The following internal benchmarks and bank covenants: 1). Current Ratio must remain above 2.5x at month end
Question:
The following internal benchmarks and bank covenants:
1). Current Ratio must remain above 2.5x at month end
2). Minimum Cash Balance must be above $10,000 at month end
Explain the reasoning behind each choice made :
1); A supplier has sent an email proposing the following deal to you:
1A: To buy the usual 500 units on account for $1,250; or
1B: To buy the usual 500 units but with cash and receive a 20% discount
Select one: A or B
2): The Company has the opportunity to make a huge (and rare) sale:
2A: To sell the unit for $10,000 but the customer wants to pay only 20% cash and the remaining 80% on account; or
2B: To sell the unit for $5,000 cash
Note: The inventory had cost the Company $1,250.
Select one: A or B
3): A repeat VIP customer has approached the Company requesting an express order:
3A: The Company's supplier will only rush the order with a 30% markup paid in full with cash. This will cost the Company $15,000 and the customer cannot pay until next month when the unit is delivered (note: revenue criteria not met until delivered). They are offering $50,000 cash for all the trouble; or
3B: Kindly reject the VIP customer's offer risking the business relationship altogether.
Select one: A or B
4): A replacement part for an employee's laptop was purchased for $1,200 cash. This is expected to extend the useful life of the laptop by an additional 3 years. You are conflicted by your coworkers' opinions but must choose one of the following:
4A: To agree with Bob who believes this purchase is an asset as it extends the life of the laptop
4B: To agree with Amy who believes its an expense as the amount is nominal
Select one: A or B
5): An invoice was received for repair work done last week costing $3,500:
5A: To pay the invoice within 3 days of receipt taking advantage of the 2% discount available
5B: To delay payment of the invoice until next month, when due, however, no discount will be applied
Select one: A or B
Prepare journal entries for each question.
Statistics The Art and Science of Learning from Data
ISBN: 978-0321755940
3rd edition
Authors: Alan Agresti, Christine A. Franklin