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2 years ago

Two reasons why collateral is important to a borrower

Business

1 answer:

Mumz [18]2 years ago

7 0

The reasons why collateral is important to a borrower are:

It serves as borrower's credit worthiness .

Collateral minimizes the risk for lenders.

<h3>What is Collateral?</h3>

Collateral can be regarded as item of value that is been used to secure a loan.

In a case whereby a borrower defaults on the loan,it is possible for lender to seize the collateral and sell it to recoup its losses. Banks require collateral on certain types of loans.

Learn more about Collateral at;

brainly.com/question/14037774

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Which loan type requires you to make loan payments while you’re attending school?

FrozenT [24]

I think the correct answer from the choices listed above is option A. The loan type that requires you to make loan payments while you’re attending school would be unsubsidized federal loan. For this type, y<span>ou are responsible for paying the interest on a Direct Unsubsidized Loan during all periods. Hope this answers the question.</span>

5 0

3 years ago

Skysong Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in ca

adell [148]

Answer:

(a) has commercial substance

Electric wax melter 5,720 (debit)

Accumulated depreciation :old gas model 6,930 (debit)

Old gas model : cost 12,320 (credit)

Profit on exchange of old gas model 320 (credit)

Electric wax melter 11,000 (debit)

Cash 11,000 (debit)

(b) lacks commercial substance

Electric wax melter 5,390 (debit)

Accumulated depreciation :old gas model 6,930 (debit)

Old gas model : cost 12,320 (credit)

Electric wax melter 11,000 (debit)

Cash 11,000 (debit)

Explanation:

In terms of IAS 16, if an exchange of non-monetary item has commercial substance the Asset Acquired is measured at the Fair Value of Asset Given up or Fair Value of Asset Acquired.

However if an exchange of non-monetary item lacks commercial substance the Asset Acquired is measured at Carrying Amount of Asset Given up and there would no be any gain or loss on the exhange of asset given up.

(a) has commercial substance

Electric wax melter 5,720 (debit)

Accumulated depreciation :old gas model 6,930 (debit)

Old gas model : cost 12,320 (credit)

Profit on exchange of old gas model 320 (credit)

Electric wax melter 11,000 (debit)

Cash 11,000 (debit)

(b) lacks commercial substance

Electric wax melter 5,390 (debit)

Accumulated depreciation :old gas model 6,930 (debit)

Old gas model : cost 12,320 (credit)

Electric wax melter 11,000 (debit)

Cash 11,000 (debit)

5 0

3 years ago

What role does ethics play in choosing and applying a depreciation method?what role does ethics play in choosing and applying a

Minchanka [31]

Answer:

Explanation:

Ethics demands reasons to be given for changing from one depreciation method to another. There are three depreciation methods that are applicable including double-declining balance technique, unit of production technique, and straight-line technique.

Changing from one depreciation method to another must be done in the best interests of shareholders and reasons for such a change must be disclosed. Therefore, ethics requires a company to reveal the changes in depreciation method and adhere to the accounting principles related to the method used.

8 0

3 years ago

The Coca-Cola Company owns 32 percent of the voting stock of Coca-Cola FEMSA, acquired at book value. Assume that Coca-Cola FEMS

hichkok12 [17]

Answer:

December 31, 2013, revenue from investment in Coca Cola FEMSA

Dr Investment in Coca Cola FEMSA 1,635,000

Cr Investment revenue 1,635,000

Explanation:

Under the full equity method, when Coca Cola FEMSA reports net income, the investment account will increase in a proportional way, and that increase is considered investment revenue.

E.g. Coca Cola Company owns 32% of stocks and reported net income is $5,000,000, so investment revenue = $5,000,000 x 32% = $1,600,000

But we must also include any realized/unrealized profits on intercompany transactions:

realized profits = markup x January 1 inventories = 35% x ($1,350,000 - $1,350,000/1.35) = $350,000

unrealized profits = markup x December 31 inventories = 35% x ($1,215,000 - $1,215,000/1.35) = $315,000

total investment revenue = % of net income reported + realized profits - unrealized profits = $1,600,000 + $350,000 - $315,000 = $1,635,000

The journal entry should be:

December 31, 2013, revenue from investment in Coca Cola FEMSA

Dr Investment in Coca Cola FEMSA 1,635,000

Cr Investment revenue 1,635,000

3 0

3 years ago

What is a mortgage?

Marta_Voda [28]

B. a type of loan used to buy property also known as the charging of real (or personal) property by a debtor to a creditor as security for a debt (especially one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period.

8 0

3 years ago