Refinancing of short-term debt

Assignment Help Finance Basics

Reference no: EM1334331

Medvedev Inc., issued $10,000,000 of short-term commerical paper during the year 2006 to finance construction of a plant. At December 31, 2006, the corporation's year-end, Medvedev intends to refinance the commercial paper by issuing long-term debt. However, because the corporation temporarily has excess cash, in January 2007 it liquidates $4,000,000 of the commercial paper as the paper matures. In February 2007, Medvedev completes an $18,000,000 long-term debt offering. Later during the month of February, it issues its December 31, 2006, financial statements. The proceeds of the long-term debt offering are to be used to replenish $4,000,000 in working capital, to pay $6,000,000 of commercial paper as it matures in March 2007, and to pay $8,000,000 of construction costs expected to be incurred later that year to complete the plant.

Instructions:

A) How should the $10,000,000 of commercial paper be classified on the December 31, 2006, January 31, 2007, and February 28, 2007. balance sheets? Give support for your answer and also consider the cash element.

B) What would your answer be if, instead of a refinancing at the date above of issuance of the financial statements, a financing agreement existed at that date.?

Reference no: EM1334331

Questions Cloud

Determine how a company structures and uses groups or teams : Determine how a company structures and uses groups or teams. Do you feel your organization would be a good fit for you ? Why or why not?

Explain consumer behavior and marketing : Explain Consumer Behavior and Marketing and Select a purchase you have made recently and describe in detail how each of the 4Ps

Interest based bargaining : Discuss how interest based bargaining is different from other techniques.

Describe how the training program would have made : Write an APA formatted paper in which you consider ways to apply the training program your team developed to a team project that you worked on that did not go as well as you would have liked.

Refinancing of short-term debt : Medvedev Inc., issued $10,000,000 of short-term commerical paper during the year 2006 to finance construction of a plant. What would your answer be if, instead of a refinancing at the date above of issuance of the financial statements, a financing ..

The pros and cons of the political patronage system : The pros and cons of the political patronage system and The best example of the political patronage system, also known as the spoils system, is how when a President takes office, he or she appoints their cabinet members.

Explain important information about fedex : Explain Important information about FedEx and Examine the importance of demographics and physical infrastructure

Explain different macroenvironments - green motorcar : Explain Different Macroenvironments - Green Motorcar and explain how these macroenvironments will impact the demand for the Green Motorcar Company car

Develop a basic compensation plan for wal-mart in china : Evaluate how elements of your proposed compensation plan will help Wal-Mart successfully compete to attract and retain qualified employees in the increasingly tight China labor market. How will it address the issues Wal-Mart is facing in China?

User Account

All Pages