The balance sheet of a firm shows current liabilities of $56,300 and long-term debt of $289,200 as of last year. Current liabilities are $76,900 and long-term debt is $248,750 as of today, which is the end of the current year. The financial statements for the current year reflect an interest paid amount of $29,700 and dividends of $19,000.
What is the amount of the net new borrowing?
A company's debt represents the amount it owes to a third party and the debt can be classified into two types based on the duration of the debt. If a debt has to be repaid within one year, it is classified as a current liability. And if a debt has to be repaid after one year, it is classified as long-term debt.
Answer and Explanation:
Answer: The amount of the net new borrowings is -$40,450.
As per the firm's data:
- Beginning balance in current liabilities = $56,300
- Beginning balance in long-term debt = $289,200
- Ending balance in current liabilities = $76,900
- Ending balance in long-term debt = $248,750
- Interest expense = $27,900
- Dividends paid = $19,000
- Net new borrowings = Ending balance in long-term debt - Beginning balance in long-term debt
- Net new borrowings = $248,750 - $289,200
- Net new borrowings = -$40,450
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from Financial Accounting: Help and ReviewChapter 8 / Lesson 7