The entity has an unsecured overdraft of R20000 at prospect Bank that carries an interest rate of 22% per annum. In which one of the following statement will this item be shown? A.Statement of financial position as a current liability B.Statement of financial position as a non current liability C.Statement of income and expenditure as finance costs C.Statement of financial position as current asset

The entity has an unsecured overdraft of R20000 at prospect Bank that carries an interest rate of 22% per annum. In which one of the following statement will this item be shown? A.Statement of financial position as a current liability B.Statement of financial position as a non current liability C.Statement of income and expenditure as finance costs C.Statement of financial position as current asset

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

Carriageways Co had the following bank loans outstanding during the whole of 2023 which form the company’s general borrowings for the year: £m 9% loan repayable 20X9 15 11% loan repayable 20Y2 24 Carriageways Ltd began construction of a qualifying asset on 1 April 2023 and withdrew funds of £6 million on that date to fund the construction. On 1 August 2023 an additional £2 million was withdrawn for the same purpose. Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 2023.
Pax Limited showed the following assets and liabilities in its financial statements at 31 December 2018. DETAILS CARRYING AMOUNT FAIR VALUE PPE 10,000,000 14,000,000 Inventory 4,200,000 4,400,000 Long Term Loans (3,500,000) (3,500,000) Account Payable (2,500,000) (2,500,000) 8,200,000 12,400,000 The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assets and liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement of the acquisition. Required: Calculate the purchase consideration. Calculate the goodwill or bargain purchase for this transaction. Prepare the journal entries required in the books of Chelsea Limited relating to this transaction.
The following information was extracted from the records of Elwood Ltd as at 30 June 2020. Asset (liability) Carrying amount ($) Tax base ($) Machinery 720,000 600,000 Accounts receivable 262,500 322,500 Prepaid rent 45,000 0 Provision for warranty (86,000) 0 Insurance payable (15,000) 0 Deposit received in advance (54,000) 0 Depreciation rate for machinery is 20% per year. For tax purpose, the depreciation rate is 25%. An allowance for doubtful debts of $60,000 has been raised against accounts receivable for accounting purposes, but such debts are deductible only when written off as uncollectible. Deposits are taxable when received, and warranty costs are deductible when paid. Deferred tax assets and deferred tax liabilities as at 30 June 2019 were $35,000 and $31,250 respectively. The tax rate is 30%. Question Calculate Deferred Tax Assets and Deferred Tax Liabilities as at 30 June 2020. Show your calculations by creating…
A money market instrument purchased by the company with a face value of $300,000 will mature on October 15, 2021. In order to meet the financial obligations of the business, management has decided to liquidate the investment upon maturity. On that date quarterly interest computed at a rate of 5% per annum is also expected to be collected. What is the interest?
a. Abc Investment Ltd., plans to borrow Ghc100,000 for a 90-day period from Lloyds Finance Company. Abc investment would repay the principal amount plus Ghc5,000 interest at maturity. Determine and calculate the Annual Percentage Rate of the credit to Abc Company Ltd. b. Belinda Limited has annual credit sales of Ghc5 million and cost of sales of GHC1.8 million. The company’s current assets consist of inventory and trade receivables. Current liabilities consist of accounts payables and an overdraft facility with an average interest rate of 10% per annum. The company gives 60 days credit to its customers and is allowed an average of 30 days credit by trade suppliers. The company has an operating cycle of 90 days. Other relevant information: Current ratio of Ait Ltd 1.5:1 Cost of long-term finance to Ait Ltd is 12% per annum Required: Calculate the, (i) Size of the overdraft of Ait Ltd (ii) Net working capital of the company (iii) Total cost of financing its current assets c.…
Horizons plc had the following bank loans outstanding during the whole of 20X8 which form the company’s general borrowings for the year: £m 10% loan repayable 20X9 250 8% loan repayable 20Y2 750 Horizons plc began construction of a qualifying asset on 1 May 20X8 and withdrew funds of £45 million on that date to fund construction. On 1 September 20X8 an additional £60 million was withdrawn for the same purpose. Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 20X8. Select one: a. £5,000,000 b. £4,250,000 c. £5,418,750 d. £850,000 e. £8,925,000 f. £3,056,250
An investment centre has reported net operating profits after tax of sh.24 million. Taxation is paid at the rate of 25 per cent of the operating profit. The company has a risk adjusted weighted average cost of capital of 12 per cent per annum and is paying interest at 9 per cent per annum on a substantial long term loan. The investment centre's non-current asset value is sh.11 million and the net current assets have a value of sh.22 million. What is the Economic Value Added (EVA) for the period? Select one: A. 6.32M B. 8.32M C. 7.32M D. None of the above
A company with P50,000 in current assets, P25,000 in quick assets, and P30,000 in current liabilities make a payment of a P1,500 current debt. As a result of this transaction, the current ratio and quick ratio will a. both decrease b. increase and decrease, respectively c. both increase d. remain the same and decrease, respectively
Use the following information for the following questions: Smooth Pass Corp. has three sources of borrowings in an accounting period: Outstanding Liabilities Interest Change Seven-year loan 8,000,000 1,000,000 25-year loan 12,000,000 1,000,000 Bank overdraft 4,000,000 600,000 QUESTIONS: If all of the borrowing are used to finance the production of a qualifying asset, but none of the borrowings relate to a specific qualifying asset, what is the capitalization rate? a. 9.67% b. 10%. c.10.83% d.11.33 % 2. If the seven-year loan is an amount which can be specifically identified with a qualifying asset, what is capitalization rate? a. 9.67%. b. 10%. c. 10.83% d. 11.33%
Horizons plc had the following bank loans outstanding during the whole of 20X8 which form the company’s general borrowings for the year: £m 10% loan repayable 20X9 25 8% loan repayable 20Y2 75 Horizons plc began construction of a qualifying asset on 1 May 20X8 and withdrew funds of £4.5 million on that date to fund construction. On 1 September 20X8 an additional £6 million was withdrawn for the same purpose. Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 20X8. a. £850,000 b. £425,000 c. £305,625 d. £892,500 e. £541,875 f. £500,000
The Malia Corporation had sales in 2019 of $65 million, total asswets of $42 million, and total liabilities of $20 million. The interest rate on th company's debt is 6 percent and its tax rate is 21 percent. The operating profit margin was 12 percent. What were the company's operating profits and net income? What was the operating return on assets and return on equity? Assume that interest must be paid on all of the debt.
On 1 January 2020, an entity purchased a debt instrument at its face value of P1,000,000. The contractual term is ten years with an annual coupon of 6%. On 31 December 2020, the fair value of the instrument decreases to P955,000. 12-month expected credit losses as determined under the impairment model are P25,000. Which statement is correct if the debt instrument is classified as FA@FVTOCI? a. The net amount to be recognized in 2020 profit or loss is P60,000. b. The amount to be recognized in 2020 other comprehensive income is P45,000. c. None of these d. The amount to be reported on the entity's December 31, 2020 statement of financial position is P930,000.