CASE 6 The Premiere Company obtained a short-term bank loan for P1,000,000 at an annual interest rate 12%. As a condition of the loan, Premiere is required to maintain a compensating balance of P300,000 in its checking account. The checking account earns interest at an annual rate of 3%. Premiere would otherwise maintain only P100,000 in its checking account for transactional purposes. Required: Compute for the effective interest rate assuming: 1. Loan is not discounted. Loan is without compensating balance. 2. Loan is discounted. Loan is without compensating balance. 3. Loan is not discounted. Loan is with compensating balance. 4. Loan is discounted. Loan is with compensating balance. 5. Which of the loan arrangements above is most beneficial to the firm? Justify.

CASE 6 The Premiere Company obtained a short-term bank loan for P1,000,000 at an annual interest rate 12%. As a condition of the loan, Premiere is required to maintain a compensating balance of P300,000 in its checking account. The checking account earns interest at an annual rate of 3%. Premiere would otherwise maintain only P100,000 in its checking account for transactional purposes. Required: Compute for the effective interest rate assuming: 1. Loan is not discounted. Loan is without compensating balance. 2. Loan is discounted. Loan is without compensating balance. 3. Loan is not discounted. Loan is with compensating balance. 4. Loan is discounted. Loan is with compensating balance. 5. Which of the loan arrangements above is most beneficial to the firm? Justify.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Can you answer part E of this qu
Concept of Reconcilation statement with an example .
duct
Zina Manufacturing Company started and completed Job 501 in December with the following Job Cost Sheet and transferred it to the warehouse. Direct Materials Date Dec 17 Dec 30 Total Direct Labor Amount Date Amount $2,000 Dec 20 $4,000 8,000 Dec 30 3,800 Total Job Cost Sheet - Job No. 501 Total Cost The journal entry to record the transaction is A) WIP Inventory FG Inventory B) Cost of Goods Sold WIP Inventory C) FG Inventory WIP Inventory D) FG Inventory WIP Inventory Debit Credit 35,800 17,800 17,800 Manufacturing Overhead Date Amount Dec 24 $10,000 Dec 30 8,000 Total 35,800 35,800 17,800 17,800 35,800
Q5 Distinguish between "report" and "certificate"
pls answer no. 4 and 5