Intermediate Accounting Test 2

Another option is the issuing of preferred stock, the company’s common stock is already overvalued in the market; therefore, sourcing additional capital through common stock might result to lower proceeds.

When Cartwright Lumber Company was originally founded, it was owned by both Mark Cartwright and Henry Stark. However, Cartwright bought out Stark’s interest for $105,000 and became sole owner of the company. To finance this payment, Henry took out a $70,000 loan with an interest rate of 11% secured by land and buildings payable over 10 years at a rate of $7,000 each year.

1a. One potential goal of earnings management is income smoothing. Briefly discuss why income smoothing might be a goal of management, including a discussion of incentives to smooth income. What techniques might be used to accomplish income smoothing beyond the selection of depreciation and inventory costing alternatives?

uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company 's manufacturing overhead data:

The main concern is that the company would have a lot of debt if they have to borrow money from the bank, continue to pay Charlie Carlton’s parents, and pay off the $1 million debt to Mr. Miller.

Currently the Brown’s pay back suppliers in the first 10 days, averaging 9.9 days, to receive a 2% discount. This is nearly three times as fast as the industry average of 26.9 days. This doesn’t work well with their current credit terms offered to customers, as their receivable days are averaging at 51 days, which is double the industry average.

1. Based on the 10 percent compensating balance requirement, how much would Pierce Control Systems have to borrow to acquire $10 million in needed funds?

The action connected to the first draw of Buck and following payments must be made on a gross foundation inside the investing action part as $70 million influx for the draw, July 30, 210. The action related the second draw made by Buck and resulting payment might be made on basis net inside the financing operation part. The $15 draw on Sept 30, 2010 and the decompensating first of December 2010 net to zero for yearly commentary reasons. The draws in the third scenario just again show some of the traits inside the flow of cash statement procedure. This transaction may be regarded vast in

The proportion of the total dollar amount receivable I included in the confirmation request is in “Account Receivable Aging Analysis” by diving the total amount that is collectible “C” by the total amount of sales. The result is 82% ($9,803,430/$11,920,028) of the total dollar balance in accounts receivable.

a) Prepare the necessary journal entries to account for any impairment loss for Division One.

4. What credit rating should Maria Ober give to this financing? Is the return to the creditor adequate to compensate for the credit risk?

The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The core problem for Allen Distribution Company is how to distinguish from the marginal accounts the difference between good creditors and bad creditors. Especially we show how the difference between creditors can be utilized in practice by the credit representatives. For this we provide clear guidelines. The option of extending the Morse Photo Company’s $ 1000 credit line is used as test case for these purposes.

By: Charn Gek Cheng, Chiang Soo Ling, Kummar Sokali Muthu Mogan, Lee Siew Fen Samantha