Reference no: EM133184951

Question - On December 31, Year 3, Kimbo Company had $7,000,000 of short-term debt in the form of notes payable to the Water State Bank due in Year 4. On January 28, Year 4, Kimbo enters into a refinancing agreement with Water State Bank that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables are expected to range between a low of $6,000,000 in May and a high of $8,000,000 in October during Year 4. The interest cost of the maturing short-term debt is 12%, and the new agreement calls for a fluctuating interest rate of 1% above the prime rate on the notes, which are due in Year 9. Kimbo's December 31, Year 3 balance sheet is issued on February 15, Year 4.

Required - Create a partial balance sheet for Kimbo at December 31, Year 3, showing how its $7,000,000 of short-term debt should be presented, including note disclosure.