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You drafted the following information and filed it up: Net income with the new equipment Less (Minus) interest charge on loan liability Not in fter th e interest charg

You drafted the following information and filed it up: Net income with the new equipment Less (Minus) interest charge on loan liability Not in fter th e interest charg

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alyssa who is currently operating a machine shop is considering Dindin, an excellent employee, to be her partner. Unfortunately, Dindin could not afford to invest cash of P 500,000 which Alyssa needs to expand her business. As consultant, you asked Alyssa to answer some questions before giving an advice on whether Dindin should be taken in as partner. What is your present annual net income? Can you avail of a loan of P 500,000? P 450,000 Yes Land Bank @ 17% P 450,000 What bank and what is the interest rate? With the new equipment, how much additional income will it generate? In how many year are you going to pay the loan? How much are you willing to pay Dindin as salary or profit? 5 years P 160,000 You drafted the following informatic and filed it up: Net income with the new equipment Less (Minus) interest charge on loan liability Net income after the interest charge Less (Minus) share of Dindin in the profits Share of Alyssa in the net income Net income the business is currently earning Net advantage (disadvantage) of forming a partnership
Transcribed Image Text:Alyssa who is currently operating a machine shop is considering Dindin, an excellent employee, to be her partner. Unfortunately, Dindin could not afford to invest cash of P 500,000 which Alyssa needs to expand her business. As consultant, you asked Alyssa to answer some questions before giving an advice on whether Dindin should be taken in as partner. What is your present annual net income? Can you avail of a loan of P 500,000? P 450,000 Yes Land Bank @ 17% P 450,000 What bank and what is the interest rate? With the new equipment, how much additional income will it generate? In how many year are you going to pay the loan? How much are you willing to pay Dindin as salary or profit? 5 years P 160,000 You drafted the following informatic and filed it up: Net income with the new equipment Less (Minus) interest charge on loan liability Net income after the interest charge Less (Minus) share of Dindin in the profits Share of Alyssa in the net income Net income the business is currently earning Net advantage (disadvantage) of forming a partnership
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Based on your computations, will you advise Alyssa to put up a partnership and borrow cash for the new equipment? Why or why not?
Transcribed Image Text:Based on your computations, will you advise Alyssa to put up a partnership and borrow cash for the new equipment? Why or why not?
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