Why is the actual cost of borrowing usually lower than the stated rate of interest that the borrower pays to a lender such as a bank? Can you think of a situation where the actual cost of borrowing wouldn't be lower than the stated rate of interest?
Answer to relevant QuestionsIn its most recent balance sheet, Vosburg Inc. reported a debt-to-equity ratio of 1.85 to 1. This ratio has increased slightly from the previous year when the ratio was 1.55 to 1. Assess Vosburg Inc.'s debt-to-equity ratio ...Provide the journal entries needed for each of the following situations:a. On October 1, 2017, Utopia Ltd. arranges a $50,000 six-month working capital loan from a commercial lender. The money is deposited in Utopia's bank ...The accountant of Hantsport Ltd. (Hantsport) is currently preparing the December 31, 2017 financial statements. She has asked you to help her classify the following items:a. During December 2017, Hantsport withheld $4,000 ...On November 1, 2017, Nordin Inc. (Nordin) issued a $5,000,000 bond with a 6 percent coupon rate and a maturity date of October 31, 2022. Interest is paid semi-annually on April 30 and October 31. The effective interest rate ...Zeballos Inc. (Zeballos) has arranged to lease new equipment for its distribution centre. The terms of the lease require Zeballos to pay $475,000 per year for the next eight years. The interest rate for the lease is 6 per ...
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