Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 9, Problem 4BTN
Assume that your team is in business and you must borrow $6,000 cash for short-term needs.
You have been shopping banks for a loan, and you have the following two options.
- Sign a $6,000, 90-day, 10% interest-bearing note dated June 1.
- Sign a $6,000, 120-day, 8% interest-bearing note dated June 1.
Required
- Discuss these two options and determine the better choice. Ensure that all teammates concur with the decision understand the rationale.
- Each member of the team is to prepare one of the following
journal entries.
a. Option A−at date of issuance.
b. Option B−at date of issuance.
c. Option A−at maturity date.
d. Option B−at maturity date. - In rotation, each member is to explain to the team the entry he or she prepared in part 2. Ensure that all team members concur with and understand the entries.
- Assume that the funds are borrowed on December 1 (instead of June 1) and your business operates on a calendar-year reporting period. Each member of the team is to prepare one of the following entries.
a. Option A−at the year-end adjustment.
b. Option B−at the year-end adjustment.
c. Option A−at maturity date.
d. Option B−at maturity date. - In rotation, each member is to explain to the team the entry he or she prepared in part 4. Ensure that all team members concur with and understand the entries.
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Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2022, for Business Solutions follow.
Total assets
$121,568
Total liabilities
$862
Total equity
$120,706
Required:1. The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.77. As of March 31, 2022, what is the maximum amount that Business Solutions could borrow from this bank? (Round your intermediate calculations to the nearest dollar amount.)2. Assume Business Solutions borrows the maximum amount allowed from the bank. (Round your intermediate dollar values to the nearest whole number and final answers to 1 decimal place.)(a) What percentage of assets would be financed by debt?(b) What percentage of assets would be financed by equity?
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term
bank loan. Selected account balances at March 31, 2022, for Business Solutions follow.
Total assets
$120,568
Total liabilities
$872
Total equity
$119,696
Required:
1. The bank has offered a long-term secured note to Business Solutions. The bank's loan procedures require that a client's debt-to-
equity ratio not exceed 0.83. As of March 31, 2022, what is the maximum amount that Business Solutions could borrow from this bank?
(Round your intermediate calculations to the nearest dollar amount.)
2. Assume Business Solutions borrows the maximum amount allowed from the bank. (Round your intermediate dollar values to the
nearest whole number and final answers to 1 decimal place.)
(a) What percentage of assets would be financed by debt?
(b) What percentage of assets would be financed by equity?
1. Maximum amount
2. (a) Percentage of assets financed by debt
%
2. (b)…
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term
bank loan. Selected account balances at March 31, 2020, for Business Solutions follow.
Total assets $121,068 Total liabilities $867 Total equity $120, 201
Required:
1. The bank has offered a long-term secured note to Business Solutions. The bank's loan procedures require that a client's debt-to-
equity ratio not exceed 0.88. As of March 31, 2020, what is the maximum amount that Business Solutions could borrow from this
bank? (Round your intermediate calculations to the nearest dollar amount.)
2. Assume Business Solutions borrows the maximum amount allowed from the bank. (Round your intermediate dollar values to the
nearest whole number and final answers to 1 decimal place.)
(a) What percentage of assets would be financed by debt?
(b) What percentage of assets would be financed by equity?
1.
2.
2. (b)
(a)
Maximum amount
Percentage of assets financed by debt…
Chapter 9 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
Ch. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - What is the combined amount (in percent) of the...Ch. 9 - What is the current Medicare tax rate? This rate...Ch. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Why are warranty liabilities usually recognized on...Ch. 9 - Prob. 10DQ
Ch. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 1QSCh. 9 - Prob. 2QSCh. 9 - Ticketsales, Inc., receives $5,000,000 cash in...Ch. 9 - Prob. 4QSCh. 9 - Prob. 5QSCh. 9 - Prob. 6QSCh. 9 - Prob. 7QSCh. 9 - Prob. 8QSCh. 9 - Prob. 9QSCh. 9 - Prob. 10QSCh. 9 - Prob. 11QSCh. 9 - Prob. 12QSCh. 9 - Sera Corporation has made and recorded its...Ch. 9 - Prob. 15QSCh. 9 - Prob. 1ECh. 9 - Prepare any necessary entries at December 31 for...Ch. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Hitzu Co. sold a copier costing $4,800 with a...Ch. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 1PSACh. 9 - Prob. 2PSACh. 9 - Paloma Co. has four employees. FICA Social...Ch. 9 - Prob. 4PSACh. 9 - Shown here are condensed income statements for two...Ch. 9 - Prob. 6PSACh. 9 - Warner Co. entered into the following transaction...Ch. 9 - Prob. 2PSBCh. 9 - Fishing Guides Co. has four employees. FICA Social...Ch. 9 - On November10, 2017, Lee Co. began operations by...Ch. 9 - Shown here are condensed income statements for two...Ch. 9 - Prob. 6PSBCh. 9 - Prob. 9SPCh. 9 - Prob. 1GLPCh. 9 - Prob. 1FSACh. 9 - Prob. 2FSACh. 9 - Prob. 3FSACh. 9 - Prob. 1BTNCh. 9 - Prob. 2BTNCh. 9 - Assume that your team is in business and you must...Ch. 9 - Prob. 5BTN
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