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Vial-tek has an existing loan in the amount of $3.5 million with an annual interest rate of 9.5%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Vial-tek's existing loan agreement with a new one. First National bank has offered to loan Vial-tek $3.5 million at a rate of 8.5% but requires Vial-tek to provide financial statements that have been reviewed by a CPA firm. City First Bank has offered to loan Vial-tek $3.5 million at a rate of 7.5% but requires Vial-tek to provide financial statements that have been audited by a CPA firm. The controller of Vial-tek approached a CPA firm and was given an estimated cost of $20,000 to perform a review and $45,000 to perform and audit.Requireda. Explain why the interest rate for the loan that requires a review report is lower than that for the loan that did not require a review. Explain why the interest rate for the other two loans.b. Calculate Vial-tek's annual costs under each loan agreement, including interest and costs for the CPA firm's services. Indicate whether Vial-tek should keep its existing loan, accept the offer from First National Bank, or accept the offer from City First Bank.c. Assume that First National Bank has offered the loan at a rate of 8.0% with a review, and the cost of the audit has increased to $50,0000 du to new auditing standards requirements. Indicate whether Vial-tek should keep its existing loan, accept the offer from First National Bank, or accept the offer from City First Bank.d. Discuss why Vial-tk may desire to have an audit, ignoring the potential reduction in interest costs.e. Explain how a strategic understanding of the client's business may increase the value of the audit service.
At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December.
If a stock has a constant growth rate of 6% per year and paid a dividend of $5.00 yesterday, what is the value of the stock if the discount rate is 10%?
Jane's travel budget for October was $330, based on her plan to drive 1,500 miles at a cost of $0.22 per mile. During October, she actually drove 1,250 miles at a cost of $290. A flexed budget performance report would show a variance of:
Arnold and Barbara Cane were divorced in June 2011. Pursuant to the divorce decree, Arnold is obliged to perform as follows.
How many distinct steps or requirements are contained in the language of IRC Section 351 (a) for non-recognition treatment, and what are they?
Sheniqua, a single taxpayer, had taxable income of $73,239. Her employer withheld $14,077 in federal income tax from her paychecks throughout the year. Using the tax tables
Short Term Financial Policy
Amber, a publicly held corporation (not a TARP recipient), currently pays its president an annual salary of $900,000. In addition, it contributes $20,000 annually to a defined contribution pension plan for him.
Greenbacks Bank also gave Doug and Pattie a cellular phone (worth $100) for opening the savings account. What amount of interest income should they report on their joint income tax return?
Maggie is single and supports her 85-year-old parents who live in a home rented for them by Maggie and who have no income. What is Maggie's filing status and why?
Net loss is $130,000 and the partners have no written partnership agreement.
How realistic do you feel the criteria are for determining whether a lease is "capital" or "operating"? Can't a lease just be negotiated at 79% of the economic life, or 89% of the present value of payments? Has FASB taken any action to address thi..
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