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Question - Induss Inc. is considering obtaining funding through advances against receivables. Total annual credit sales are $600,000.00, terms are net 30 days, and payment is made on an average of 30 days. A local bank will advance funds under a pledging arrangement for 13 percent annual interest. On average, 75 percent of credit sales will be accepted as collateral. Ikhlas Finance offers factoring on a nonrecourse basis for a 1 percent factoring commission, charging 1.5 percent per month on advances and requiring a 15 percent factor's reserve. Under this plan, the firm would factor all accounts and close its credit and collections department, saving $10,000.00 per year.
Required -
(i) Calculate the effective interest rate and the average amount of funds available under pledging and under factoring.
(ii) What considerations other than cost should a firm account for in determining whether to enter the factoring agreement?
The costs of inspection satisfied the recognition criteria for capitalization. How much is the carrying amount of the equipment on December 31, 2020?
Of the potential strategies available to Regal Marine, have they chosen differentiation, cost leadership, or quick response? Do you think that is a good choice for a boat manufacturer? Why or why not?
norman company sells MP3 players for $60 each. Variable cost are $40 per unit, and fixed cost total $60,000. What sales are need bay norman to break even?
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Prepare any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at year-end (round all calculations to the nearest dollar).
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