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Carlisle Corporation has an existing loan in the amount of $3 million with an annual interest rate of 5.9%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Carlisle Corporation's existing loan agreement with a new one. Money Tree Bank has offered to loan Carlisle $3 million at a rate of 4.7% but requires Carlisle to provide financial statements that have been reviewed by a CPA firm. Earn More Bank has offered to loan Carlisle $3 million at a rate of 3.3% but requires Carlisle to provide financial statements that have been audited by a CPA firm. Carlisle Corporation's controller approached a CPA firm and was given an estimated cost of $31,000 to perform a review and $61,000 to perform an audit. Read the requirements. (Enter amounts in dollars, not millions, throughout.) Requirement c. Assume that Money Tree Bank has offered the loan at a rate of 4.0% with a review, and the cost of the audit has increased to $68,500 due to new auditing standards requirements. Indicate whether Carlisle should keep its existing loan, accept the offer from Money Tree Bank, or accept the offer from Earn More Bank. Begin by calculating the annual costs under each loan agreement. (Enter a "0" for any zero balances.) Annual Lender Existing loan Money Tree Bank Earn More Bank CPA Service None Review Audit Cost of CPA Services 0 $ 31,000 61000 $ Annual Interest Enter any number in the edit fields and then click Check Answer 177,000 $ 141,000 99,000 Loan Cost 177,000 172,000 160000 Carlisle Corporation has an existing loan in the amount of $3 million with an annual interest rate of 5.9%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Carlisle Corporation's existing loan agreement with a new one. Money Tree Bank has offered to loan Carlisle $3 million at a rate of 4.7% but requires Carlisle to provide financial statements that have been reviewed by a CPA firm. Earn More Bank has offered to loan Carlisle $3 million at a rate of 3.3% but requires Carlisle to provide financial statements that have been audited by a CPA firm. Carlisle Corporation's controller approached a CPA firm and was given an estimated cost of $31,000 to perform a review and $61,000 to perform an audit. Read the requirements. (Enter amounts in dollars, not millions, throughout.) Requirement c. Assume that Money Tree Bank has offered the loan at a rate of 4.0% with a review, and the cost of the audit has increased to $68,500 due to new auditing standards requirements. Indicate whether Carlisle should keep its existing loan, accept the offer from Money Tree Bank, or accept the offer from Earn More Bank. Begin by calculating the annual costs under each loan agreement. (Enter a "0" for any zero balances.) Annual Lender Existing loan Money Tree Bank Earn More Bank CPA Service None Review Audit Cost of CPA Services 0 $ 31,000 61000 $ Annual Interest Enter any number in the edit fields and then click Check Answer 177,000 $ 141,000 99,000 Loan Cost 177,000 172,000 160000
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Related Book For
Auditing And Assurance Services An Integrated Approach
ISBN: 9780135176146
17th Edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley
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