EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 17, Problem 7P
a.
Summary Introduction
To determine: The annual pre-tax returns.
b.
Summary Introduction
To discuss: The additional information that is necessary to make a decision.
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Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table:
Customer
Accounts
Receivable
Average age
of account
Average payment
period of customer
A
$11,000
42 days
50 days
B
$25,000
70 days
65 days
C
$10,000
48 days
45 days
D
$28,000
55 days
50 days
E
$14,000
50 days
60 days
F
$19,000
21 days
35 days
G
$30,000
10 days
30 days
H
$16,000
25 days
40 days…
Proco had an account payable of $63,000 due to Shirmoo Incorporated, one of its suppliers. The amount was due to be paid on
January 31. Proco did not have enough cash on hand then to pay the amount due, so Proco's treasurer called Shirmoo's treasurer and
agreed to sign a note payable for the amount due. The note was dated February 1, had an interest rate of 9% per annum, and was
payable with interest on May 31.
Required:
a. Use the horizontal model to show the effects (+ for addition and for subtraction) of each of these transactions and adjustments for
Proco on the following:
a. February 1, to show that the account payable had been changed to a note payable.
b. March 31, to accrue interest expense for February and March.
c. May 31, to record payment of the note and all of the interest due to Shirmoo.
b. Prepare the journal entries to show each of these transactions and adjustments.
Complete this question by entering your answers in the tabs below.
Required A Required B
Use the…
On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year.
Minimum of 175 words
Should you write this check today and record the expense or write the check tomorrow?
How would the company be affected if the check is written and the invoice ends up being erroneous?
Chapter 17 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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- Proco had an account payable of $3,800 due to Shiroo Inc., on of its suppliers. The amount was due to be paid on January 31. Proco did not have enough cash on hand then to pay the amount due, so Proco's treasurer called Shirmoo's treasurer and agreed to sign a note payable for the amount due. The note was dated February 1, had an interest rate of 12% per annum, and was payable with interest on May 31. Use the horizontal model to show the effects (+for addition and -fro subtraction) of each of these transactions and adjustment for Proco on the following: a. February 1, to show that the account payable had been changed to a note payable. b. March 31, to accrue interest expense for February and March. c. May 31 to record payment of the note and all ofthe interst due to Shirmoo.arrow_forwardAdams, Inc., pays its employees’ weekly wages in cash. A supplementary payroll sheet that lists the employees’ names and their earnings for a certain week is shown below. Complete the payroll sheet by calculating the total amount of payroll and indicating the least possible number of denominations that can be used in paying each employee. However, no employees are to be given bills in denominations greater than $20arrow_forwardGiblin’s Goodies pays employees weekly on Fridays. However, the company notices that March 31 is a Wednesday, and the pay period will end on April 2. The payroll data for March 29-31 is as follows: Gross pay: $8,000.00 Federal income tax: $920.00 Social Security tax: $496.00 Medicare tax: $116.00 State income tax: $160.00 Federal Unemployment Tax $48.00 State Unemployment Tax $432.00 Required: Give the adjusting entry in the General Journal to recognize the employee and employer share of the payroll for March 29–31. The date of the entry is March 31. Then record the journal entry to reverse the adjustment on April 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to 2 decimal places.) Record the adjusting Journal Entry for employees' share of payroll accrual. date general journal debit credit march 31 Record the reversal of adjusting Journal Entry for…arrow_forward
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