North Face is one of the world's most popular outdoor apparel companies. Assume that North Face borrows $2.2 million from U.S.Bank and signs a note promising to pay back the $2.2 million in nine months, at which time North Face also will pay any accruedinterest. The interest rate on the note is 8 percent.Required:1. Prepare the journal entry North Face will record when it signs the note and receives the cash.2. Prepare the journal entry that North Face will record when it pays off the note and any accrued interest after nine months.(For all requirements, if no entry is required for a transaction/event, select "No journal entry required" in the first account field.Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)

Requirement 1: Journal Entry When North Face Signs the Note and Receives the CashStep 1: Identify…

Answered: North Face is one of the world's most…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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North Face is one of the world's most popular outdoor apparel companies. Assume that North Face borrows $2 million from U.S. Bank and signs a note promising to pay back the $2 million in nine months, at which time North Face also will pay any accrued interest. The interest rate on the note is 8 percent. Required: Prepare the journal entry North Face will record when it signs the note and receives the cash. ( Record the nine-month note with an interest rate of 8%. Prepare the journal entry that North Face will record when it pays off the note and any accrued interest after nine months. ( Record the payment of the note along with the accrued interest.
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…
Kansas City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12 credit customers, the average age of each account, and the customer’s average payment period are as shown in the following table. If the bank will accept all accounts that can be collected in 45 days or less as long as the customer has a history of paying within 45 days, which accounts will be acceptable? What is the total dollar amount of accounts receivable collateral? (Note: Accounts receivable that have an average age greater than the customer’s average payment period are also excluded.) In addition to the conditions in part a, the bank recognizes that 5% of credit sales will be lost to returns and allowances. Also, the bank will lend only 80% of the acceptable collateral (after adjusting for returns and allowances). What level of funds would be made available through this lending…
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. A. Sign a $6,000, 90-day, 10% interest-bearing note dated June 1. B. Sign a $6,000, 120-day, 8% interest-bearing note dated June 1. Required 1. Discuss these two options and determine the better choice. Ensure that all teammates concur with the decision and understand the rationale. 2. 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. 3. 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. 4. 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…
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $21 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 7% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.Required:1. Prepare the journal entries on November 1, 2021, to record (a) the notes payable for Eskimo Joe’s and (b) the notes receivable for Stillwater National Bank.2. Record the adjustment on December 31, 2021, for (a) Eskimo Joe’s and (b) Stillwater National Bank.3. Prepare the journal entries on April 30, 2022, to record payment of (a) the notes payable for Eskimo Joe’s and (b) the notes receivable for Stillwater National Bank.
Zara Corporation borrowed RM100,000 from their bank for one year. The bank required the company to pay RM9,500 in interest at the end of the year plus maintain a minimum balance of RM10,000 with the bank in a chequing account throughout the year. What is the effective interest rate on this loan?
Weavile Corporation takes out a $100,000 cash loan from its bank by signing a 30%, 10-month promissory note on July 1. The journal entry at the note's maturity will include: Group of answer choices Debit to Interest Expense for $10,000 Credit to Cash for $100,000 Debit to Interest Expense for $30,000 Debit to Interest Expense for $15,000
OBLEMS Eskimo Joe's, designer of the world's second best-selling T-shirt (just behind Hard Rock Cafe), borrows $20.9 million cash on November 1, 2024. Eskimo Joe's signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. Required: 1. Prepare the journal entries on November 1, 2024, to record (a) the notes payable for Eskimo Joe's and (b) the notes receivable for Stillwater National Bank. 2. Record the adjusting entry on December 31, 2024, for (a) Eskimo Joe's and (b) Stillwater National Bank. 3. Prepare the journal entries on April 30, 2025, to record payment of (a) the notes payable for Eskimo Joe's and (b) the notes receivable for Stillwater National Bank. Complete this question by entering your answers in the tabs below. Required 1 Prepare the journal entries on November 1, 2024, to record (a) the notes payable for Eskimo Joe's and (b) the notes…
A bank is offering to sell 6-month certificates of deposit for $12,000. At the end of 6 months, the bank will pay $13,000 to the certificate owner. Compute the nominal annual interest rate and the effective annual interest rate.
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $19.7 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. 1. Prepare the journal entries on November 1, 2021, to record the issuance of the note. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) Record the issuance of the note to Eskimo Joe's Date General Journal Debit Credit November 01, 2021 Record the acceptance of the note by Stillwater National Bank. Date General Journal Debit Credit November 01, 2021
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $19.7 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. 3. Prepare the journal entry on April 30, 2022, to record payment of the notes payable at maturity. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) Record the repayment of the note at maturity for Eskimo Joe's. Date General Journal Debit Credit April 30, 2022 Record the receipt of cash at maturity for Stillwater National Bank.…
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $19.7 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. 2. Record the adjustments on December 31, 2021, for (a) Eskimo Joe's and (b) Stillwater National Bank (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) Record the adjusting entry for interest for Eskimo Joe's. Date General Journal Debit Credit December 31, 2021 Record the adjusting entry for interest for Stillwater National Bank.…

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