Compensating balances are often included as a requirement for a line of credit. These balances provide income to banks but add to the cost of financing for the borrower. Why, then, would borrowers agree to such an arrangement?
What will be an ideal response?
Credit lines are flexible lending arrangements that allow firms to borrow funds quickly as the funds are needed. As long as the firm has an outstanding loan balance that is less than the credit line, the firm can borrow as frequently as needed up to the maximum amount. This flexibility and quick access to funds provides a great benefit to the firm. Because of these benefits, the firm is willing to provide a compensating balance as a form of payment to the provider of these benefits.
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Jacob has been quite ill. When three of his neighbors come to visit one day, he tells them that he is dying and that he wants them to witness his oral will. In some states, he can validly dispose of his personal property by his witnessed, oral statements
Indicate whether the statement is true or false
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using the effective interest method of amortization is:
A) Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00. B) Debit Interest Payable $14,000.00; credit Cash $14,000.00. C) Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. D) Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. E) Debit Interest Expense $15,351.72; credit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.
____ is the earned value minus the actual cost.
a. SV b. CV c. CPI d. SPI
A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000, and had a five-year useful life. What is the depreciation expense for one year?
a. $1000. b. $1800. c. $2400. d. $2000. e. $2160.