(Related to Checkpoint 18.2) (Calculating the cost of a short-term bank loan) On July 1, 2016, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 22 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 6 percent (assume a 360-day year). a. If Southwest normally maintains a $22,000 to $32,000 balance in its checking account with FNB of Dallas, what is the annualized cost of credit through the line-of-credit agreement when the maximum loan amount is used for a full year? a. If Southwest normally maintains a $22,000 to $32,000 balance in its checking account with FNB of Dallas, the effective cost of credit under the line-of-credit agreement when the maximum loan amount is used for a full year is %. (Type a whole percentage.)

(Related to Checkpoint 18.2) (Calculating the cost of a short-term bank loan) On July 1, 2016, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 22 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 6 percent (assume a 360-day year). a. If Southwest normally maintains a $22,000 to $32,000 balance in its checking account with FNB of Dallas, what is the annualized cost of credit through the line-of-credit agreement when the maximum loan amount is used for a full year? a. If Southwest normally maintains a $22,000 to $32,000 balance in its checking account with FNB of Dallas, the effective cost of credit under the line-of-credit agreement when the maximum loan amount is used for a full year is %. (Type a whole percentage.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(Assigning Accounts Receivable) On April 1, 2017, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2017. The assignment agreement calls for Rasheed to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).Instructions(a) Prepare the April 1, 2017, journal entry for Rasheed Company.(b) Prepare the journal entry for Rasheed’s collection of $350,000 of the accounts receivable during the period from April 1, 2017, through June 30, 2017.(c) On July 1, 2017, Rasheed paid Third National all that was due from the loan it secured on April 1, 2017. Prepare the journal entry to record this payment.
On April 1, 2014, Somers Company assigns $200,000 of its accounts receivable to Third National Bank as collateral for a $100,000 loan due July 1, 2014. The assignment agreement calls for Somers Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the accounts receivable, and interest on the loan is 8% (a realistic rate of interest for a note of this type). a) Prepare the April 1, 2014, journal entry for Somers Company. b) Prepare the journal entry for Somers’s collection of $175,000 of the accounts receivable during the period from April 1, 2014, through June 30, 2014. c) On July 1, 2014, Somers paid Third National all that was due from the loan it secured on April 1, 2014. answr all three subparts thnx
On April 1, 2025, Sunland Company assigns $504,100 of its accounts receivable to the Third National Bank as collateral for a $314,000 loan due July 1, 2025. The assignment agreement calls for Sunland to continue to collect the receivables. Third National Bank assesses a finance charge of 4% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). (a) Prepare the April 1, 2025, journal entry for Sunland Company. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Apr. 1, 2025 Account Titles and Explanation Debit Credit
On April 1, 2017, Indigo Company assigns $549,400 of its accounts receivable to the Third National Bank as collateral for a $301,600 loan due July 1, 2017. The assignment agreement calls for Indigo to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Your answer is partially correct. Try again. Prepare the April 1, 2017, journal entry for Indigo Company. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Apr. 1, 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT…
(b) On April 1, 2025, Marigold Company assigns $505,300 of its accounts receivable to the Third National Bank as collateral for a $327,200 loan due July 1, 2025. The assignment agreement calls for Marigold to continue to collect the receivables. Third National Bank assesses a finance charge of 4% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). (a) Your answer is correct. Prepare the April 1, 2025, journal entry for Marigold Company. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Account Titles and Explanation Apr. 1, Cash 2025 Interest Expense Notes Payable eTextbook and Media List of Accounts Debit 306988 20212 Credit 327200 Attempts: 1 of 2 used Prepare the journal entry for Marigold's collection of $378,200 of the…
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On January 1, 20x1, an entity obtains an 11%, P5,000,000 bank loan. The bank charges the entity an 8.74% nonrefundable loan origination fee. The principal on the loan matures on December 31, 20x4 but interest is due annually every December 31. Requirements: Compute for the initial carrying amount of the loan. Compute for the effective interest rate on the loan. Compute for the carrying amount of the loan on December 31 20x1.
The following selected transactions relate to liabilities of Colorado Adventures. Colorado's fiscal year ends on December 31. January 13 Negotiate a revolving credit agreement with First Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $10 million at the bank's prime rate. February 1 Arrange a three-month bank loan of $3.8 million with First Bank under the line of credit agreement. Interest at the prime rate of 7% is payable at maturity. May 1 Pay the 7% note at maturity. Required: Record the appropriate entries, if any, on January 13, February 1, and May 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 million should be entered as 5,000,000).)
On September 1, 2022, Accounts receivable in the amount of $900,000 were assigned as collateral to the Credit Suisse Finance Company by Gemini, Inc., as security for a loan of $750,000. The finance company assessed a 5% finance charge on the face amount of the loan, and the note bears interest at 9% per year. During the month of September, Gemini collected $425,000 on assigned accounts. This amount was remitted to Credit Suisse along with one month's interest on the note on October 1, 2022. Instructions Make all the journal entries for Gemini Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the Credit Suisse.
On April 1, 2020, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2020. The assignment agreement calls for Rasheed to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Instructions a. Prepare the April 1, 2020, journal entry for Rasheed Company. b. Prepare the journal entry for Rasheed’s collection of $350,000 of the accounts receivable during the period from April 1, 2020, through June 30, 2020. c. On July 1, 2020, Rasheed paid Third National all that was due from the loan it secured on April 1, 2020. Prepare the journal entry to record this payment.
DBC Company has received a confirmation letter from the First National Bank of Miami (FNBM) about a line of credit for $12,000,000 on January 2, 2020. According to the terms of this short-term loan, DBC Company will be charged the following: A. ABC will be charged for 50 basis points interest (on an annual basis) for any unused amount of credit from the commencement of this agreement. B. Upon usage of any funds, the interest charge will be Prime rate plus 75 basis points. Prime rate at the commencement of this loan on January 2, 2020, was 5.25%. C. The following events took place in 2020: 1) On February 1, 2020; DBC Co., used $4,000,000 against its line of credit for its working capital purposes. 2) On May 1, 2020; DBC Co., used an additional $2,400,000 to purchase fixed assets. 3) On June 1, 2020, upon the meeting of F.O.M.C., the Fed announced its "Quantitative Easiness" policy and reduced the discount rate by 0.50 basis points. Immediately FNBM bank reflected the same reduction to…
Latvia Limited made a loan to Lithuania Incorporated in exchange for a $250,000 note on July 1, 2021.This note is for a period of seven years, with interest at 4% quarterly. Assume the market rate forcomparable loans is 8%. Prepare the journal entry in good form for Latvia Limited’s books

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