On February 10, 2014, after issuance of its financial statements for calendar 2013, Diogenes Corp.entered into a financing agreement with Gigantic Bank, allowing Diogenes Corp.to borrow up to $6,000,000 at any time through 2016.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, 2015.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, 2013 statement of financial position is
A)$0.
B)$2,250,000.
C)$3,000,000.
D)$6,000,000.

Question

Quizplus · Accepted Answer

The $2,250,000 notes payable to Provincial Bank maturing on March 15, 2015, are considered short-term debt as of December 31, 2013, because they are due within one year from that date. The financing agreement with Gigantic Bank does not affect the classification of these notes as short-term debt as of December 31, 2013.

On February 10, 2014, After Issuance of Its Financial Statements