Current funding availability, Cost Accounting

Assignment Help:

1. The Initial Borrowings required are determined by the amount required to start  the project less the Cash Invested by the Corporation.  The loans will always be principle & interest term loans with payments in advance (ie at the start of each period).

2. The Interest Rate applicable to the investment loan is the banks Prime Lending Rate.

3. The Term of the Loan is determined by several factors, including the corporations current gearing levels, the anticipated life of the project, expected net cash inflows, etc.  Note that the term of the loan will never exceed the anticipated life of the project and that where the project  is terminated(sold) prior to the end of the projects anticipated life, the loan will be repaid in full.

4. The amount of operating interest received and paid. The 'project operating bank accounts' have an unlimited overdraft facility. The corporation pays interest on a negative balance (ie overdraft) at the rate given.  This amount of interest is paid at the end of each year, calculated on the closing balance of the previous year (ie the opening balance of the current year - each investment project beginning with a zero balance) and is considered by management to be a operating expense item.  If the balance is positive at the end of a year the corporation earns interest at the rate given. 

This interest is received at the end of each year, calculated on the closing balance of the previous year (ie the opening balance of the current year) and is considered by management to be a operating income item.

5. The corporations 'project operating bank accounts' have the following arrangements;

  • Interest on positive balances is 6% lower than the Prime Lending Rate. Interest received is considered to be operating income.
  • Interest on negative balances (overdraft) is 3% greater than the Prime Lending Rate.
  • The interest is paid or earned at the end of each year is calculated on the closing balance of the previous year (ie the opening balance of the current year).  Interest paid is considered a operating expense.

Related Discussions:- Current funding availability

Materials transaction, Materials Transaction i. Purchase of Materials ...

Materials Transaction i. Purchase of Materials on Credit ii. Return of Materials to Suppliers iii. Purchase of Materials in Cash. The above transactions affect both t

Market-based transfer price optimal, Under what conditions is a market-base...

Under what conditions is a market-based transfer price optimal?

Alternative cost, Mission Foods produces two flavors of tacos, chicken and ...

Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics: Chicken Fish Selling price per taco $3.00 $4.50 Variable cost p

Cash flows statement , You have recently graduated from VU and are now work...

You have recently graduated from VU and are now working for a small accounting firm. The firm recently purchases MYOB software for internal use. Upon learning that you had learnt M

Principles of incremental revenue and relevant costs, Shortflower Ltd curre...

Shortflower Ltd currently publishes, prints and distributes a range of catalogues and instruction manuals. The management has now decided to discontinue printing and distribution a

Costing term, Match each of the six following terms with the phrase that mo...

Match each of the six following terms with the phrase that most closely describes it. Each answer may be used only once. _____ 1. Direct costs _____ 2. Fixed costs _____ 3

Calculate the amount of annual investment return rates, Using the table bel...

Using the table below, calculate the amount of overall increase of your purchasing power over the period of 5 years given the annual investment return rates and annual inflation ra

Costs and revenues over a range of activity levels, 1. Single product or si...

1. Single product or single mix of products 2. Variable cost, fixed cost and selling price are constant 3. The level of production will equal the level of sales Example:

Cost drivers and predictors, why is determining the cost to manufacture a p...

why is determining the cost to manufacture a product quite a different activity from determining how to control such cost?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd