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DanielleElmas [232]
3 years ago
5

urrent and Quick Ratios The Nelson Company has $1,250,000 in current assets and $500,000 in current liabilities. Its initial inv

entory level is $400,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.2
Business
1 answer:
charle [14.2K]3 years ago
4 0

Answer: $3,250,000

Explanation:

The Current Ratio is used to calculate if the company's current assets can pay off it's current Liabilities.

It is calculated by dividing Current Assets by Current Liabilities.

The company plans to increase it's note payable to enable it but more Inventory. We can therefore assume that the increase in notes Payable (current Liability) will be the same as the increase in inventory (current asset) since the former is funding the latter.

The company does not want the current Ratio dropping below 1.2 so 1.2 is the ideal ratio.

The formula will therefore be;

1.2 = (Current Assets + Change in Notes Payable ) / Current Liabilities + Change in Notes Payable

1.2 = (1,250,000 + Change in Notes Payable) / 500,000 + Change in Notes Payable

600,000 + 1.2(Change in Notes Payable) = 1,250,000 + Change in Notes Payable

1.2( Change in Notes Payable) - Change in Notes Payable = 1,250,000 - 600,000

0.2 (Change in Notes Payable) = 650,000

Change in Notes Payable = $3,250,000

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Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipm
Masja [62]

Answer and Explanation:

The Journal entry is shown below:-

a. Cash Dr, $20,811,010

            To Bonds payable $20,000,000

            To Premium on Bonds payable $811,010

(Being issuance of the bond is recorded)

For recording this we debited the cash as it increased the assets and at the same time it also increased the liabilities so the bond payable and premium is credited

b. Interest expenses Dr, $818,899

Premium on Bonds payable $81,101 ($811,010 ÷ 5 × 6 ÷ 12  )

              To Cash $900,000 ($20,000,000 × 9% × 6 ÷ 12)

(Being  interest expense is recorded)

For recording this we debited the interest expense as it increased the expenses and credited the cash as it reduced the assets plus the remaining balance is debited to premium on bond payable

c.The contract rate of interest is higher than market rate of interest.

5 0
3 years ago
You have just received an offer in the mail from Friendly Loans. The company is offering to loan you $4,250 with low monthly pay
Kobotan [32]

Answer:

73 months

approximately 6 years

Explanation:

The period of time it would take to pay off the loan can be determined using excel nper function as below:

=nper(rate,pmt,-pv,fv)

rate is the interest expressed in monthly terms which is 15.3%/12

pmt is the amount payment per month i.e $90

pv is the amount of loan which is $4250

fv is the balance of the loan after all payments have been made i.e $0

=nper(15.3%/12,90,-4250,0)= 73 months

73 months/12 months=approximately 6 years  

8 0
2 years ago
Parisian Cosmetics Company is planning a one-month campaign for September to promote sales of one of its two cosmetics products.
leonid [27]

Answer:

Explanation:

1.) Promote Moisturizer or Promote Perfume

21-Aug

Promote Moisturizer Promote Perfume Differential Effect

(Alternative 1) (Alternative 2) (Alternative 2)

Revenues 22,000 units x $55.32 = $1,217,040 20,000 units x $59.64 = $1,192,800 ($24,240)

Costs:  

Direct Materials 22,000 units x $9.05 = $199,100 20,000 units x $14 = $280,000 ($80,900)

Direct Labor 22,000 units x $3.06 = $67,320 20,000 units x $4.93 = $98,600 ($31,280)

Variable Factory Overhead 22,000 units x $3.04 = $66,880 20,000 units x $4.93 = $98,600 ($31,720)

Variable Selling expenses 22,000 units x $16.02 = $199,100 20,000 units x $14.97 = $299,400 $53,040

Sales Promotion $136,430 $136,430 $0

Income (Loss) $394,870 $279,770 ($115,100)

Alternative 1 income = $394,870

Alternative 2 income = $279,770

Alternative 3 income = $115,100

2.) The company should promote moisturizer (Alternative 1)

3.) The decision of the manager is absolutely wrong as the manager is of the view that operating income will increase by $82,170 because he has considered the fixed expenses too which are not going to occur as we can see in the question. Hence the fixed expenses is irrelevant to cost to choose the alternative. As per the differential analysis, Alternative 1 i.e to sale moisturizer extra with the help of the promotion expenses.

4 0
3 years ago
A worksheet contains sales dollars for agents with your company. The values are $1,250, $1,090, $985, $985, $880, $756, $675, $6
ivolga24 [154]

Answer:We use the Large Function. the general formula is  =LARGE(first cell:last cell,3) .Please refer to the explanation section for details

Explanation:

Let us assume

A 1 = $1,250,  A 2 = $1,090, A 3 = $985, A 4 = $985, A 5 = $880, A 6 = $756, A 7 = $675, A 78= $650, and A 9 =$600

Using the Large function on excel to return the third largest value, on the formula bar we have the following formula;

=LARGE(A1:A2,3)

7 0
3 years ago
For sara, ramen noodles are a normal good, however sean considers ramen noodles to be inferior. if sara and sean have the same a
avanturin [10]
<span>In this case, Sara will see the ramen as a good that is more elastic in demand than will Sean. This will mean that, as income drops for Sara, she will purchase less of the good than will Sean. Sean will end up purchasing less of the good if he has an increase in income.</span>
8 0
3 years ago
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