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3 years ago

Why do lenders often require a down payment when credit is used to purchase a good?

Business

1 answer:

kherson [118]3 years ago

4 0

Answer:

see below

Explanation:

A down payment is a lump-sum amount paid a borrower raises when purchasing an asset on credit. The down payment or deposit is paid to the lender and reduces the credit to be extended. Usually, the lender will demand a down payment of up to 20% of the asset's value.

The down payment reduces the risk a lender takes in advancing the loan to the borrower. It reduces the loan amount involved. The down payment shows the borrower is financially stable. If they can raise 20 percent of the amount, it gives the lender confidence that the borrower can repay the loan. A down payment shows the borrower is a low-risk customer

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Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $82,000 and $4,500, r

Cerrena [4.2K]

Answer: $10,700

Explanation:

The Uncollectible Account Expense is the Accounting Adjustment made when a Receivable defaults on their debt and it can be calculated using the following formula,

= Uncollectible Amount written off + Closing Balance - Opening Balance.

Now the balances are as follows,

Opening Balance for Year 2 = 4,500

Closing Balance for Year 2 = 6,800

Uncollectible Amount written off during Year 2 = 8,400

Calculating therefore,

= 6,800 + 8,400 - 4,500

= $10,700

Allegheny will report $10,700 as Uncollectible Accounts Expense for Year 2.

3 0

3 years ago

On a shopping trip, Melanie decided to buy a light blue coat made from woven fabric. A tag on the coat stated that the price was

sergij07 [2.7K]

Answer: 5

Explanation: C

Consumer surplus is the difference between the quantity that a consumer is eager to pay for any product and the amount that he or she really ends up paying for that commodity. In this question Melanie was expecting to pay $79.95 when she saw the tag. Later she came to know that the coat was on a sale and she would have to pay 20% less. She finally paid $63.96 that is $15.99 less than the stated price $15.99. Thus, $15.99 is the consumers' surplus.

5 0

3 years ago

Sibila, Inc. sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering

Ahat [919]

Answer:

c. It will increase.

Explanation:

Break even point is the level of activity at which a firm neither makes a profit nor a loss.

Break - even units = Fixed Costs ÷ Contribution per unit

therefore,

Existing break-even point in units :

Break - even units = $16,000 ÷ ($40 - $18) = 727.27 or 728 units

New break-even point in units :

Break - even units = $21,000 ÷ ($40 - $16) = 875 units

Conclusion :

The results show that break-even point in units will increase from 728 units to 875 units as a result of the changes

8 0

3 years ago

A new sports car sells for $40,000. The value of the car decreases by 12% annually. After how many years will it be worth half o

Marysya12 [62]

Answer:

n= 6.11 years

Explanation:

Giving the following information:

Present value= $40,000

Future value= $20,000

Decrease rate= 0.12

To calculate the number of years for the car to reach a value of $20,000; we need to use the following formula:

n= ln(FV/PV) / ln(1+i)

n= ln(20,000/40,000) / ln(1.12)

n= 6.11 years

8 0

3 years ago

On October 1, 2018, Swifty Company places a new asset into service. The cost of the asset is $125000 with an estimated 5-year li

Novosadov [1.4K]

Answer:

The book value of the plant asset on the December 31, 2018 is $75,000.

Explanation:

Determine the depreciable cost,

The depreciable cost = Acquisition cost - Salvage value.

The depreciable cost = 125,000 - 30,500.

The depreciable cost = $94,500.

Determine the annual depreciation expense,

The annual depreciation expense = depreciable cost/useful life

The annual depreciation expense = 94,000/5

The annual depreciation expense = $18,900.

Find the % rate of depreciation .

The % rate of depreciation = (18,900/94,500) × 100.

% rate of depreciation = 20%

Since it is the double-declining-balance method of depreciation we multiply the % rate by 2 = 20% × 2 = 40%

Applying the rate to the carrying value of the asset to obtain current year's depreciation expense.

Current year's depreciation expense = Carrying value of the asset × the depreciation rate %.

Current year's depreciation expense = 125,000 × 40%.

Current year's depreciation expense = $75,000

4 0

3 years ago