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bazaltina [42]
3 years ago
5

Susan participates in a Section 403(b) plan at work that includes loan provisions. Susan has recently enrolled in college and ha

s inquired about the possible consequences of borrowing from the Section 403(b) plan to help pay for her education. As her financial planner, what is your advice to her?
Business
1 answer:
stiks02 [169]3 years ago
8 0

Answer:

Susan qualifies for the loan under section 403(b) plan at work. However, this loan should be well negotiated as regards repayment of the interest elements and the principal.

Explanation:

When a loan is taken up, one has invariably taken up the pledge to repay the Principal component and the Interest element. At the point of funding the loan, a good and favorable interest rate should be well negotiated. As an active employee, the repayment is taken from the monthly pay, after the deduction of statutory tax payment.

It must be advised that Susan should pursue the intention of applying for the loan with utmost faithfulness, as a deviation from this will be frowned upon. Such loan are not to be invested and/or diverted for other purposes.

Susan should properly understand the attending obligation before her - the repayment of principal and interest within the agreed period of time. A default is not advised as this comes with a penalties. The entirety of the loan may be treated as an income, and subsequently taxed in same breath. Plus other penalties.

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Answer:

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1. Budgeting increases effective financial management while ensuring proper allocation of scarce resources.  It encourages planning for the future as well as improved business decisions.  It helps management to identify problems before they occur and to develop strategies for solving any problems that may arise.  With budgeting, the organization is in a better position to monitor its overall performance and ensure the achievement of its goals and objectives.  Finally, budgeting increases the motivation to achieve goals for both the management and individual employees.

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4. The accounts receivable balance at the end of July are $6,000.

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a) Data and Calculations:

Budgeted selling price per unit = $70

                                      June      July       August    September  

Budgeted unit sales     8,400   10,000    12,000       13,000

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40% month of sale      3,360     4,000      4,800        5,200

60% month following                5,040      6,000        7,200

Total cash collections 3,360     9,040    10,800       12,400

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Ending Inventory        2,000     2,400     2,600

Cost of goods sold     8,400   10,000    12,000       13,000

Goods available        10,400   12,400    14,600

Beginning Inventory   1,680    2,000      2,400         2,600

Production costs        8,720   10,400    12,200

Unit cost of materials $10         $10          $10   ($2 * 5)

Units produced            872      1,040      1,220

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June credit sales      $8,400

June cash collection  3,360

July 1 Beginning bal.  5,040

July credit sales       10,000

Cash collections       9,040

Ending balance        6,000

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