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Johnson Enterprises Inc. Is involved in the manufacture and sale of electronic components used in small AM/FM radios. The firm needs $300,000 to finance an anticipated expansion in receivables due to increased sales. Johnson's credit terms are net 60, and its average monthly credit sales are $200,000. In general, the firm's customers pay within the credit period; thus, the firm's average accounts receivable balance is $400,000. Chuck Idol, Johnson's comptroller, approached the firm's bank with a request for a loan for the $300,000 us- ing the firm's accounts receivable as collateral. The bank offered to make a loan at a rate of 2 percent over prime plus a 1 percent processing charge on all receivables pledged . Furthermore, the bank agreed to lend up to 75 percent of the face value of the receiv- ables pledged. a. Estimate the cost of the receivables loan to Johnson when the firm borrows the $300,000. The prime rate is currently 11 percent. b. Idol also requested a line of credit for $300,000 from the bank. The bank agreed to grant the necessary line of credit at a rate of 3 percent over prime and required a 15 percent com- pensating balance. Johnson currently maintains an average demand deposit of $80,000. Estimate thje cost of the line of credit to Johnson. c. Which source of credit should Johnson select? Why?
Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2011, recording any necessary amortization and reflecting all balances accurately as of that date.
Intercompany transactions are very important in the consolidation process. Choose an intercompany transaction. Discuss the effects of intercompany transactions when consolidating financial statements. Your discussion should include the effects on ..
Do you think favorable variances should be investigated? Why or why not?
Which of the following is not an important consideration for senior management of an entity in fulfilling governance responsibilities?
On January 1, 2010, Ball Co. exchanged equipment for a $160,000 zero-interest-bearing note due on January 1, 2013. The prevailing rate of interest for a note of this type at January 1, 2010 was 10%. The present value of $1 at 10% for three periods..
Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in year 3 and thereafter. The required return on this low risk stock is 9%. What..
Fred's interest is not considered to be a passive activity.If his share of the partnership losses is $35,000 in 2007 and$25,000 in 2008, how much can he deduct in each year?
ling construction entered into a contract in 1997 to build atunnel at a contract price of 11 million. the company
The board of directors declared and paid a $2,000 dividend in 2009. In 2010, $12,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2010?
Karr Company purchased bonds with a face amount of $400,000 between interest payment dates. Karr purchased the bonds at 102, paid brokerage costs of $6,000, and paid accrued interest for three months of $10,000.
If Analog computers can borrow at 9.5% for 3 years, what is the effective rate of interest on a $800,000 loan where a 15% compensating balance is required?
The bond issue costs relating to this transaction were $90,000. Harry amortizes discounts, premiums, and bond issue costs using the straight-line method. What amount of loss should Harry recognize on the redemption of these bonds (ignore taxes)?
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