Monterry Corporation has an existing loan in the amount of 7 million with an annual interest rate of 6.5% The company provides an internal company prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Monterrey Corporation's existing loan agreement with a new one. Southwest National Bank has offered to loan Monterrey 7 million at a rate of 5.5% but requires Monterrey to provide financial statements that have been reviewed by a CPA firm. First City Bank has offered to loan Monterrey 7 million at a rate of 4.5% but requires to provide financial statements that have been audited by a CPA firm. Monterrey Corporation's controller approached a CPA firm and was given an estimated cost of $45,000 to perform a review and $80,000 to perform an audit.
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- Young Company has a 7 percent annual interest rate on its bank loan which the company is in the process of repaying. The loan currently has a principal balance of $15 million. Young Company provides financial statements to the bank in order to meet the bank's loan requirements. Young prepares its financial statements with some help from a local CPA, who provides advice in preparing journal entries and closing the books. Young Company approached several other banks and found two that were willing to offer loans at competitive rates. Country Valley Bank offers a 6 percent annual interestrate for small businesses that involve a CPA in helping prepare their financial statements. Communitv Bank offers a 4.5 percent rate on its loan but would require that Young Company have its financial statements separately audited by an independent CPA firm each year to get that lower rate. Young Company reached out to a local CPA firm and received an estimate of $145,000 annually to provide an…Young Company has a 7 percent annual interest rate on its bank loan which the company is in the process of repaying. The loan currently has a principal balance of $15 million. Young Company provides financial statements to the bank in order to meet the bank's loan requirements. Young prepares its financial statements with some help from a local CPA, who provides advice in preparing journal entries and closing the books. Young Company approached several other banks and found two that were willing to offer loans at competitive rates. Country Valley Bank offers a 6 percent annual interestrate for small businesses that involve a CPA in helping prepare their financial statements. Communitv Bank offers a 4.5 percent rate on its loan but would require that Young Company have its financial statements separately audited by an independent CPA firm each year to get that lower rate. Young Company reached out to a local CPA firm and received an estimate of $145,000 annually to provide an…Aggressive Corporation approaches Matt Taylor, a loan officer for Oklahoma State Bank, seeking toincrease the company's borrowings with the bank from $100,000 to $150,000. Matt has an uneasyfeeling as he examines the loan application from Aggressive Corporation, which just completed itsfirst year of operations. The application included the following financial statements The income statement submitted with the application shows a net income of $30,000 in the first yearof operations. Referring to the balance sheet, this net income represents a more-than-acceptable15% rate of return on assets of $200,000.Matt's concern stems from his recollection that the $100,000 note payable reported on the balancesheet is a three-year loan from his bank, approved earlier this year. He recalls another promising newcompany that, just recently, defaulted on its loan due to its inability to generate sufficient cash flowsto meet its loan obligations.Seeing Matt's hesitation, Larry Bling, the CEO of…
- Justin Company is in the process of negotiating a line of credit with two local banks. The prime rate is currently 8 percent. The terms follow: Bank Loan Terms Citywide Bank 1 percent above prime rate on a discounted basis and a 20% compensating balance on the face value of the loan. State Bank 2 percent above prime rate and a 15% compensating balance. Calculate the effective interest rate of both banks.Quick Print Press borrowed $20,000 from the Provincial Bank on May 25 at 7.5% and secured the loan by signing a promissory note subject to a variable rate of interest. Quick Print made partial payments of $5000 on July 10 and $8000 on September 15. The rate of interest was increased to 8% effective August 1 and to 8.5% effective October 1. What payment must Quick Print make on October 31 if, under the terms of the loan agreement, any interest accrued as of October 31 is to be paid on October 31? Quick Print must make a payment of S (Round to the nearest cent as needed. on October 31.The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments, together with annual rates of return, are as follows: The credit union will have 2 million available for investment during the coming year. State laws are credit union policies impose the following restrictions on the composition of the loans and investments: Risk-free securities may not exceed 30% of the total funds available for investment. Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). Furniture loans plus other secured loans may not exceed the automobile loans. Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the 2 million be allocated to each of the loan/investment alternatives to maximize total annual return? What is the projected total annual return?
- 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…Maris Bank has analyzed the accounts receivable of Anthony Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lending rate set at prime 3% and a 2% commission charge. The prime rate currently is 8.5%. Show Solutions and Explanation. A. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Anthony Software? (Format: 111,111) B. What is Anthony Software’s effective annual rate of interest if it borrows $100,000 for 12 months? (Note: Assume a 365-day year and a prime rate that remains at 8.5% during the life of the loan.) (Format: 11.1%)Quick Print Press borrowed $20 000 from the Provincial Bank on May 25 at 7.5% and secured the loan by signing a promissory note subject to a variable rate of interest. Quick Print made partial payments of $5000 on July 10 and $8000 on September 15. The rate of interest was increased to 8% effective August 1 and to 8.5% effective October 1. What payment must Quick Print make on October 31 if, under the terms of the loan agreement, any interest accrued as of October 31 is to be paid on October 31? Hint: How much is interest due to the Provincial Bank on and including October 31?
- 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 Reynolds Corporation buys from its suppliers on terms of 2/15, net 55. Reynolds has not been utilizing the discounts offered and has been taking 55 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 21 percent. The bank requires a 29 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement. Calculate the cost of not taking a cash discount. Note: Use a 360 day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Calculate the effective rate of interest if the company borrows from the bank. Note: Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Do you agree with Duke's proposal? multiple choice No YesAssuming loan made by M Enterprises to Banco De Oro amounting to P350,000.00 payable in three years with a monthly interest of 1.05%. M enterprises issued 12 checks for 1 year and upon 3rd month, issued check was bounced. What could be the possible action of the drawee? Elaborate your answer with supporting data. What could be the possible violation of the above scenario where they would just escape the obligation to the said bank upon the rules of commercial/ personal credit?