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Vial-tek has an existing loan in the amount of $3.5 million with an annual interest rate of 9.5%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Vial-tek's existing loan agreement with a new one. First National bank has offered to loan Vial-tek $3.5 million at a rate of 8.5% but requires Vial-tek to provide financial statements that have been reviewed by a CPA firm. City First Bank has offered to loan Vial-tek $3.5 million at a rate of 7.5% but requires Vial-tek to provide financial statements that have been audited by a CPA firm. The controller of Vial-tek approached a CPA firm and was given an estimated cost of $20,000 to perform a review and $45,000 to perform and audit.Requireda. Explain why the interest rate for the loan that requires a review report is lower than that for the loan that did not require a review. Explain why the interest rate for the other two loans.b. Calculate Vial-tek's annual costs under each loan agreement, including interest and costs for the CPA firm's services. Indicate whether Vial-tek should keep its existing loan, accept the offer from First National Bank, or accept the offer from City First Bank.c. Assume that First National Bank has offered the loan at a rate of 8.0% with a review, and the cost of the audit has increased to $50,0000 du to new auditing standards requirements. Indicate whether Vial-tek should keep its existing loan, accept the offer from First National Bank, or accept the offer from City First Bank.d. Discuss why Vial-tk may desire to have an audit, ignoring the potential reduction in interest costs.e. Explain how a strategic understanding of the client's business may increase the value of the audit service.
What accounts does a company debit and credit in a prepaid expense adjusting entry? What accounts are debited and credited in an unearned revenue adjusting entry.
A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:
Prepare a combined statement of income and comprehensive income for 2011, beginning with net income.
Data for the first six months of 2011 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated i..
Assume that at the beginning of 2010, Northeast USA, a FedEx competitor, purchased a used Boeing 737 aircraft at a cost of $53,000,000. Northeast USA expects the plane to remain useful for five years (six million miles) and to have a residual valu..
Manufacturing overhead is allocated at 130% of direct labor costs. Actual manufacturing overhead was $86,500, and jobs costing $225,000 were?
The trust pays $5,000 of the discretionary distributions from corpus. What is the taxable amount of the Megan's tier 2 distribution?
Show the proper disclosures in the stockholders' equity section of the balance sheet issued at the end of the first quarter, March 31, 2013. Assume net income of $100000 during the first quarter.
On November 8, 2006, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized?
Ramsey Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 60,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions?
On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October?
Suppose a stock had an initial price of $83 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $96.
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