Crane Inc. (CI) has a short-term working capital loan to help finance its working capital. The terms of the loan enable CI to borrow anamount of up to 35% of its inventory balance and 55% of its accounts receivable. One of the loan covenants requires that CI maintaina current ratio greater than 2. Information related to CI's current assets and current liabilities is shown in the following table:In thousandsCashAccounts receivableInventoryOther current assets,Accounts payableShort-term bank loanOther current liabilities(a)Current ratio2024CI$1612,0541,3423381.402562562023$2241,2302,3063951.343Does CI satisfy the loan covenant in both years? (Round answers to 2 decimal places, eg. 18.45)2781122024timesthe loan covenant in 2024the loan covenant in 20232023times

The liquidity ratio used to assess a company's capacity to meet short-term or one-year-due…

Answered: Crane Inc. (CI) has a short-term…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 19P

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Pickles R Us is a pickle farm located in the Northeast. The following transactions take place: A. On November 6, Pickles borrows $820,000 from a bank to cover the initial cost of expansion. Terms of the loan are payment due in six months from November 6, and annual interest rate of 3%. B. On December 12, Pickles borrows an additional $200,000 with payment due in three months from December 12, and an annual interest rate of 10%. C. Pickles pays its accounts in full on March 12, for the December 12 loan, and on May 6 for the November 6 loan. Record the journal entries to recognize the initial borrowings, and the two payments for Pickles.
On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a 750 service fee, advances 85% of Jordans accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan.
Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
On January 1, Kilgore Inc. accepts a 20,000 non-interest-bearing, 5-year note from Dieland Company for equipment. Neither the fair value of the note nor the equipment is determinable. Kilgore had originally purchased the equipment for 18,000, and the equipment has a book value of 14,000 on January 1. Kilgore knows Dielands incremental borrowing rate of 9%. Prepare the journal entry for Kilgore to record the sale of the equipment on January 1.
Stephens Metals Company has a revolving credit agreement with its bank permitting it to borrow up to $25 million at an annual interest rate of 12. Stephens is required to maintain a 10% compensating balance on any funds borrowed under this agreement and to pay a 0.5% commitment fee on the unused portion of the credit line. The company maintains a $500,000 balance at the bank that can be used to meet the compensating balance requirement. Determine the annual finance cost of borrowing the $20 million under this revolving credit. *show work* A) 13.3% B) 13.5% C) 13.1% D) 12.0%
Falcon Corporation has current assets of $400,000 and current liabilities of $275,000. Compute the effect of each of the following transactions on Falcon's current ratio: Refinanced a $60,000 long-term mortgage with a short-term note. Purchased $108,000 of merchandise inventory with short-term accounts payable. Paid $50,000 of short-term accounts payable. Collected $90,000 of short-term accounts receivable. please include details to support your response. Thank you.
FIVESIX Company, a lending institution lent P2,000,000 at 8.0000% perannum, to LAMANEH, Inc. The loan is payable after 5 years. Thecompany incurred direct origination costs of P200,000 and indirectorigination costs of P50,000. The company also charged origination feesto the borrower amounting to P295,000.The implicit interest rate on this loan is 9.2284%How much is the initial carrying value of the loan receivable?
Furman Corporation entered into an assignment agreement with a finance company whereby Furman would be advanced 80% of all accounts assigned, minus a $2,000 service charge. The assignment does not meet the conditions for a sale and should be accounted for as a secured borrowing. During the year, $300,000 of accounts receivable were assigned, $220,000 collections were made on outstanding assigned accounts, and $210,000 was remitted to the finance company. This remittance included interest charges of $2,100. Sales returns and allowances on assigned accounts amounted to $5,000. Required: 1. Prepare the journal entries necessary to record the preceding information. 2. Show how the preceding information would be reported on Furman’s year-end balance sheet (assume the note payable is short-term).
Black Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, Black receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual peso amount of cash received. Additionally, the finance company charges Black 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement: December 1, 2014 - Accounts receivable of P175,000 are assigned. December 11, 2014 - A sales return of P1,000 on an assigned account is allowed by Black. December 31, 2014 - Collections are made on P86,000 of assigned accounts. This amount and 1 month's interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month). January 29, 2016 - P60,000 of assigned accounts are collected and the remainder of the loan is repaid. a. What is the journal entry to record the December 1, 2014 loan? b. What…
Black Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, Black receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual peso amount of cash received. Additionally, the finance company charges Black 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement: December 1, 2014 - Accounts receivable of P175,000 are assigned. December 11, 2014 - A sales return of P1,000 on an assigned account is allowed by Black. December 31, 2014 - Collections are made on P86,000 of assigned accounts. This amount and 1 month's interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month). January 29, 2016 - P60,000 of assigned accounts are collected and the remainder of the loan is repaid. What is the journal entry to record the January 29, 2016 payment of the…
Black Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, Black receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual peso amount of cash received. Additionally, the finance company charges Black 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement: December 1, 2014 - Accounts receivable of P175,000 are assigned. December 11, 2014 - A sales return of P1,000 on an assigned account is allowed by Black. December 31, 2014 - Collections are made on P86,000 of assigned accounts. This amount and 1 month's interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month). January 29, 2016 - P60,000 of assigned accounts are collected and the remainder of the loan is repaid. 1. What is the journal entry to record the December 1, 2014 loan? 2. What…
Black Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, Black receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual peso amount of cash received. Additionally, the finance company charges Black 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement: December 1, 2014 - Accounts receivable of P175,000 are assigned. December 11, 2014 - A sales return of P1,000 on an assigned account is allowed by Black. December 31, 2014 - Collections are made on P86,000 of assigned accounts. This amount and 1 month's interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month). January 29, 2016 - P60,000 of assigned accounts are collected and the remainder of the loan is repaid. What is the journal entry to record the December 31, 2014 collection? What…

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