Chapter 10 Homework

Chapter 10 Homework - Rachel L Gates ACC-240 Chapter 10...

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Rachel L. Gates ACC-240 Chapter 10 Homework Assignment E10-1 Determining Financial Statement Effects of Transactions Involving Notes Payable 1.) Date Assets Liabilities Stockholders’ Equity (a) Nov. 1 Cash +6,000,000 Note Payable +6,000,000 NE (b) Dec. 31 NE Interest Payable +75,000 Interest Expense (+E) -75,000 (c) Apr. 30 Cash – 6,225,000 Note Payable -6,000,000 Interest Payable -75,000 Interest Expense (+E) -150,000 (b) Interest = (P) x (R) x (T) 75,000 = 6,000,000 x 7.5% x 2/12 (c) 6,000,000 x .075 x 4/12 = 150,000 150,000 + 75,000 = 225,000 6,000,000 + 225,000 = 6,225,000 2.) If Target needs extra cash every Christmas Season, should management borrow money on a long term basis to avoid negotiating a new short-term loan each year? One reason for long term borrowing, it will essentially provide financing for Target. On the other hand, following the Christmas Holiday season, they won’t really need it any longer because Target will eventually collect the funds from their credit sales resulting in no necessary need to borrow long term funds and end up paying more interest on a loan not needed after the season passes. It is a better decision to borrow on a short-term basis for short-term needs. Perhaps, Target could discuss a line of credit loan from their banking institution. Therefore, it would be short-term and very low interest, if any at all!

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S10-1 Finding Financial Information 1.) 2009 Results 2008 Results .13 = (519 + 6 + 972) .14 = (445 + 12+ 1,259) 11,153 12,706 The two above Quick Ratio results suggest that in 2008, Home Depot was had a slightly better
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Chapter 10 Homework - Rachel L Gates ACC-240 Chapter 10...

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