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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.
how much liability for outstanding premiums should be recorded at the end of 2008?
Gordeeva Corporation began selling goods on the installment basis on January 1, 2010. During 2010, Gordeeva had installment sales of $179,000; cash collections of $77,300; cost of installment sales of $121,720.
Gore Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2008, Gore reacquired 100 shares at $85 per share. On September 1, Gore reissued 60 shares at $90 per share.
On the benefit side, Camus estimated that the new process would save $135,000 per year in environmental costs (fines and cleanup costs avoided). The cost of capital is 10%. Ignore tax effects. Is it beneficial to implement the new design process?
What makes a CPA license valuable? a. Time, effort and education it takes to get the license. b. Continuing education after receiving the license. c. Monopoly on public accounting services.
If the company were to buy the component, the machine would no longer be rented. The rent on the machine, in relation to the decision to make or buy the component, is:
Nashville Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and long-run monthly usage of staff hours for Operating Departments 1 and 2 follow:
The break even or cost volume profit (CVP) model is based on a number of assumptions. Discuss these assumptions and whether or not they are correct in the real world. Finally, discuss how CVP analysis can be useful in planning. Describe the advant..
On November 1, Prince Vacuum Company offered special early retirement benefits to those employees who were eligible. This program was in effect until year-end. Prince should recognize a liability and an expense related to these special termination..
a. Determine the variable cost per unit and the fixed cost. b. Based on part (a), estimate the total cost for 10,000 units of production.
CAPM and Venture Capital
Courgar Inc. issued 3,000 shares of 4% cumulative $120 par value preferred stock at par. What is the journal entry to record this transaction?
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