of an intangible asset over a period.